A store assistant handles gold chains hanging from a wall display (Photographer: Dario Pignatelli/Bloomberg)

Gift to Family Helps Wipe $2.6 Billion Off PC Jeweller Value

(Bloomberg) -- An Indian jeweler that saw its market worth reach $3.6 billion at the start of the year is now floundering at about a quarter of that value after one of its founders gifted some shares to family members, raising concern about the company’s governance.

PC Jeweller Ltd. slumped about 40 percent in the past week after the company said that one of its founders, P.C. Gupta, made the gifts in off-market trades. While the shares rebounded 44 percent Friday, they’re still down 70 percent from the Jan. 19 record and the company’s market value has shrunk to 68.9 billion rupees ($1 billion).

“Investors are concerned about the quality and timeliness of the company’s disclosures,” said Devansh Lakhani, director at investment advisory firm Lakhani Financial Services Ltd. There was speculation that family members may be selling shares in the open market though recent management comments have assuaged some of those concerns, he said.

The claims were baseless and the founders were “very much invested in the company as they still hold 58 percent stake,” PC Jeweller Chief Financial Officer Sanjeev Bhatia said in an interview. “We have done everything and said everything. There is nothing extra that I could say about this.”

Gift to Family Helps Wipe $2.6 Billion Off PC Jeweller Value

In response to questions from investors, the company said in the April 25 filing that it wasn’t aware of a reason for the sudden plunge that day in the stock. It denied that any founders had sold shares on the market, but revealed Gupta had made the gift of an undisclosed number to “his family member (s).” The company said it makes timely disclosures and its fundamentals remain strong.

PC Jeweller has suffered once before this year after Vakrangee Ltd., which had been a shareholder, was reported to be under regulatory investigation. Vakrangee said at the time that it hadn’t received any official communication from the regulator.

The company no longer holds a stake in PC Jeweller, Bhatia said.

Fidelity International’s FMR LLC is among investors that have pared exposure to the jeweler, having cut holdings to 3.5 percent from 7.04 percent, according to a May 3 disclosure. An April filing had put FMR’s stake at 9.5 percent.

Jewelers in India are having a tough year. The industry has come under a cloud with two companies under investigation for an alleged banking fraud of $2 billion. This comes even as the World Gold Council estimates that physical demand for jewelry slid 12 percent in the first three months of 2018.

©2018 Bloomberg L.P.