Core Education & Technologies Ltd., an Indian education software services provider to universities overseas, said it may ask regulators to investigate a selloff that erased more than half the value of its shares.
Core sank a record 62 percent to 110.50 rupees at the close in Mumbai today, leading a plunge in four other companies on the S&P BSE 500 index amid speculation that shares pledged by the company founders were being sold by brokers facing margin calls.
“We are having a call with the board to figure out if we should officially write to the regulators to help us find out why this happened,” Nikhil Morsawala, director finance at Core Education, said by phone today. “None of the shares we had pledged with institutions for borrowing have moved today. All our loans are current and everything is intact.”
Core Education had raised 2.5 billion rupees ($46 million) by pledging 47 percent of the owner’s stake to lenders, he said. Founders who have pledged a large chunk of their shares risk losing control of their companies should a drop in equity prices erode the value of the collateral, according to CNI Research Ltd. Borrowing costs in the $1.8 trillion economy are among the highest in Asia.
Cresta Fund Ltd. sold 1.38 million shares at 113.71 rupees today, according to exchange filings. The fund owns 3.5 percent of Core Education, according to exchange data. About 28 million shares were traded compared with a six-month daily average of 515,230.
“Broker positions in some scrips got smashed due to lack of funding as they could not gather additional amount of collateral in a falling market,” Deven Choksey, managing director at K.R. Choksey Shares & Securities Pvt. in Mumbai, said by telephone. “Genuine investors are a victim of such situations. Incidents like this will damage the confidence of the investors.”
Core Education was the worst performer on the S&P BSE 500 index, which retreated 0.3 percent, compared with the 0.1 percent gain in the benchmark S&P BSE Sensex index. Welspun Corp. fell 20 percent to 66.80 rupees, its lowest level since December 2011.
“No sale of pledged shares were involved,” Akhil Jindal, a spokesman at Welspun Group, said in a phone interview today. “The share sale had nothing to do with any of our large investors or the promoters.”
The fall today was probably triggered by margin calls in a few mid-cap stocks and because the stock has been removed from the futures and options segment, he said.
ABG Shipyard Ltd. plunged 20 percent to 291.25 rupees. Opto Circuits India Ltd. sank 10 percent to 53.40 rupees, the lowest level since July 2006. DB Realty Ltd. dropped 10 percent to 76.20 rupees, the lowest since October.