PNB fraud: Will Nirav Modi scam also hurt other known jewellers?

Rs 11,000 crore Punjab National Bank (PNB) fraud, perpetuated by two known luxury jewelry brands Nirav Modi and Gitanjali Gems, has shaken banking sector of India, creating hayway in operations of other bigshot jewellers in the country.
 
It was February 14, when the ongoing illegal transaction came to light against state-owned Punjab National Bank.
 
What was more shocking to know that the bank’s own employees had issued unauthorised LoUs in favour of three companies owned by Nirav Modi namely Sollar Exports, Steller Diamonds and Diamond R Us for availing buyers’ credit.
 
In fact, PNB’s officials managed to misuse the SWIFT network to transmit messages to other banks bypassing the core banking system (CBS), keeping the bank management in dark.
 
With those LoUs, lenders like Allahabad Bank and Axis Bank credited PNB’s Nostro account, from where funds were moved to certain overseas parties.
 
Thus, Nirav Modi’s hideous practice resulted in over Rs 11,000 crore scam in PNB, which has already been choked with structural asset quality issues over past few fiscals.
 
PNB is not only suffering heavy losses, but has also been betrayed by its own employees. This has failed to melt any emotion of investors who continue to beat the bank’s stock price, so much so that it has tumbled by 40% in three days.
 
On Friday, PNB was trading at Rs 124 per piece down by 3.39% on the BSE. The lender, therefore, lost, between February 14 and February 16, Rs 10.734.82 crore market valuation to Rs 30,162.18 crore compared to Rs 40,897 crore valuation before it.
 
As the PNB is passing through its worst phase, the question now arises will other known jewellers be affected from this scam? Will the lenders be more cautious in this sector?
 
It may be noted that PNB has already released a cautionary note to several banks, suggesting similar modus operandi may have been used by these officials in companies belonging to Mehul Choksi  -‐ Gitanjali Gems, Gili India and Nakshatra, while issuing LoUs/LCs.
 
As expected, just like PNB, the share price of Gitanjali Gems also took huge hit by investors. Within three days, the company has tumbled by 42% after finishing on Friday at Rs 37.55 per piece, down by Rs 10 or 19.94% on the BSE.
 
Nirav Modi’s companies are not listed on stock exchanges.
 
The impact of this scam has already been sensed in stock price of other jewelry firms.
 
Companies like Tribhovandas Bhimji Zaveri, Thangamyil Jewellery, Tara Jewels, Goldiam International, Radhika Jeweltech and Lypsa Gems & Jewellery saw a decline in the range of 3% to 5% on Friday.

 
Gitanjali Gems, however, has been part of India's jewellery market since 1986. Apart from Gitanjali brand, it also has other brands like Nakshatra in its kitty, and has also hired many Bollywood biggies for endorsement of the brand.
 
Recently, Kriti Sanon and Shraddha Kapoor were roped in as brand ambassadors of Nakshatra and Gitanjali Gems respectively.