Shares of Polycab India, a leading manufacturer of wires, cables and electrical items, plummeted by 22% on Thursday, after the income tax department uncovered unaccounted cash sales of around Rs 1,000 crore by the company. The IT officials conducted raids at 50 premises of Polycab India in Maharashtra, Gujarat and Delhi on January 10 and seized incriminating documents and digital data.
According to the Central Board of Direct Taxes (CBDT), the flagship company of the Polycab group had not recorded the cash sales in its books of accounts and had also made cash payments of more than Rs 400 crore for unaccounted purchases of raw materials¹. The company had also inflated its expenses by claiming non-genuine sub-contracting, transport and purchase expenses amounting to about Rs 100 crore.
The IT department also found that one of the authorised distributors of Polycab India had facilitated certain parties to inflate their purchase accounts by issuing bills without genuine supply of goods, whereas such goods had been sold in the open market in cash. The distributor, who exclusively sells products of Polycab India, had undertaken unexplained transactions worth about Rs 500 crore.
The IT raids resulted in the seizure of unaccounted cash exceeding Rs 4 crore and the restraint of more than 25 bank lockers. The CBDT said that further investigation is in progress.
Polycab India had earlier denied any tax evasion by the company and said that it had not received any communication from the IT department regarding the outcome of the December 2023 search operations². The company had asserted its commitment to compliance and transparency and said that it had fully cooperated with the IT officials.
However, the latest revelations by the CBDT have cast a shadow over the company's credibility and corporate governance. The stock price of Polycab India fell by 22.4% to hit a low of Rs 3,812.35 on the BSE on Thursday, after hitting a 52-week high of Rs 5,722.90 on December 14, 2023. The company also witnessed multiple block deals worth a total of Rs 1,293 crore, involving around 33 lakh shares, representing a 2.2% stake in the company. The buyers and sellers of these transactions are not yet known.