Shares in Manpasand Beverages have seen a dramatic fall in the last few weeks, as investors continue to dump the stock, after the auditor of the company resigned suddenly.
This company had some very prestigious list of investors, including top-notch mutual funds and foreign portfolio investors.
These set of investors now seem to be selling the stock on worries over the books of accounts. The auditors resigned on lack of information.
"Significant information requested by us at various points in time was not provided. There has been no further progress with respect to the pending information, evidences and explanations," the auditors said.
Therefore, the statutory audit for the year ended March 31, 2018 remained incomplete by the previous auditors. The company has since appointed a new set of auditors. It has clarified though that the lack of information, was largely on account of systems upgrade.
Manpasand Beverages: Debt free
Manpasand Beverages owns the "Mango Sip" and "Fruits Up" range of brands, which presently contribute a bulk of the turnover of the company. It has other brands as well, but, these two form the bulwark.
What is interesting about the company, is that it has managed to raise capital as and when necessary and hence has remained a debt free company. All of its expansion plans have come by way of equity infusion. Many large and small investors have in the past, subscribed to shares, which has helped the company expand. It has been able to raise money at hefty premiums.
Manpasand Beverages is now adding new facilities and also expanding its presence.
Should we buy this stock?
We still believe that this stock is overvalued even at levels of Rs 128 and there could be a further downslide that can be anticipated. The stock had come out of the circuit filter around the Rs 150 to Rs 160 levels, but, there has been fresh dumping of the stock.
For a stock that has worries over corporate governance, it would be expensive to pay a p/e of 20 times one year forward earnings. In fact, if you get the stock around Rs 80, it may be worth taking a risk, otherwise it is still best to avoid the stock.
There are many other small cap stocks that could do well. One of these is Sanwaria Consumer. Read more on why you should buy the Sanwaria Consumer stock
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