No Longer Street’s Manpasand

Amit Mantri is having the last laugh. The co-founder of 2Point2 Capital, the Mumbai-based PMS firm, had in a blog post on December 6, 2016 raised suspicion over the numbers of the Baroda-based Manpasand Beverages, which sells fruit drinks and juices under the Mango Sip and Fruits Up brands.

Titled “The curious case of Manpasand Beverages,” Mantri pointed out that Parle Agro’s Frooti, despite being a 30-year old brand, a large advertising budget and an extensive distribution reach, could not achieve what Manpasand had. In North, West and East India, Manpasand had achieved 60%+ of Frooti’s scale in volumes. “This is a phenomenal achievement considering Manpasand spends precious little in terms of advertising and has a limited retail reach. How then did this company achieve such a large scale in such a short time?” wrote Mantri. Among the other red flags, he also questioned the low compensation of a supposedly “high performing” management, besides governance concerns. Mantri felt that something was amiss and left it at that.

Around the time that Mantri had written about the stock, it had already more than doubled from its issue price of Rs.320 a share since its listing in July 2015. The listing, in fact, was a dismal one with the stock closing Day 1 at Rs.326.85, a marginal gain of 2% but not before it fell to a low of Rs.286. But since his post, the stock went on to a hit a high of Rs.512 on September 15, 2017 and saw some marquee mutual funds and investors riding the gravy train and soon it was seen as one of the best consumption stocks that investors needed to pay heed to. The presence of SAIF Partners and Aditya Birla Private Equity, who did not sell any stock during the IPO, only added to the halo.

Now, the sudden exit of the company’s auditor Deloitte Haskins & Sells India on May 26, just days before the declaration of annual results for FY18, citing the management’s inability to share key revenue and capital expenditure data, has sent the stock into a freefall. Adjusted for 1:1 bonus issue in September 2017, the share price has since fallen to Rs.162 against its adjusted issue price of Rs.160.

On May 31 — three days after the company’s auditor resigned — Dhirendra Singh, promoter and director of the company, bought 50,000 shares, worth Rs 1.11 crore, to provide a cushion. But that has failed to break ice with investors.

Before the controversy hit the fruit juice maker, the company’s VP and COO Vijay Jayantibhai Panchal had sold shares worth Rs.1.12 crore on September 9, 2017, just days before the stock hit its record high. After the company was listed in 2015, Singh had bought shares worth Rs 85 lakh in December 2016 for the first time in the open market. Currently, the promoters hold 44.12% stake in the company. Venture capital investor SAIF Partners is the single largest public shareholder in Manpasand, holding 17% stake.

While investors are jittery about Manpasand, the March 2018 holding showed substantial mutual funds presence. Motilal Oswal MF, SBI MFand ICICI Prudential MF held 5.51%, 4.40% and 1.04% respectively. The June 2018 disclosure might just show if any of them were able to bolt out in April & May before the carnage. SAIF, which had invested Rs.90 crore in the company, now holds 17.57% stake, after it sold over 2% stock in 2016 for Rs.67 crore. What was worth Rs.867 crore before the crash, is now worth Rs.339 crore .

For Q3FY18, Manpasand had reported YoY net sales and net profit growth of 39.7% and 65.4% respectively. For 9MFY18, revenue and profit were up 27% and 37%. The management had claimed that the growth was driven by its flagship brand Mango Sip.

While the promoter has mentioned that they are on track to release the numbers and SAIF too backing the management, it remains to be seen whether there will be any takers for the stock after the considerable erosion in market cap.