Shares of home loan provider Dewan Housing Finance Corp Ltd slumped 17 percent in early trade on Thursday, with sources saying the Indian government has launched a probe into allegations of financial mismanagement against the company.

Ministry of Corporate Affairs will look into allegations against Dewan following a report by investigative media outlet, two government sources with direct knowledge of the matter told Reuters on Wednesday. The sources said on Thursday the probe has been launched.

The secretary of the ministry of corporate affairs did not immediately respond to an email seeking comment.

Cobrapost said on Tuesday Dewan diverted funds to shell companies to buy assets, and that firms linked to Dewan's controlling shareholders - the Wadhawan group - made political donations beyond mandated levels.

Dewan, one of India's largest housing finance companies, did not respond to a Reuters request for comment after the government initiated the probe. Earlier on Tuesday, it said the Cobrapost report was unfounded and malicious and that it had engaged lawyers to defend itself.

Dewan's shares fell for the fourth straight day on Thursday, trading at ₹138.75, down 14 percent.

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