By Hrishikesh Dubey
The Manpasand Beverages stock has lost 60% of its value since news emerged that auditors Deloitte Haskins and Sells had resigned. The auditor stated that the company had not provided adequate information to complete the audit. As this went public, stock markets responded negatively, with widespread rumours making their way through Dalal Street.
Livemint reported, for instance, that the MCA and SEBI had launched investigations into the company, which prompted the Bombay Stock Exchange to send an inquiry to the company. Manpasand responded by stating that they had not received any communication from either MCA or SEBI. They stated moreover that they continued to remain in compliance with Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015.
To address the issue of the resignation of the auditor, the company stated that the auditors, Deloitte Haskins and Sells had been auditing the books for 8 years and had not previously expressed concerns on the financial situation of the company. It also refuted the allegation that it had abstained from providing information to their auditor.
In this context, what is also being discussed is a post on 2Point2 Capital titled ‘The Curious Case of Manpasand Beverages’.Originally published in December 2016, it appears to have gained traction recently. The post claims that there have been lapses on the accounting front for the company.
A core focus of the post has been its focus on comparing Manpasand with unlisted companies including Parle Agro, Coca-Cola India and Pepsico India. Interestingly, the blog takes the figures for the unlisted private companies at face value while raising questions on the numbers for the listed company, which faces far greater scrutiny.
The article also raised the question on the Qualified Institutional Placement for the sum of Rs 500 crore raised by the company after its IPO. The article claims that the QIP was done for vague reasons. However, the funds from the QIP were utilised for the constructions of four new plants – a fact that was communicated with the Bombay Stock Exchange in official communication.
The article questions the Indian juice market and it’s growth rate as presented by Manpasand Beverages. It raises questions about the meteoric growth of the company’s top line. The article contends that the fact that Manpasand accounting for 50% of Parle Agro’s volumes in FY 2016 as a less than believable stat.
However, a report by Euromonitor International states that the Indian Juice market is expected to register compounded annual growth rates (CAGR) of 8% by 2022 to cross Rs. 17,500 crore compared to around Rs. 12,040 crores at present. The report further states that regional players and start-ups are challenging present market leaders by introducing a new healthy line of juices. The report goes on to state that ‘companies like Manpasand Beverages and Hector Beverages are quickly gaining market share since the last couple of years’
A 2016 report by Mintel on the global juice market indicates that in India too, packaged juice is likely to grow by taking a share from fresh-squeezed juice and moving into small cities and more rural areas, similar to what is observed globally.
“In India, for example, local fruit juice manufacturer Manpasand Beverages found success focusing on semi-urban and rural markets, where growth is fuelled by rising disposable incomes and a void left by bigger brands that have largely stuck to urban centers,” the Mintel report states.
Being a publicly listed company, there is an abundance of data available to examine the company. A look at the top line and bottom line indicates healthy numbers.
Manpasand had posted a 740+ crore turnover in FY17 along with a 43.85% rise in net profit at Rs. 72.63 crore. Revenues from Mango Sip witnessed an increase of 18% YoY and Fruits Up increased by 46% YoY, with the split between carbonated and non-carbonated being 50-50.
Company stats indicate growth in 1QFY18 driven by 20% growth in volume and 5% in value. With major capacity expansions coming online Vadodara, Varanasi and Sri City coming up in the next year, the company remains bullish on the ability to expand volumes.
Given the recent bloodbath on the bourses with the stock, investors should attempt to separate out facts from rumours flowing thick and fast. The stock may have plenty of value left in it, and value investors may consider picking it up at an attractive valuation now that the price is near IPO levels.
Hrishikesh Dubey is a stock market analyst
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