Scribd
Upload
125 views5 pages

Manpasand

Manpasand Beverages, an Indian fruit beverage company, engaged in fraudulent activities including fictitious transactions with dummy entities to claim improper tax credits, non-disclosure of competing interests, and raising funds through a QIP with vague use of proceeds plans. In 2018, the company's auditor Deloitte resigned citing failure to provide requested information, and the company was found to have committed GST fraud of Rs 40 crore through fake business units. Senior management resigned or were arrested in relation to the tax fraud scandal that erased 60% of the company's market capitalization.

Uploaded by

Gautam Tandon
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
Download as docx, pdf, or txt
125 views5 pages

Manpasand

Manpasand Beverages, an Indian fruit beverage company, engaged in fraudulent activities including fictitious transactions with dummy entities to claim improper tax credits, non-disclosure of competing interests, and raising funds through a QIP with vague use of proceeds plans. In 2018, the company's auditor Deloitte resigned citing failure to provide requested information, and the company was found to have committed GST fraud of Rs 40 crore through fake business units. Senior management resigned or were arrested in relation to the tax fraud scandal that erased 60% of the company's market capitalization.

Uploaded by

Gautam Tandon
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
Download as docx, pdf, or txt
Download as docx, pdf, or txt
You are on page 1/ 5

Corporate fraud

– Manpasand beverages

I-INTRODUCTION TO THE CASE: -

The company is founded by Dhirendra Singh, the company launched his


first product mango sip in 1998. The main focus of company is mango drinks
which covers almost 85% of the total sales. The company’s manufacturing
facilities are located at Vadodra in gujrat, Varansi in Uttar Pradesh, and at
dehradun in uttranchal. Once market capitalization of Manpasand Beverages was
approx Rs.5000 crores around 2017.

The firm, which markets X-Cite, Mango Sip, Siznal, and Aprilla fruit juices,
among others, allegedly carried out fictitious transactions with dummy entities to
avail input tax credit.

1
II-INCEPTION OF THE FRAUDULENT ACTIVITY: -

1.) In May 2018, DeloitteHaskins& Sells resigned as auditor of manpasand


beverages ltd.

As per section 140 of companies act 2013, the auditor who has resigned from the
company shall file within a period of 30 days from the date of resignation, a
statement in the prescribed form with the company and the registrar, indicating the
reasons and other facts as may be relevant with regard to this resignation.

2.) It is uncommon for auditors in India to resign halfway through an audit. Even
more uncommon for them to quit just before the finalisation of annual accounts.

In its resignation letter Deloitte said: “significant information” requested by it


at various points in time was not provided. there has been no further progress
with respect to the pending information, evidences and explanations.
Therefore, it is unable to complete the statutory audit for the year ended
March 31, 2018.

Thereby Deloitte became the organization to originally identify the problems


plaguing manpasand beverages.

Manpasand’s statement was It is very unfortunate that we had to part ways with
our long-term associate.” that the decision was “taken by the management after due
consultations” and is in the best interests of shareholders. that “the timing of this
event is purely coincidental and has no direct correlation”. that “this is just a minor
hiccup” and doesn’t represent any long-term business impact.

2
III-TIME LINE OF FRAUDULENCE: -

1.The curious case of Hansraj Agro Fresh

Manpasand’s IPO documents had an interesting disclosure which was missed by the
analyst community.

SEBI requires companies to disclose if they or their family members have any
interests in competing businesses. This ensures that investors are aware of any
conflict of interest of the Promoters/Managers of a company. Companies with
Promoters having competing interests is considered negative from a governance
standpoint.

Mr. Satyendra Singh (MD’s brother) and Ms. Renu Singh (MD’s wife’s sister) are
the Directors of Hansraj Agro Fresh (started in 2014) which manufactures the same
products as Manpasand.

This information should have been disclosed in the IPO offer documents. This
information was not disclosed in even the recent QIP documents. Promoters
choosing to not disclose the existence of a competing business run by immediate
family members is a serious red flag. A LinkedIn search shows that ex-employees
of Manpasand now work for Hansraj Agro Fresh.

3
2. The curious case of the 500-cr QIP

In September 2016, Manpasand raised 500 crs through a Qualified Institutional


Placement (QIP). This was after it had just raised 400 crs through an IPO in July
2015. Companies rarely need to raise additional capital so soon after an IPO. As per
SEBI data, Manpasand had the smallest time gap ever between its IPO and its QIP.
There must have been good reasons why the company needed to raise such a large
amount of capital in such a short time after its IPO. The “Use of Proceeds” outlined
in the QIP document was as follows:

Well, that seems a bit vague. Basically, the company is saying they can do whatever
they want. Just give us the money.

Such a large fundraise so soon after the IPO is odd for several reasons. The company
used 100 crs of the 400 cr fundraise in the IPO for repaying its debt. This suggests
that, till a few months back, the company considered debt repayment a better use of
proceeds than investing in growth opportunities. As of 31st March 2016, the
company still had over 90 crs in cash to continue to invest in growth and expansion.
In case that was not sufficient, it could very well have raised debt again. With this
QIP, Manpasand has raised over 1000 crs in equity capital over a 5-year period.

3. In May 2018, DeloitteHaskins& Sells resigned as auditor of manpasand


beverages ltd.

Erodes the market capitalization of the company about 60% within a month.

4
4.GST TAX FRAUD

Vadodara-based MBL was already the center of a controversy after Deloitte resigned
as its auditor in May 2018. Things went even further south when its top brass was
arrested for the goods and services tax (GST) fraud of Rs 40 crore.

MBL had allegedly created sales and purchases of its products across over 30 fake units.

in case of MBL, it has been found that the company set up several fake units
and across the country at that, Real purchase and sale transactions were then
shown with values inflating with each transaction in order to claim a
cumulatively large sum of input tax credit,"

Most of the senior management of the company have resigned, but they have
maintained that they did not have any information about these transactions.

Vishal Sood, Bharat Vyas, Chirag Doshi, Milind Babar and Dhruv Agarwal, five
of the six directors of the company, have resigned.

The company's Managing Director Abhishek Singh, his brother


Harshvardhan Singh and the Chief Financial Officer Paresh Thakkar were
arrested after a raid on May 23.

You might also like