Shares of Polycab India Ltd experienced a significant decline of over 22 percent on Thursday, following a temporary pause. This decline was triggered by a recent search conducted by the income tax department at Polycab India premises on January 10. The Ministry of Finance reported that the search operation covered 50 locations in Pune, Aurangabad, Mumbai, and Nashik in Maharashtra.
During the search, a substantial amount of incriminating evidence in the form of documents and digital data was discovered and seized. These pieces of evidence shed light on the group’s tax evasion practices, which involved unauthorized distributors. The Ministry of Finance stated that the preliminary analysis indicates that the company engaged in unaccounted cash sales, cash payments for unrecorded purchases, non-genuine transport, and sub-contracting expenses to suppress its taxable income.
As a result of these developments, Polycab India shares plummeted by 22.4 percent, reaching a low of Rs 3,812.35 on the BSE. This decline follows concerns arising from the IT raids conducted in Daman, Gujarat, and Delhi.
The Ministry of Finance has announced that credible evidence obtained during the search has revealed that the flagship company has engaged in unrecorded cash sales amounting to approximately Rs. 1,000 crore. Additionally, evidence of unrecorded cash payments exceeding Rs. 400 crore, made by a distributor on behalf of the flagship company for the purchase of raw materials, has been seized.
Furthermore, the ministry has identified non-genuine expenses totaling around Rs. 100 crore, related to sub-contracting expenses, purchases, and transport expenses, from the evidence seized at the flagship company’s premises.
The search operation has also uncovered unexplained transactions carried out by the distributor, involving the issuance of bills without genuine supply of goods. These goods were subsequently sold in the open market for cash. This fraudulent activity has allowed certain parties to inflate their purchase accounts, resulting in an aggregate amount of approximately Rs. 500 crore. It is important to note that this distributor exclusively sells products of the flagship company.
During the search operation, unaccounted cash exceeding Rs. 4 crore has been seized, and more than 25 bank lockers have been placed under restraint.