Shares of Polycab India were plunging on Thursday after authorities reportedly found large sums of unaccounted cash in the cables and electricals manufacturer’s books.

What Happened: The Income Tax department’s recent raids on the Polycab group have exposed “unaccounted cash sales” amounting to approximately ₹1,000 crore, PTI reported, citing the Central Board of Direct Taxes (CBDT) and official sources.

The searches, initiated on December 22 last year, covered a total of 50 premises in Mumbai, Pune, Aurangabad, and Nashik in Maharashtra, Daman, Halol in Gujarat and Delhi. The CBDT revealed that unaccounted cash exceeding ₹4 crore was seized during the raids, and over 25 bank lockers were placed under restraint.

While the CBDT statement did not explicitly name the group, official sources confirmed to the news agency that it was in fact Polycab.

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Why It Matters: In response to the reports circulating in the media regarding tax evasion by the company, Polycab India had previously issued a clarification deeming them “rumors.” The company emphasised its commitment to compliance and transparency, asserting that it fully cooperated with Income Tax department officials during the search proceedings in December 2023.

The company had claimed in the statement that it had not received any communication from the Income Tax department regarding the outcome of the search.

The CBDT reportedly said the raids yielded a substantial amount of “incriminating” evidence in the form of documents and digital data, exposing the “modus operandi of tax evasion” employed by the group in collusion with some authorized distributors.

Breakdown Of Findings: Preliminary analysis reportedly indicates that the company engaged in unaccounted cash sales, cash payments for unaccounted purchases and non-genuine expenses for the suppression of taxable income. The CBDT alleged that the flagship company made unaccounted cash sales of around ₹1,000 crore, not recorded in the books of accounts.

Additionally, unaccounted cash payments exceeding ₹400 crore, made by a distributor on behalf of the company for raw material purchases, were reportedly discovered. The CBDT claimed to have identified “non-genuine” expenses amounting to about ₹100 crore, including sub-contracting expenses, purchases, and transport expenses, from the seized evidence.

The search action also exposed “unexplained” transactions by the distributor, inflating purchase accounts for certain parties, totalling about ₹500 crore. This distributor exclusively sells products of the flagship company, according to the CBDT statement.

Price Action: Polycab’s share price nosedived 20.36% to ₹3,911.80 in early trade on Thursday after the news broke.

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