The share price of India’s largest manufacturer of wires and cables was trading 2.96 percent higher in the morning session of Friday. However, since January 9, the shares have crashed over 28 percent.
December 22, 2023 – The search operations against the Polycab group were launched by the Central Board of Direct Taxes (CBDT) at around 50 plants linked to Polycab India in Mumbai from December 22 to December 30, 2023.
The shares had fallen by over 4 percent when reports of the search operations by the I-T Department first surfaced.
January 9, 2024 – Media reports claimed that Polycab has been charged with tax evasion which was identified as Rs. 200 crore in undisclosed income by the I-T department. It has been further added by media reports that the I-T department has identified transactions recorded in the promoter accounts worth Rs. 250 to Rs. 300 crore.
The share price of Polycab was trading in red as soon as the news came in and the stock fell to about 9 percent.
The company in a press release denied such rumours of tax evasion on their part by issuing a statement later the same evening and further said that it remains focused on its mission to offer quality products and services to its customers.
January 10, 2024 – The I-T department found large sums of unaccounted cash sales of about Rs. 1,000 crores after the recent raid in the Polycab Group. The exposed unaccounted cash of over Rs. 4 crore was seized, and over 25 bank lockers were restrained.
Along with this, it was also found that the unaccounted cash payments of over Rs. 400 crores were made by a distributor (on behalf of the company) towards purchases of raw materials and Rs. 100 crores of “non-genuine” expenses, which aggregate to about Rs. 500 crore.
Apart from the income tax report, foreign investor Smallcap World Fund sold 8.51 lakh shares, which is a 0.57 percent stake in Polycab India at Rs. 3,955.87, and the total value of this transaction was worth Rs. 336.64 crore.
These incidents have had such a large impact that Mutual funds lost over Rs. 940 crore and foreign investors lost Rs. 1,885 crore just in one day on Thursday, whereas, the stocks of Polycab India crashed the very next day by over 22 percent in the morning trade.
January 12 – A press release by Polycab India Limited states that it has not received any written communication from the I-T department regarding the outcome of the search operations.
They also mentioned that there is no material adverse impact on the financial position of the Company, following which Polycab India moved up by 2.38 percent and opened high at Rs. 3,910 against its previous close of Rs. 3,878, just a day after crashing around 21 percent in its single-day fall.
In the last nine sessions, foreign investors have lost around Rs. 2,936 crore and mutual funds around Rs. 1,460 crore throughout the subsequent corporate governance and income-tax concerns.
As per the shareholding data, mutual funds held nearly 90.93 lakh shares, which is a 6.06 percent stake in Polycab India, in the September quarter. In the last 6 months, the company has given just 4.37 percent returns, whereas, in a span of one year, it has given over 48 percent of returns.
Polycab India Ltd. is one of the fastest growing FMEG (Fast-moving Electric Goods) companies, with a consolidated turnover of over Rs. 141 billion in FY23. With a market cap of Rs. 59,618 crores, Polycab India is held by 12.4 percent of FIIs and 8.08 percent of DIIs, aggregating to 20.5 percent of the institutional holding, while the promoters have reduced their shareholding.
The company’s revenues from operations grew 15.6 percent from Rs. 12,203 in FY22 to Rs. 14,107 crores in FY23, accompanied by profits of Rs. 917 crores in FY22 increasing to Rs. 1,282 crores in FY23. So far in 2024, the stock of Polycab is down by over 27 percent, which is the biggest single-day drop since March 2020.
Written by Shivani Singh
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