Shares of Polycab India, a leading manufacturer of cables and wires, witnessed a dramatic 8.7% plunge on January 9th, 2024, following reports of a potential Rs 200-crore tax evasion scheme. CNBC TV18 sources claim the Income Tax Department (I-T) unearthed Rs 250-300 crore worth of suspicious transactions linked to the company’s promoter accounts, triggering the sell-off.
The I-T department further amplified the accusations by asserting they possess “proof of tax evasion” spanning the past five-six years from Polycab’s accounts. This claim adds weight to the potential financial impropriety, raising concerns among investors.
Adding fuel to the fire, December 22nd, 2023, marked a day of extensive raids by the I-T department across 50 of Polycab’s locations nationwide. While the company vehemently denies any wrongdoing, their statement acknowledging cooperation with I-T inquiries and a lack of formal communication regarding the investigation’s outcome fails to fully quell investor anxieties.
The timing of these allegations couldn’t be worse for Polycab. In the recently concluded quarter ending September 2023, the company displayed remarkable success, boasting a 58.5% surge in consolidated net profit to Rs 436.89 crore. However, the past month has witnessed a 12% decline in share price, with 6% of that drop occurring solely after the December raids.
Further Context for Readers:
- Market Significance: Polycab India is a heavyweight player in the Indian electrical equipment sector, commanding a sizable market share. The company’s performance is often seen as a barometer for the industry’s overall health.
- Potential Implications: If the tax evasion allegations are proven true, Polycab could face hefty fines, penalties, and reputational damage. This could lead to a prolonged correction in share price and disrupt the company’s growth trajectory.
- Investor Outlook: The ongoing investigation creates significant uncertainty for investors. Until a clear resolution emerges, the stock is likely to remain volatile, making it a risky proposition for short-term traders.
In conclusion, the tax evasion allegations against Polycab India cast a dark cloud over the company’s recent success story. While the company maintains its innocence, the I-T department’s claims and ongoing investigation leave investors jittery. As the case unfolds, close monitoring of developments is crucial for anyone considering an investment in Polycab India.