(Yicai Global) Jan. 25 -- Shares of Huabao International Holdings and its Shenzhen-listed unit have plunged since Chinese authorities launched an investigation into the billionaire chairwoman of the tobacco flavoring and fragrances company for suspected disciplinary violations.

The Supervisory Committee of the city of Leiyang in Hunan province is probing Zhu Linyao, who is also Huabao International’s chief executive and controls 71 percent of the company, the two firms said in separate statements yesterday morning. They did not provide any details about the alleged violations but said the businesses are operating normally.

After diving almost 66 percent in Hong Kong yesterday, Huabao International [HKG: 0336] rose 6 percent today to HKD5.15 (66 US cents). Huabao Flavours & Fragrances [SHE: 300741] fell by the 20 percent exchange-imposed limit yesterday, and slid a further 11.2 percent today to close at CNY31.19 (USD4.93).

As Zhu is not involved in the operation and management of Huabao Flavours, the incident will not have a significant impact on the business, the Shanghai-based company said.

Zhu founded Huabao Flavours' predecessor Huabao Edible Flavor & Fragrance Shanghai in June 1996. She became chairwoman and chief executive of Huabao International in March 2004.

The Shenzhen Stock Exchange asked Huabao Flavours last yesterday to provide more details and clarify whether the violation involved corporate responsibility. It also called on the firm to carry out its own checks and disclose any recent changes in business situation.

Huabao Flavours, which mainly makes tobacco and food flavorings, is famous for extravagant dividends. It has distributed CNY4.7 billion (USD742.5 million) since it listed in 2018, with the amount that year alone exceeding the firm’s 2018 profit. Huafeng International received a total of about CNY3.8 billion.

The dividends have attracted many institutional investors. As of Sept. 30, Orient Red Qiyuan 3-Year Holding Period Mixed, a fund of Industrial and Commercial Bank of China, and Sunshine Property and Casualty Insurance were among Huabao Flavours' top 10 shareholders.

Editor: Futura Costaglione