Polycab India Faces 22% Stock Decline After Tax Department Detects Rs 1,000 Crore in Unaccounted Sales
- cagoyalayush
- Jan 11, 2024
- 2 min read
Polycab India's Share Plunge:
- Shares of Polycab India experienced a 22% drop in morning trade on January 11.
- The decline was attributed to the income tax department's revelation of "unaccounted cash sales" amounting to approximately Rs 1,000 crore during a search at the company's offices the previous day.
Block Deals and Share Transactions:
- Multiple block deals totaling Rs 1,293 crore occurred on the exchanges.
- Around 33 lakh shares, representing a 2.2% stake in Polycab, changed hands.
- The buyers and sellers involved in the transactions were not immediately identified by Moneycontrol.
Stock Performance and Market Capitalization:
- At 10.12 am, Polycab shares were trading at Rs 3,825 on the NSE.
- Trading volumes significantly increased, with 20 lakh shares changing hands, well above the one-month daily traded average of 7 lakh shares.
- Over the last nine sessions, Polycab witnessed a market capitalization loss of approximately Rs 23,091 crore, reducing it to Rs 59,270.70 crore.
Income Tax Department's Findings:
- The Central Board of Direct Taxes (CBDT) stated that credible evidence from the search revealed unaccounted cash sales of around Rs 1,000 crore by Polycab.
- The CBDT did not explicitly name the group in its statement but was confirmed by official sources to be Polycab India.
Investigation Allegations:
- A distributor, acting on behalf of Polycab, was found to have made unaccounted cash payments exceeding Rs 400 crore for raw material procurement.
- The investigation also uncovered "non-genuine" expenses worth around Rs 100 crore, including sub-contracting expenses, purchases, and transport expenses, based on seized evidence.
Unexplained Transactions and Distributor's Role:
- Unexplained transactions were conducted by the distributor, involving the issuance of bills without actual goods supply.
- The goods were purportedly sold in the open market for cash, with the distributor enabling certain parties to inflate their purchase accounts by approximately Rs 500 crore.
Impact on Stock and Industry Valuations:
- Nuvama Institutional Equities anticip a medium-term impact on Polycab's stock, expecting a de-rating on valuations.
- The upcoming Q3 results are seen as critical, with any revenue growth lower than 14-15% adding a negative trigger.
- The development is also seen as potentially impacting the valuations of the entire cables and wires sector, as the market may assume similar practices by other players.
Market Reaction on Other Stocks:
- Shares of KEI Industries also slumped by 8.5% to Rs 2,880 on the NSE.
- Nuvama Institutional Equities suggests that stocks with expanded valuations, like KEI Industries at 42x, are at risk of getting de-rated in the very immediate term.
Comments