Investors should exit Manpasand Beverages over weak corporate governance

There could be more downside for the stock which is down 78 per cent from the issue price

A stock has no value in the markets if the company does not value corporate governance. This is the case with Vadodara-based Manpasand Beverages (Manpasand) which has been in the news since May 2018 after its auditors resigned. Despite the steep 85 per cent correction in the stock price since hitting its peak, investors should offload existing shares, according to analysts and market experts.

“One should exit from the stock where there are governance issues and the promoter's role is in question,” says Vishal Gutka, vice president, Philip Capital.  

Last week, top executives of the fruit juice maker were arrested by Goods and Services Tax (GST) department officers for an alleged tax fraud. According to exchange filings, whole time director Abhishek Singh, Harshvardhan Singh and chief financial officer Paresh Thakkar were arrested. Following the arrests, some directors chose to discontinue with the company.

The stock has been hitting its lower circuit in the past two days. With a 40 per cent fall since Monday, the stock now trades at Rs 70.4 apiece, around 78 per cent lower that its issue price. The stock was listed on bourses in July 2015.

Experts say Manpasand’s bad corporate practices are evident and it is better to get out of the stock. Moreover, they are skeptical about its prospects.

In fact, several red flags about Manpasand were highlighted by Amit Mantri of 2Point2 Capital, in his blog titled ‘The Curious Case of Manpasand Beverages’ in December 2016. Lower retail penetration in core markets, achieving high scale without any significant advertising, non-disclosure of the existence of a competing business run by immediate family members in the IPO and QIP documents, among others, are some of the issues in the blog.