Polycab India Stock: Over 28% drop in 6 sessions leads to retail investors losing ₹3,108 crore; here’s why

Domestic mutual funds have experienced a decline in their value invested in Polycab India, attributed to a substantial drop in the company's shares during recent trading sessions amid tax evasion allegations against the company.

From January 4 to January 11, the company's share price plummeted from ₹5,404 apiece to ₹3,878, marking a substantial drop of 28.3%. During this period, mutual funds incurred a loss of approximately ₹1,387.77 crore.

As per the latest BSE shareholding data, mutual funds held approximately 90.93 lakh shares, constituting a 6.06% stake in Polycab India at the end of the September quarter of FY24.

Also Read: Polycab share price gains 3% after falling 28% in last 5 sessions; what should you do?

In a similar vein, foreign portfolio investors (FPIs) experienced a loss of ₹2,774.20 crore between January 4 and January 11. According to BSE data, FPIs held a 12.13% stake, equivalent to 1,82,03,798 shares, in the company as of the end of Q2 FY24.

Meanwhile, retail investors incurred a loss of ₹3,108 crore. At the end of Q2FY24, retail investors held 20,388,755 shares, constituting a 13.58% stake in the company.

Drop in market capitalisation

Following the sharp decline in Polycab shares, the company's market capitalisation, which stood at ₹80,897 crore on January 4, experienced a reduction of ₹22,844 crore, reaching ₹58,053 crore on January 11.

Allegations

According to the Ministry of Finance, the IT Department started search and seizure operations at Polycab and some of its distributors on December 12, 2023, at more than 50 locations across Mumbai, Pune, Aurangabad, Nasik, Daman, Halol, and Delhi.

During the search, incriminating evidence was found and seized, which reveals a modus operandi of tax evasion. Preliminary analysis suggests unaccounted cash sales, cash payments for unaccounted purchases, non-genuine transport, and sub-contracting expenses for suppression of taxable income.

Also Read: I-T dept detects ₹1,000 crore unaccounted cash sales in Polycab

Unaccounted cash sales of ₹10 billion (not recorded in the books), unaccounted cash payments of more than ₹4 billion made by a distributor on behalf of Polycab, and ₹1 billion of non-genuine expenses are some of the allegations against the company, domestic brokerage firm Axis Capital stated in its recent note. 

Still holds multibagger gains

The company's shares, which made their debut in April 2019 at ₹538, have consistently demonstrated impressive gains since their listing. In both CY19 and CY20, the stock yielded positive returns, registering gains of 85% and 15%, respectively.

Also Read: Over 45 Nifty 500 stocks gained between 10% and 50% in January so far; Sobha, JBM Auto among top gainers

The year CY21, in particular, stood out with a remarkable multibagger return of 138%, followed by an additional 4% increase in the subsequent year. In the recently concluded 2023, the stock once again delivered a multibagger return of 114%.

With the current trading price of ₹4,000 per share, the stock has surged by an impressive 644%, showcasing a substantial increase from its IPO price.

Disclaimer: We advise investors to check with certified experts before taking any investment decisions.