Rolls-Royce share price: Company faces further scrutiny in India

on Apr 7, 2014
Updated: Apr 9, 2020
Listen, Monday, April 7: Rolls-Royce Holdings Plc (LON:RR) is facing further scrutiny of its conduct in India with state-run gas utility GAIL India asking the FTSE 100 company to explain allegations that it had paid intermediaries to win contracts.

Rolls-Royce share price has lost more than one percent in London trading this morning.
Fresh India woes
The Telegraph reported today that GAIL India had issued Rolls-Royce with a ‘show cause notice’ over claims that the UK company had used middlemen to secure deals. The notice means that Rolls-Royce has to explain its actions and why it did not declare that it was using intermediaries.

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Rolls-Royce has supplied GAIL with 63 of the 72 gas turbines installed on a nationwide pipeline network in India and also provides services and repairs to the turbines. While the use of intermediaries is not illegal in India for civil contracts, the companies must declare when agents have been used.
Last week, the Economic Times quoted unnamed sources with knowledge of the matter as reporting that Rolls-Royce had allegedly paid a commission of between ten and 11.3 percent in 24 spares and services deals to Singapore-based agent Aashmore, without disclosing the information when it submitted the bids.

The Telegraph today quoted a Rolls-Royce spokesman as saying that the company had “a close and long-standing relationship with GAIL and will work with them to seek a resolution to this issue”.

GAIL’s notice follows earlier allegations that Rolls-Royce had paid bribes to secure a contract to supply aircraft engines in the country. Last month, India’s defence ministry confirmed that it had ordered an investigation into a deal which the UK aerospace and defence giant had made with state-run aircraft manufacturer Hindustan Aeronautics Limited. (Rolls-Royce share price: Company faces Indian corruption and bribery probe)

The FTSE 100 company is also facing a probe by the UK Serious Fraud Office (SFO) into allegations of bribery and corruption across a number of emerging markets including China and Indonesia.
**Analysts on Rolls-Royce**
Last Monday, Sanford C. Bernstein reiterated its ‘market perform’ rating on the UK engine maker with a price target of 1,100p. Earlier in March, Liberum Capital, which rates Rolls-Royce as a ‘buy’, lowered its price target on the stock from 1,300p to 1,225p, while Davy Research reaffirmed the company as a ‘sell’ with a price target of 860p.
Rolls-Royce currently has a consensus ‘hold’ rating and an average price target of 1,128.23p.
**As of 08:31 BST, buy Rolls-Royce shares at 1072.00p.**
**As of 08:31 BST, sell Rolls-Royce shares at 1071.00p.**


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