Last week, the Income Tax Department announced that it raided Polycab for evading tax. Who exactly did Polycab defraud here? A fun read

Link: https://boringmoney.in/p/polycab-may-have-done-some-tax-fraud

TLDR:

1. The ITD raided Polycab's offices, factories, even distributors for tax fraud. It said it found a bunch of unaccounted sales that were done in cash

2. When this news came out, its share price fell more than 23% on a single day, the highest ever in its history.

3. BUT this assumes that tax fraud is always bad for the company. In this particular instance, the ITD press release says that the tax fraud was done by hiding revenue.

4. Which means that -- assuming ITD is correct -- this is additional revenue that will be recognised the next year onward (even though it was hidden till now). So, in some ways, Polycab should actually be worth more than before the tax fraud was discovered, because of the additional revenue.

5. This is a simplification, of course. If Polycab has defrauded investors once, it might do so again. Which is why its future share price will not just be about its discounted future cash flows but also but about the trust that the company will have lost in the eyes of the investors.

6. The summary doesn't do the article justice: https://boringmoney.in/p/polycab-may-have-done-some-tax-fraud