X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
How Deceptive Appearances Can Be Wealth Destroyers - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

How Deceptive Appearances Can Be Wealth Destroyers
Jun 7, 2018

Manpasand Beverages made a stellar debut on the bourses in 2015. Within a year of listing, the stock had surged by over 100% from its issue price of Rs 320 per share.

Brokerages, mutual funds, and retail investors were enamoured by the moat that the company boasted of in its IPO document.

Present in the beverages segment, Manpasand offers a mango based fruit drink under the 'Mango Sip' brand. It also offers fruit drinks and carbonated fruit drinks under the 'Fruits Up' brand as well as energy boosting fruit drinks under the 'Manpasand ORS' brand.

The company claims to have a strong reach in semi-urban markets where it enjoys higher market shares than some of the established names such as Parle Agro (Frooti), Dabur (Real), and PepsiCo India (Slice).

It is worth noting that building a strong franchise in such a short time is not a simple thing.

Parle Agro - that pioneered packaged fruit juice in the country through Frooti - built its wide distribution reach over a period of three decades.

In the words of a reputed asset management firm, the company's strong potential stemmed from the theme of value migration from carbonated drinks to fruit based drinks.

Manpasand's management succeeded in painting a rosy picture of the company. They emphasised the moats of a strong distribution reach, pricing power, and rising market share.

Everyone was floored by the tall claims made but hardly any one bothered to check the management's track record or quality.

In a glaring breach of corporate governance, the promoters held stake in a competing business (Hansraj Agro Fresh) but failed to disclose the conflict of interest at the time of coming out with an IPO in 2015 and further at the time of raising funds through qualified institutional placement in September 2016.

The final straw came last month when the company's auditors, Deloitte Haskins and Sells, resigned as its statutory auditor due to the non-provision of significant information required to complete the audit of financial statements for FY18.

Apparently, Deloitte was unable to get documents and other evidence supporting the costs, revenues, and capital expenditure of the company that finally led to its exit.

Both SEBI and the corporate affairs ministry have started investigations into the non-disclosures and the possible accounting lapses by Manpasand Beverages.

Needless to say, the company's stock has been in a free fall ever since. In the last one month, the stock is down more than 50%. A lot of retail investors have been caught off guard.

The investing world is abound with such inflated angels vying for attention.

The only way to avoid such traps is to refrain from herd behaviour and question the authenticity of the so called 'moat' that a company swears by.

Warm regards,

Madhu Gupta
Research Analyst, ValuePro

Madhu Gupta

Madhu Gupta (Research Analyst), ValuePro has a post graduate degree in both physics and finance. Having worked with India's leading economic research agency, she has a natural flair for numbers and analytics. She brings with her a near-decade long rich experience in the field of finance. A firm believer of the principles of value investing, she looks for robust businesses with durable competitive advantages.

Equitymaster requests your view! Post a comment on "How Deceptive Appearances Can Be Wealth Destroyers". Click here!

  

More Views on News

Two Meetings That Nailed the Idea of Owning Brilliant Smallcaps Without Buying Them (The 5 Minute Wrapup)

Mar 22, 2018

Certain blue chips hold the potential of delivering returns comparable to small-cap stocks. With these stocks, you can get the best of both worlds.

What They Forgot to Tell You About Sensex at One Lakh (Profit Hunter)

Nov 29, 2017

Stocks that could beat Sensex returns in the long term.

Which Equity Mutual Funds to Buy Now? (Outside View)

Nov 13, 2018

PersonalFN explains that in falling markets investing in equity mutual funds can be beneficial in long run by choosing the right equity mutual fund scheme.

What SIPs Tell Us About the Stock Market (Vivek Kaul's Diary)

Nov 13, 2018

The real test of the SIP investor will come once the stock market falls by 20% or more, or for a period of six months or more, which it hasn't up until now.

Good News! Earnings Are Turning Around... Slowly (The 5 Minute Wrapup)

Nov 13, 2018

Do not be in a hurry to buy stocks that have performed brilliantly in latest quarter's earnings. Nor dump the ones that have under-performed.

More Views on News

Most Popular

3 Big Money Makers to Round Out Your 2018 Portfolio(Profit Hunter)

Oct 31, 2018

The market is offering many strong opportunities in the small cap space right now. Don't miss out. This is the time to get rich.

These Are the Kind of Blue Chips You Should Invest In(The 5 Minute Wrapup)

Nov 9, 2018

All blue chip companies are large caps but all large caps are not blue chips.

Insider Buying: These Owner Operators Are Taking Advantage of the Correction(Chart Of The Day)

Nov 2, 2018

We believe insider buying is one of the strongest smart money indicators.

Are You Among The 35% Parents Who Will Not Be Able To Finance Their Child's Future?(Outside View)

Nov 1, 2018

PersonalFN explains the importance of being prepared for your child's future.

Are Fund Houses Opening Up Their NFO Factories Again?(Outside View)

Nov 2, 2018

PersonalFN sheds light on FY 2018-19 so far, the mutual fund industry has collectively launched 84 New Fund Offers (NFOs), of which some are still open for subscription.

More

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Nov 13, 2018 (Close)

MARKET STATS