Polycab stock plunge: Retail investors lose ₹3,108 crores in 6 sessions, unravelling the dive

Polycab India stock plummets 28% in 6 sessions, causing a ₹3,108 crore loss for retail investors. The abrupt decline sparks investigations into the contributing factors.

The value of domestic mutual funds’ investments in Polycab India has decreased, which can be linked to the company’s shares declining significantly during recent trading sessions due to accusations of tax evasion.

The company’s share price fell sharply from ₹5,404 per share to ₹3,878, a significant drop of 28.3%, between January 4 and January 11. Mutual funds experienced a loss of roughly ₹1,387.77 crore during this time.

Investors are reeling after Polycab India’s stock saw a sharp drop amid a flurry of market volatility. According to the most recent shareholding data available from the Bombay Stock Exchange (BSE), mutual funds, foreign portfolio investors (FPIs), and retail investors have all experienced significant losses. This has prompted inquiries into the underlying causes of this noteworthy market shift.

The most recent BSE shareholding data paints an unfavourable image for the investors in Polycab India. Mutual funds, which held about 90.93 lakh shares at the end of the September quarter of FY24, saw a loss as the stock fell, making up 6.06% of their total holdings in the company.

Additionally, ₹2,774.20 crore was lost by foreign portfolio investors (FPIs) between January 4 and January 11. At the close of the second quarter of FY24, FPIs owned 1,82,03,798 shares or 12.13% of the troubled company.

Retail investors, meanwhile, suffered a significant loss of ₹3,108 crore. At the end of Q2 FY24, retail investors held 20,388,755 shares or 13.58% of the company.

Not only has the steep drop in Polycab stock hurt investors financially, but it has also had a big effect on the market capitalization of the company. The market capitalization fell sharply by ₹22,844 crore from ₹80,897 crore on January 4 to ₹58,053 crore on January 11. This sharp decrease highlights how much the stock has dropped, and it also raises questions about the company’s financial stability.

The Ministry of Finance added gasoline to the fire when it revealed that on December 12, 2023, the IT Department began conducting multiple-location search and seizure operations at Polycab and its distributors. Over fifty sites were examined, including Delhi, Mumbai, Pune, Aurangabad, Nasik, Daman and Halol

Polycab is accused of engaging in a tax evasion scheme that involves unreported cash sales of ₹10 billion, unreported cash payments of more than ₹4 billion made by a distributor acting on Polycab’s behalf, and ₹1 billion in fictitious expenses. These disclosures, which are the result of incriminating evidence discovered during the search, have raised questions regarding the company’s financial handling procedures.

It’s important to recognize Polycab India’s historical stock performance despite the recent decline. Since the company’s launch in April 2019 at ₹538 per share, its shares have continuously shown remarkable growth. The stock produced positive returns in both CY19 and CY20, showing gains of 85% and 15%, respectively.

The most notable year was CY21 when Polycab shares produced an amazing 138% multi-bagger return, which was followed by a 4% gain the next year. The stock returned 114%, which was another multi-bagger, in the recently ended 2023.

The stock, which is currently trading at ₹4,000 per share, has increased by an amazing 644%, indicating significant gains from the IPO price. This historical background illuminates Polycab India’s stock’s potential and resilience in the face of recent difficulties. The investing world has been rocked by the recent upheaval surrounding Polycab India’s stock. The market cap declines, investor losses and regulatory scrutiny have clouded the once-soaring stock.