Reliance Communication fell 1.39% to Rs 244.35 at 10:18 IST after the company was accused by government-appointed auditors of under-reporting revenue to save on licence fees.
Meanwhile, the BSE Sensex was 157.88 points, or 0.93%, to 17184.55.
On BSE, 8.16 lakh shares were traded in the counter as against an average daily volume of 26.64 lakh shares in the past one quarter.
The stock hit a high of Rs 252 and a low of Rs 239 so far during the day. The stock had hit a 52-week high of Rs 359 on 11 June 2009 and a 52-week low of Rs 131.35 on 9 March 2009.
The stock had underperformed the market over the past one month till 12 October 2009, falling 16.82% as compared to the Sensex 4.69% rise. It underperformed the market in past one quarter, rising 2.33% as against 26.08% rise in the Sensex.
India's second largest listed mobile phone company by sales has an equity capital of Rs 1032.01 crore. Face value per share is Rs 5.
The current price of Rs 244.35 discounts the company's Q1 June 2009 annualised EPS of Rs 7.17, by a PE multiple of 34.07.
Reliance Communications (RCom) said it is in full compliance with all regulatory requirements in filing its financial statements. RCom has not received any communication from the Department of Telecom (DoT) on the special auditor's report, the company said in a statement.
The accounts of Reliance Communications have been questioned by a government-commissioned audit that alleges it under reported its revenue to the government and paid too little in licence and spectrum fees.
Jaipur-based audit firm Parakh and Company, which was asked to carry out a special audit of RCom by the DoT, has informed the ministry about its findings.
RCom sought to avoid paying around Rs 316 crore in licence and spectrum fees in the two years ended 31 March 2008, the auditor said. There was a difference of Rs 2,915 crore in the revenue reported to the regulator and stock exchanges, with the bourses being given a higher figure, according to the audit report. The government said it was yet to examine the results of the inquiry.
The report is the first of a series of 'special audits' being conducted on behalf of the DoT on India's mobile operators including Bharti Airtel, Vodafone Essar, Idea Cellular and Tata Teleservices as well as Reliance Communication.
The government wants to check whether mobile operators have been correctly reporting wireless revenue from which the state extracts a share in the form of licence and spectrum fees.
DoT is awaiting the report on four other companies - Tata Telecom, Bharti Airtel, Vodafone and Idea.
The latest discovery has come at a time when the Indian telecom sector - with estimated 494 million subscribers -is in the middle of an intensifying tariff war. RCom recently lowered call charges to 50 paise a minute. RCom has 84.11 million subscribers, second to Bharti Airtel's 107 million.
RCom's net profit rose 6.5% to Rs 370 crore on a 5.4% decline in net sales to Rs 3006.13 crore in Q1 June 2009 over Q1 June 2008. The net profit was boosted by interest income and foreign-exchange gains.
RCom provides telecommunication services including wireless, wire line, voice, data and Internet communication services