Mutual Funds

What made Manpasand Beverages so popular to now so unpopular?

Manpasand Beverages’ Rs 400-crore IPO in 2015 witnessed the demand for 1.4 times the number of shares on sale.

Shares of Manpasand Beverageshave been on a downward journey for seven consecutive sessions, losing 55 percent of its value since the beginning of the week from May 23.

That day it emerged that Deloitte Haskins & Sells India quit as the auditor of Manpasand Beverages as the fruit juice maker failed to provide them with “significant information” on the financial results for the year ended March 31, 2018. The announcement of results, slated for May 30, was subsequently postponed.

This spooked investors, for whom Manpasand had been the flagbearer of rising rural consumption, the company that reflected the importance of Bharat – rural India – in the Indian economy. After all, Manpasand Beverages has the unique distinction of being the sole listed company from the beverages sector. ​

The reaction reflected the popularity the company had enjoyed among investors. But what had made Manpasand such a darling since it got listed on the Bombay Stock Exchange in 2015?

The Rural Story

Founded by Dhirendra Singh, Manpasand Beverages launched its first product Mango Sip in 1997. The product was strategically focused on semi-urban and rural markets.

It was a good choice. Mango drink make up for 85 per cent of the juice drinks segment. Mango based drink category market is worth Rs 6,300 crore in India.

The company created an extensive network to sell its product. Manpasand’s beverage brands are present in over 20 states through more than 200,000 retailers, over 2000 distributors and 200 plus super stockists.

The company’s manufacturing facilities are located at Vadodara in Gujarat, Varanasi in Uttar Pradesh and at Dehradun in Uttaranchal.

The choice of market – Mango Sip was targeted towards consumers in Tier II and Tier III cities – was strategically right. Bigger peers like Maaza and Slice, which control more than 50 percent market share, are urban centric brands.

 Money Spinner

The company also made one smart move.

In  July 2017, Manpasand launched ‘samosa packs’ of Mango Sip, which now came at Rs 5 for a 80ml pack. This leveraged on the company’s understand of the rural market.

This worked well because Maaza, Slice and Frooti played more in the Rs 15 and above packs. Thus, Manpasand now kept competition at bay.​

The move worked. Mango Sip revenues grew ~6.3x  or 44 percent CAGR over FY12-17 driven by 47 percent CAGR rise in capacity and distribution expansion over FY12-17.

Mango Sip contributed 75 percent of revenues in FY17 of which around 55 percent of revenues were from rural areas, 20 percent of overall revenues through IRCTC and the remaining from urban areas.

In 2016, for Manpsand’s less than Rs 10 packs formed 40 percent to total revenues thus indicating its focus on small towns and hinterland.

Its distributors were also happy to stock Mango Sip as Manpasand awarded them with 35 percent margins, against the competition which paid 20-25 percent margins.

 Portfolio Diversification

Manpasand Beverages then diversified its portfolio from 2014, thus reducing the seasonality that is associated with a mango drink.

The company launched fruit juice-based ‘Fruits Up’ premium category beverage. Fruits Up carbonated fruit drinks are available in grape, orange and lemon flavors.

Further, the company launched Siznal a healthy vegetable and fruit drink with honey thereby diversifying its product portfolio to cater to every customer segment across the price pyramid.

These products reported revenues, EBITDA, PAT, CAGR of 52 percent, 59 percent, 64 percent, respectively, over FY12–17. 

 IPO, Investors

Manpasand Beverages’ Rs 400-crore IPO in 2015 witnessed the demand for 1.4 times the number of shares on sale.

​Goldman Sachs India Fund (4.26 percent), SBI Emerging Businesses Fund (1.92 percent), ICICI Pru Balanced Advantage Fund (1.31 percent), and Birla Sun Life Insurance Company (1.15 percent) were the large institutional investors during the IPO.

Manpasand Beverages last raised Rs 500 crore in September 2016. Several of the existing shareholders including Motilal Oswal, SBI Magnum Fund, ICICI Prudential and Nomura participated in the issue.

In the first nine months of FY18, Manpasand reported net sales of Rs 701 crore, 28 percent higher on year, and net profit of Rs 73 crore, up 44 percent.

What’s Brewing?

The mayhem of this week has taken off much of the sheen of the stock.

The company blamed system upgrades for the delay in providing data and information to the auditor. All the distribution related information was passed to the auditors and the results will be declared soon, the company had informed exchanges.

In a filing to the BSE, Manpasand Beverages had said, “It is very unfortunate that we had to part ways with our long-term associate. Everything related to financial results announcement and the timing of this event is purely coincidental and has no direct correlation.”

But questions remain on the information that Deloitte was seeking by the company.

Three brokerages—Kotak Securities, Motilal Oswal Securities and India Infoline—have withdrawn their rating on the stock. Manpasand Beverages now has 83 percent ‘Buy’ calls compared to 90 percent at the beginning of the month.

Its market capitalisation has come down to Rs 3,946 crore, down by Rs 1,200 crore, within a week.

The continued slide in the Manpasand Beverages stock has hit the value of mutual funds who had invested in the company.

Can the company clear the doubts and again get to being the favourite among its investors? Surely, more than a sip will be required.

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