Polycab India, a leading cables and wires manufacturer, disclosed a robust 15.3% surge in net profit for the December quarter, reaching Rs 416.51 crore compared to Rs 361.69 crore in the corresponding period last year.
The company’s net sales for the quarter amounted to Rs 4,340.47 crore, reflecting a substantial 16.8% increase from the previous year. Highlighting a noteworthy 19% rise, the total cost reached Rs 3,865.06 crore, as per an exchange filing.
Revenue from wire and cable operations witnessed a significant jump to Rs 3,900 crore, marking a 17% year-on-year increase. However, revenue from the Fast-Moving Electrical Goods (FMEG) segment declined by 13% to Rs 296 crore. On the flip side, other revenue recorded an impressive 97% increase, reaching Rs 248 crore, according to Polycab India.
Addressing the Income-Tax authorities’ search conducted in December 2023, Polycab India emphasized its full cooperation, providing necessary details, clarifications, and documents. Up to the financial results’ issuance date, no written communication from the department regarding the search outcome was received. The management, relying on available records, expressed the belief that there is no material adverse impact on the company’s financial position. Consequently, no material adjustments are deemed necessary for the quarter and the nine months ending December 31, 2023.
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On January 11, Polycab India’s stock experienced a significant decline of over 21% following the Income-Tax department’s announcement of a search on “a cable and wire company” in December, uncovering unaccounted cash sales of approximately Rs 1,000 crore. Subsequently, the stock rebounded by 16% as several brokerages maintained a positive stance, increasing the target price.
Earlier In an unprecedented turn of events, Polycab India, the country’s largest wire and cable maker, experienced its most significant share fall on January 11, plunging by a staggering 21 percent and wiping out over Rs15,000 crore from its market valuation. The substantial decline was fueled by mounting concerns surrounding potential tax evasion, a departure from the company’s otherwise positive trajectory since its listing in April 2019.
The market shockwave emanated from Income Tax Department searches conducted at 50 locations between December 22 and December 30, casting a shadow over the company’s financial practices. The turmoil escalated after Polycab issued a press release on January 9, vehemently denying the reports of tax evasion circulating in the media. The company asserted that it had not received any communication from the income-tax department regarding the outcome of the search.
However, the situation took a turn when, on January 10, the Finance Ministry released information stating that the IT department had initiated search and seizure operations “in the case of a group engaged in the manufacturing of wires and cables and other electrical items.” The ministry revealed that unaccounted cash sales of around Rs1,000 crore had been uncovered, along with evidence of more than Rs400 crore in unaccounted cash payments made by a distributor on behalf of the flagship company. Additionally, non-genuine expenses totaling about Rs100 crore were identified.
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The fallout was palpable on January 11, as Polycab’s shares witnessed a significant decline. In response, the company issued another release, reiterating its stance of not receiving any written communication from the IT department and questioning the lack of specificity in the press release from the Press Information Bureau on January 10.
Market analysts are expressing heightened concerns about the gravity of the situation, emphasizing the potential impact on the company’s corporate governance. Despite Polycab’s track record of delivering positive annual returns, questions about its premium multiples and corporate practices may pose challenges in the future. Foreign portfolio investors (FPI), who consistently increased their stake in Polycab from nine percent in June last year to over 12 percent in September, may play a crucial role in determining the company’s fate if they decide to sell.
Adding to the complexity, last week, US-based Capital Group offloaded shares worth Rs337 crore on the National Stock Exchange, signaling a shift in investor sentiment. Polycab, known for its remarkable growth, achieved a record-high stock price of Rs5,733 last month, marking a ten-fold return over its initial public offering (IPO) price.
Inder Jaisinghani, the chairman and managing director of Polycab, who rose to rank 32 on the 2023 Forbes India Rich List with a net worth of $6.4 billion, is now under increased scrutiny. As the company enters its silent period ahead of announcing its latest quarterly results, industry watchers are closely monitoring unfolding events, anticipating their potential ramifications on Polycab India’s financial standing, market reputation, and the broader implications for the industry.