Shares of Manpasand Beverages Ltd. hit the 20 percent lower circuit after the fruit juice maker announced the sudden resignation of its statutory auditor Deloitte Haskins & Sells.
That came four days ahead of Saif Partners and Nomura-backed company’s board meeting to announce March quarter results on May 30. The maker of Mango Sip juice appointed Mehra Goel & Co in place of Deloitte, it said in an exchange filing yesterday. Also, the board meeting has been cancelled, it informed the NSE in a filing today.
Everything related to financial results announcement and the timing of the auditor's exit is purely coincidental, Manpasand Beverages said in another exchange filing today.
We want to take this opportunity to assure everyone that the decision has been taken by the management after due consultations and it is in the best interests of our shareholders.Manpasand Beverages Statement
This is just a minor hiccup and doesn't represent any long term business impact, the company added. Emails and phone calls to Deloitte by BloombergQuint for an explanation remained unanswered.
An auditor resigning is rare and them resigning suddenly just a few days before the annual accounts are finalised is rarer still, said Amit Mantri, founder of investment adviser 2Point2 Capital, who in a December 2016 blog had raised concerns about the fruit juice maker’s financials. “We need to see the auditor’s resignation letter to understand the reasons given by them for this move. So far that information has been missing from the company filings on the exchange.”
Kotak Institutional Equities, which had a ‘Buy’ rating with a target price of Rs 450 on Manpasand Beverages, suspended its rating on the stock after the auditor resigned. Citing lack of disclosure, its note indicated that the brokerage will review the stance after the company announces annual results.
The stock, locked at Rs 344.20, has a return potential of 65.2 percent, according to the consensus of analysts tracked by Bloomberg. Of the brokerages covering the stock, eight recommend a ‘Buy’ and only one has a ‘Sell’ call on it. This data predates the auditor resignation.
Deloitte Haskins & Sells have been auditors for Manpasand Beverages since the company’s listing in 2015 and the resignation seems more due to their internal structuring, said Sameer Kalra, co-founder of Target Investing. It would be a negative for the stock price in the short term till shareholders approve the new auditors and results are announced, he said
We would look at it as an opportunity to accumulate for long-term investors since the business doesn’t have debt or any operational issues. The recent tie-up with Parle only supports the business growth and validation of company.Sameer Kalra, Co-Founder, Target Investing
Financial Health
Manpasand Beverages reported revenue of Rs 564 crore in nine months ended December compared with Rs 702 crore for the full year 2016-17. Its nine-month earnings per share stood at Rs 4.97 compared with Rs 6.65 in 2016-17.
(Updated with comments from Manpasand Beverages’ management.)
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