Polycab India tumbles 30% on Income Tax Fraud; 881% returns in 5 years; Fundamental Analysis; What should investors do ?

1

News

Impact of News

  • Polycab India tumbles more than 30% due to this news
  • Share tumbles from 5619 to 3810, on Jan 11 2024 polycab made its new low in 1 year

Polycab India tumbles 30% on Income Tax Fraud

Should you invest in such companies ?

  • As per the Warren Buffet ” The best things that happens to us is when a great company gets into temporary trouble, We want to buy them when they are on the operating table”
  • Keeping this thing in mind we can always look out for such companies which are trading at a discounted price
  • One can also argue that there are certain examples where such bad news (Fraud) happens it impacts the company in the long run , companies such as Yes Bank, Punjab National Bank, Paytm, Suzlon Energy , etc
  • In these companies 1 thing was common all these companies management issue & the shareholding pattern of the promoters had issues 
  • But when it comes to the Polycab India, there was no any serious management issues but 1 thing that can be said is that Balance sheet of Polycab India is really strong so it impacted the company in the short term.

About Company

  • Polycab is India’s leading manufacturers of cables and wires.
  • Polycab has also launched a wide range of consumer electrical products like Fans, Switches, Switchgear, LED lights and Luminaries, Solar Inverters, and Pumps
  • In wire & cable segment Polycab India has 23% market share in India.
  • Company has 25 manufacturing sites
  • Company has a strong presence pan India with 4300+ distributors, 205,000+ Retail Outlets, 23 Warehouses and depots, 4 Regional offices, 9 Local offices and 17 Experience centres.

Revenue Mix

Polycab India has 3 revenue sources

  1. Wires & Cables– company manufactures wires and cables for retail and industrial use, catering to a diverse customer base across a wide range of industries.
  2. FMEG: commenced in FY14, is a high-growth segment. It features a growing product mix across different price points that caters to the complete spectrum of customers
  3. Other- Mainly EPC business.
  • Product wise Breakup-

  • Location wise breakup

 

  • Distribution Channel

Key Ratios

Market Cap ₹ 96,844 Cr.
Current Price ₹ 6,446
High/Low ₹ 6,456 / 3,295
Stock PE 54.3
Sector PE 34
ROCE 32.3 %
ROE 24.1 %
PEG Ratio  1.87
Debt To Equity  0.02

Shareholding Pattern

Change In Shareholding Pattern

Jun-21 Mar-24 Change
Promoters + 68.40% 65.24% -3.16%
FIIs + 6.51% 11.96% 5.45%
DIIs + 8.80% 7.23% -1.57%
Public + 16.29% 15.58% -0.71%
  1. Promoters: Promoters’ ownership has decreased from 68.40% in June 2021 to 65.24% in March 2024, indicating a decrease of 3.16%. This might suggest that promoters have either divested some of their shares or that new shares have been issued, diluting their ownership.
  2. FIIs (Foreign Institutional Investors): FIIs’ ownership has increased from 6.51% in June 2021 to 11.96% in March 2024, indicating a significant increase of 5.45%. This suggests that foreign institutional investors have increased their stake in the market, possibly due to improved market conditions or attractive investment opportunities.
  3. DIIs (Domestic Institutional Investors): DIIs’ ownership has decreased from 8.80% in June 2021 to 7.23% in March 2024, indicating a decrease of 1.57%. This implies that domestic institutional investors have reduced their stake in the market over this period, possibly reallocating their investments to other assets or sectors.
  4. Public: Public ownership has decreased from 16.29% in June 2021 to 15.58% in March 2024, indicating a decrease of 0.71%. This suggests that individual retail investors have slightly reduced their ownership in the market, possibly due to various factors such as market volatility or individual investment decisions.

Financial Trend

Sales:

  • March 2020 Sales: ₹8,330
  • March 2024 Sales: ₹18,039
  • Sales: Increased by approximately 104%.

Net Profit:

  • March 2020 Net Profit: ₹759
  • March 2024 Net Profit: ₹1,784
  • Net Profit: Increased by approximately 135%.

Company Valuation

Share Price (70% up)

  • Polycab India tumbles 30% on Income Tax Fraud ( This was the best opportunity to invest in this company)
  • From 3810 level when the raid happened, share price has grown by 70% to 6430 level.

Share Price (5 years)

  • In last 5 years, company has given 881%
  • If one has invested 1Lakh in 2019, it would have became 9.91 Lakhs.

Median Price to Earning Ratio

  • Current PE- 54.3
  • Median PE- 36.2
  • As per the Median PE, company is overvalued

 

What Should Investors Do ?

  • As the company’s Sales & Net Profit have been continuously increasing
  • Polycab India is fundamentally strong company
  • As of now, Median PE is lower than Current PE, so company is overvalued
  • This is not the right time to invest in this company
  • When the Current PE is less than or equal to Median PE then will be the right time to invest
  • As of now, investors can stay away from this company, if you are thinking of the long term then you can invest small chunk of money

Check this out- Fundamental Analysis of Sula Vineyards Ltd.

Disclaimer

  • This article is a complete guide about Polycab India Ltd.
  • These information and forecasts are based on our analysis, research, company fundamentals and history, experiences, and various technical analyses.
  • Also, We have talked in detail about the share’s future prospects and growth potential.
  • Hopefully, this information will help you in your further investment.
  • If you have any further queries, please comment below. We will be happy to answer all your questions.
  • If you like this information, share the article with as many people as possible

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