Polycab Plunges 21%: Mutual Funds, FIIs Reel as Tax Raid Uncovers Cash Discrepancy

12 Jan 2024 , 09:28 AM

On January 11, mutual funds witnessed a staggering loss of over Rs 940 crore, while foreign investors incurred a hefty Rs 1,885 crore setback as shares of Polycab India Ltd tumbled by more than 21%. This sharp decline was triggered by the income-tax department’s revelation of ‘unaccounted cash sales’ amounting to approximately Rs 1,000 crore during a search of the company’s offices the previous day.

Over the last nine sessions, mutual funds have collectively lost around Rs 1,460 crore, and foreign investors faced a significant dip of Rs 2,936 crore, marking a 29.1% drop in the stock. The descent was propelled by concerns related to corporate governance and income-tax issues.

As of the September quarter shareholding data, mutual funds held approximately 90.93 lakh shares, constituting a 6.06% stake in Polycab India. Meanwhile, Foreign Institutional Investors (FIIs) possessed around 1.82 crore shares, representing a 12.13% stake in the company.

In the most recent bulk deal, foreign investor Smallcap World Fund offloaded 8.51 lakh shares, equivalent to a 0.57% stake in Polycab India, at a price of Rs 3,599.87 per share. The total transaction value amounted to Rs 336.64 crore.

The revelation of Polycab making undisclosed cash sales of around Rs 1,000 crore, coupled with credible evidence found during the searches by the Central Board of Direct Taxes (CBDT), is anticipated to have a lasting impact on the stock in the medium term. This development is expected to lead to a de-rating on valuations, which expanded to 37x in 2023. The company is set to release its third-quarter results next week.

On January 11, the stock concluded at Rs 3,904.70 on the National Stock Exchange, experiencing a significant 20.5% drop from the previous close.