Carillion disclosed on Aug. 11 that Kiltearn had doubled its stake to 10 percent at the start of February when shares were trading at around 225 pence each, becoming the company's biggest shareholder.

But Carillion's shares have tumbled about 75 percent since February and more than 70 percent from early July to close at 54.85 pence on Monday. The plunge has knocked about 70 million pounds off the value of Kiltearn's shareholding.

The size of Kiltearn's loss has only emerged now because the doubling of its stake in February was only disclosed to the stock market on Friday.

Carillion said it had not notified other investors of Kiltearn's stake hike because it had "no record" of the February increase until last week, when the investor trimmed its holding to 9.85 percent.

Shares in the building contractor dived after it said on July 10 that it was taking an 845 million pound ($1.10 billion) writedown and that Richard Howson, its chief executive, was stepping down with immediate effect.

While the share price drop has spurred speculation the FTSE 250 business could become a takeover target, analysts expect the company will be forced to turn to its shareholders to help shore up its balance sheet through a rights issue.

It has drafted in accountancy firm EY to help it undertake a strategic review and is working with advisers HSBC, Morgan Stanley, Lazard and Stifel.

Investment firm Kiltearn was set up in 2011 with the backing of Silchester International Investors, a hedge fund that specialises in long-only investments and does not short shares.

Kiltearn describes itself on its website as a "value" investor and that "we screen only for the cheapest stocks available to us in the world."

A spokesman for Kiltearn declined to comment on why it had lifted its Carillion stake to 10 percent.

The spokesman said the firm had "fulfilled its UK disclosure obligation in relation to it crossing the 10 percent threshold by notifying Carillion and the FCA (Financial Conduct Authority) that it had crossed the 10 percent threshold on 1 February 2017".

(Reporting by Ben Martin; editing by Susan Thomas and Rachel Armstrong)

By Ben Martin