Polycab India: The Finance Ministry stated that numerous incriminating evidences, including documents and digital data, were discovered and taken into custody during the search operation.

Market News Updates : Following a brief pause, the selloff in shares of Polycab India Ltd. resumed on Thursday. The Ministry of Finance stated in a statement that the income tax department possesses strong evidence of unreported cash sales of around Rs 1,000 crore by a company involved in cables and wire. The business is thought to be Polycab India Ltd. The search also included some of the group’s authorized distributors, and the finance ministry indicated that the operation was carried out at more than 50 locations across Delhi, Mumbai, Pune, Aurangabad, Nasik, Daman, Halol, and Mumbai. On December 22, 2023, the search and seizure activities were carried out.

The Ministry stated that numerous pieces of damning evidence, including documents and digital data, were discovered and taken into custody during the search operation. These data demonstrate the tax evasion strategy used by the group in collusion with a few authorized distributors. According to preliminary findings, the flagship firm engaged in cash payments for unaccounted purchases, cash sales for unaccounted sales, phony transportation and subcontracting charges, and other practices to reduce its taxable income, according to the Ministry of Finance.

Shares of Polycab India dropped 22.4%, reaching a low of Rs 3,812.35 on the BSE. On December 14, 2023, the stock reached a 52-week high of Rs 5,722.90 before beginning to decline due to worries of IT raids at the business’s location.

The flagship company has reportedly made unrecorded cash sales of approximately Rs. 1,000 crore that are not shown in the books of accounts, according to credible evidence uncovered during the search. Evidence of unrecorded cash payments of over Rs. 400 crore made by a distributor to buy raw materials on behalf of the flagship firm has also been found, according to the Ministry of Finance.

Furthermore, the government stated in a release that evidence collected from the flagship company’s facilities included non-genuine charges in the form of purchases, transportation, and subcontracting expenses, totaling approximately Rs 100 crore.

The search operation also led to the discovery of mysterious transactions made by the distributor, who issued invoices for commodities that were never actually supplied even though they were paid for in cash on the open market. Consequently, the authorized distributor enabled some parties to artificially increase their purchase accounts, totaling around Rs. 500 crore. This distributor only offers goods from the main company. Over twenty-five bank lockers have been placed under search, and unaccounted cash worth more than Rs. 4 crore has been confiscated on moderation.

Recall that Polycab India previously refuted allegations that the business had evaded taxes on stock exchanges and asserted that it had not heard from the income-tax authority about the results of the search operations conducted in December 2023.

“The company reaffirms its dedication to compliance and openness, having provided the Income Tax Department with complete cooperation during the search process in December 23. The company informed stock markets that it had not heard back from the income-tax department regarding the search’s results.

In the market for cables and wires, Polycab is the industry leader. In FY23, its exports increased dramatically by 54% YoY and made up 10% of its total sales. 72 countries are home to Polycab’s exports, however industrialized nations like the US and Australia are the company’s main markets. According to a Jefferies analysis earlier this month, Polycab India previously benefited from the China +1 policy as well as domestic expansion in electricity, housing, and industrial expenditure.

Disclaimer : The above article is meant for informational purposes only, and should not be considered as any investment advice.

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