Polycab slides again amid rise in volumes

MUMBAI – Investors could consider moving out of Polycab India after its shares on Thursday saw their sharpest fall since listing on allegations of unaccounted cash sales of Rs 1,000 crore and cash payments of Rs 400 crore made on behalf of the company.

The shares tumbled nearly 23% intraday, before recouping some losses to end at 3,878.45 rupees on the NSE, down 21% from the previous close. This is the second time this week that the shares have seen sharp losses, bringing its total losses for the week to over 28%.

While the Central Board of Direct Taxes has not named the company in its statement released late Wednesday, news agency PTI’s reported it is Polycab India.


Shares of other listed cable companies – R R Kabel, KEI Industries and V-Marc India – also fell 4-5% on Thursday. Polycab, meanwhile, said that it has not received any communication from the tax department.

“The Company reiterates that as on date, the Company has not received any written communication from the IT Department regarding the outcome of the search,” it said on Thursday, after market hours.

“The Company is an ethical and law-abiding company and follows the best corporate governance practices,” it said.

The plunge in the stock was accompanied by a surge in volumes, suggesting selling by some big investors. Over 18 crore shares of the company were traded on the NSE on Thursday, which is more than 26 times its 3-month daily average volume of 681,105 shares.

US-based Smallcap World Fund Inc was among the sellers of Polycab India, selling 851,003 shares or 0.57% stake in the company on Thursday.

According to market chatter, a prominent Mumbai-based AIF and PMS (portfolio management services) firm has been cutting its holding in the company, which has been one of its top holdings.

“The severity of the allegation is something to worry about, and requires a clarification from the management,” said Praveen Sahay, analyst at Prabhudas Lilladher. “We can take a call only after that.”

Polycab India has often been considered as the bellwether for the cables sector in India, and more than three-fifth of the analysts covering the shares have a ‘buy’ or equivalent rating for it.

Though valuations have been expensive, analysts retained their positive ratings on strong growth prospects. Now, they await clarification from the company on the alleged tax evasion case to decide on the ratings.

"The ongoing Rs. 1000 crore tax evasion case involving Polycab awaits further clarity," said Anil R, analyst at Geojit Financial Services. "Amidst expectations of sustained volatility, there is an anticipation that the stock will underperform."