Polycab India I-T raids: Will it singe other wire and cable manufacturers' valuations?

The I-T department said it recovered “credible” evidence during the search, which established that Polycab had made unaccounted cash sales of around Rs 1,000 crore, which need to be recorded in the books of accounts.

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26 Aug, 2025 12:21

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The stock price of Polycab India Ltd (PIL), a well-known manufacturer of wires, cables, and electrical items, suffered a massive 21 percent drop on January 11, after it updated the stock exchanges about the income-tax raid on it in December.

We delve into how the raids will impact the company and the valuations of other manufacturers in the wire and cable industry as well.

What happened?

On December 22, 2023, Polycab was raided by the Income Tax Department, which has recently detected "unaccounted cash sales" of approximately Rs 1,000 crore from the Polycab group.

ALSO READ: Polycab volatility to persist as short buildup indicates weakness, support at 3,600

Officials alleged that preliminary analysis suggests the company engaged in unaccounted cash sales, cash payments for unaccounted purchases, non-genuine transport and sub-contracting expenses to suppress taxable income.

PIL is currently the leading company in the Indian wires and cables industry, mainly due to its extensive dealer-distributor network, which includes over 4,300 entities. The company has a strong pan-India presence, with manufacturing facilities in Gujarat, Uttarakhand, Maharashtra, and Daman.

As for the company's ownership structure, the Promoter & Promoter Group holds 65.91 percent of the shares, while the public has 34.09 percent.

What did Polycab say?

Polycab India said on January 11 that it has yet to receive any written communication from the Income Tax Department regarding the outcome of the searches carried out on its premises in December. The company also stated that the stock exchanges have sought clarification about news reports related to income tax searches. Following this, Polycab India shares witnessed a sharp decline of 21 percent on January 11, which resulted in the erosion of Rs 15,485.96 crore from its market valuation.

What did the I-T Department say?

The Income Tax Department has reported that a search operation was conducted during which a significant amount of “incriminating evidence”, including physical documents and digital data, was discovered and confiscated. This evidence has exposed how the group, in collaboration with some authorised distributors, has been engaging in tax evasion, the I-T officials have alleged. The company indulged in unaccounted cash sales, cash payments for unaccounted purchases, non-genuine transport and sub-contracting expenses, etc., to suppress its taxable income, the I-T Department has alleged.

The department said that it recovered “credible” evidence during the search, which established that the flagship company had made unaccounted cash sales of around Rs 1,000 crore, which need to be recorded in the books of accounts.

"Evidences of unaccounted cash payments of more than Rs 400 crore made by a distributor, on behalf of the flagship company towards purchases of raw materials, have also been seized," it said, adding that non-genuine expenses like sub-contracting expenses, purchases and transport expenses, etc, aggregating to about Rs 100 crore have also been identified in the seized evidence from the premises of the flagship company.

The department said that its search action also resulted in the determination of unexplained transactions undertaken by the distributor for issuing bills without a genuine supply of goods. In contrast, such goods have been sold in the open market in cash.

It added that the authorised distributor facilitated certain parties to inflate their purchase accounts, aggregating to about Rs 500 crore. This distributor exclusively sells products of the flagship company. Unaccounted cash exceeding Rs 4 crore was seized during the search operation, and more than 25 bank lockers were restrained.

Impact on stock in the medium term

Nuvama Institutional Equities expects a medium-term impact on the stock amidst a de-rating on valuations, which had expanded to 37x throughout 2023. The brokerage said the next week's Q3 results become even more critical now, as anything lower than 14-15 percent revenue growth for Polycab will further add a negative trigger.

The brokerage also feels that the development has put valuations of the entire cables and wires pack at risk now as, in the near term, the market may assume that some of these practices might be done by other players as well.