Factors in the uncertainties due to the IT raid, the share price target for Polycab India Ltd has cut sharply to Rs 4300 from Rs 5,809 by Axis Capital.
Geojit Financial Services expects to underachieve and states its “Sell” target on the stock has been achieved.
In the last trading session, Polycabs India’s stock price plunged by 21 percent. This happened due to the Ministry of Finance without mentioning the company name said that a leading cables and wires company likely Polycab India had unaccounted cash sales of Rs 1000 crore during a raid in December and the IT department has strong evidence about it.
Axis Capital does not have enough information to decide whether tax-eluding occurred and the schedule for the final judgment if Polycab decides to contend the charges. Besides, it is irresolute that the scale of the impact of tax eluded is proven. Possibility can be GST and IT eluding and a penalty.
“But we believe a multiple downrating is inexorable till the charges are proven otherwise. We slash our share target price to Rs 4,300. We slit EPS estimates by 2-4 percent to factor in interruption due to IT raid in FY24E and lower cables and wires margins as capacity is added in the sector in FY25/26E it said.
Axis Capital’s discussion with management suggests Polycab India has not received any formal letter from the IT department yet.
The company contradicts any tax-elusion and intends to appeal against the same if the charges are equalized. It said, in this schema, legal redressal and final judgment on that matter could be processed for a long time.
Further, it said “We do not have adequate data at this point to judge the likely balance sheet impact on Polycab in the event the tax elusion case is proven, given:
- The potential charges flattened might be both GST elusion 18 percent and IT elusion.
- The penalty charges for IT elusion could be between 100 % to 200%.
It is germane to note that Polycab had net cash and investment totaling Rs 15.3 billion end of September 2023.
Research Analyst at Geojit Financial Services Mr. Anil R said the ongoing Rs 1000 crore tax elusion case involving Polycab India awaits further coherence.
Amid the supposition of sustained volatility, there is an eagerness that the stock will underperform he said.