Polycab India tanks 22% as I-T dept finds 'unaccounted income' of Rs 1,000 crore

Polycab India's shares experienced a significant drop, declining by approximately 22% to 23% in morning trade on January 11, 2024. This plunge in stock value was a reaction to the Income Tax Department's discovery of "unaccounted cash sales" amounting to around ₹1,000 crore. The detection of these unrecorded sales occurred during a search operation conducted at the company's offices on January 10, 2024.

The Central Board of Direct Taxes (CBDT) disclosed that credible evidence established these unaccounted sales, which were not recorded in Polycab's books of accounts. The searches covered various premises, including those in Mumbai, Pune, Aurangabad, Nashik, Daman, Halol, and Delhi, and also involved authorized distributors of the group.

The CBDT accused a distributor associated with Polycab of making unaccounted cash payments exceeding ₹400 crore for raw material procurement. Additionally, the investigation uncovered "non-genuine" expenses totaling about ₹100 crore, which included sub-contracting, purchases, and transport expenses, based on the evidence seized from Polycab's premises.

Polycab India tanks 22% as I-T dept finds 'unaccounted income' of Rs 1,000 crore
Meanwhile, Polycab India, on its part, denied any rumors of tax evasion. The company asserted its commitment to compliance and transparency, emphasizing that it fully cooperated with the Income Tax Department officials during the December 2023 search proceedings. Polycab India highlighted its focus on continuing to provide quality products and services, upholding corporate governance, and practicing ethical business conduct.

Despite this recent setback, Polycab has shown strong performance since its listing in April 2019, with positive annual returns each year, including over 100% returns in both 2023 and 2021. However, the recent developments have had a noticeable impact on the company's stock value and could potentially affect market perceptions of the entire cables and wires sector.

Investors and market analysts are now closely watching the unfolding developments, particularly the upcoming Q3 results, to assess the long-term impact on Polycab's financial health and market standing.