Hero MotoCorp’s shares fell more than 8% on Tuesday, according to media sources, after the income tax agency discovered over Rs 1,000 crore in fake charges and over Rs 100 crore in cash transactions for a farmhouse in Delhi.
On the BSE, the stock fell more than 7% to settle at Rs 2,208.35. It fell to a day’s low of Rs 2,155, only a few cents above its 52-week low of Rs 2,148.
According to Ashwin Patil, Senior Research Analyst at LKP Securities said, “Despite the fall, the stock does not look very attractive to us in the long term mainly due to pressure on its volumes and a tepid outlook given the rise in fuel costs, slow recovery in both urban and rural markets and a 25-30% hike in acquisition costs of the two-wheelers since the pandemic started.”
The stock’s knee-jerk reaction today may see some recovery tomorrow if management provides a sufficient explanation to the market, according to Patil.
On March 23, the Income Tax Department conducted a search and seizure operation on Hero Motocorp and its chairman and managing director Pawan Munjal at various sites across Delhi NCR, which ended on March 26. The search efforts included more than 40 areas across Delhi and the National Capital Region.
According to ANI, during the search operations, a considerable amount of damning material in the form of hard copy papers and digital data was recovered. These documents revealed that the group had made fictitious transactions, made large unexplained cash expenditures, and got lodging entries totaling over Rs 1000 crore.
According to ANI, the Department also discovered evidence of cash transactions of over Rs 100 crore in the acquisition of a farmhouse in Chhattarpur, Delhi. Munjal bought a farmhouse in Chhattarpur where the market price was adjusted to minimize tax and he utilized black money to pay cash in excess of Rs 100 crore, which is a violation of section 269 SS of the IT Act.
If the seller accepts an amount of Rs 20,000 or more in cash from the buyer, the seller would face a 100% penalty under section 269SS of the Income Tax Act when selling Immovable Property.