After a brief pause, Polycab India Ltd's shares resumed a sharp decline, plummeting over 22% on Thursday following a recent income tax department search on January 10. The Ministry of Finance disclosed that the search covered 50 locations across Pune, Aurangabad, Mumbai, and Nashik in Maharashtra, as well as Daman in Gujarat and Delhi. The operation unearthed substantial evidence, including documents and digital data, exposing the company's alleged tax evasion tactics. Preliminary analysis suggests involvement in unrecorded cash sales, unaccounted cash payments for purchases, and artificial expenses related to transport and sub-contracting, all aimed at suppressing taxable income.
Polycab India's shares hit a low of Rs 3,812.35 on BSE, marking a 22.4% decline. The stock had reached a 52-week high of Rs 5,722.90 on December 14, 2023, before concerns over the IT raids began affecting its performance.
The Ministry of Finance asserted that credible evidence revealed unaccounted cash sales of around Rs. 1,000 crore and unrecorded cash payments exceeding Rs. 400 crore made by a distributor on behalf of the company. Moreover, non-genuine expenses totaling about Rs. 100 crore, categorized as sub-contracting expenses, purchases, and transport expenses, were identified in the seized evidence from the flagship company's premises.
The ministry's release detailed the determination of unexplained transactions by a distributor, inflating purchase accounts by about Rs. 500 crore, and facilitating certain parties to inflate their accounts with unaccounted cash. The search operation led to the seizure of unaccounted cash exceeding Rs. 4 crore, along with the restraint of more than 25 bank lockers.
Polycab India, in response to the tax evasion reports, had recently refuted any such claims on stock exchanges. The company affirmed its commitment to compliance and transparency, emphasizing its cooperation with the Income Tax Department officials during the search proceedings in December 2023. As of now, the company stated it had not received any communication from the Income-tax department regarding the search's outcome.
