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By Ruma Dubey

Manpasand Beverages hit the 20% LC the moment it opened for trading and was locked at Rs.344.80, a new 52-week low.  If one may recollect, the company has gone public in 2015 and its IPO prices was Rs.320.

The stock price slumped today after Deloitte Haskins & Sells resigned as Statutory Auditors of the company with effect from May 26, 2018. No reason was given in the disclosure for their resignation and this has caused a lot of discomfort with brokerage houses, with Kotak suspending rating on the stock.

The company further announced that due to sudden exit of its auditors, the Board meeting scheduled on May 30, 2018 for consideration of quarterly and annual results has been cancelled – this makes it all the more suspicious.

The only thing which the company mentioned w.r.t auditors was that it has now appointed M/s. Mehra Goel & Co., Chartered Accountants, New Delhi, as Statutory Auditor of the Company with effect from 27th May 2018 to fill the casual vacancy.

This is indeed very serious news and in the current atmosphere of heightened suspicion in the backdrop of so many scams creeping out of rotten companies which outwardly look so glamorous.

Someone as big a Deloitte does not tender in a resignation without a solid reason, that too just four days before Q4FY18 and FY18 numbers are to be declared. What is all the more suspicious is that the company chose to remain mum – why not disclose the reasons if there is nothing to hide or untoward?

Remember, in recent time, in March’18, it was the same auditor Deloitte which refused to sign off on Fortis’s Q3 numbers unless the Singh brothers returned the Rs.500 crore allegedly taken out from the company without the Board approval.

Also in 2014, it was Deloitte which resigned as statutory auditor of Financial Technologies India Ltd (FTIL) after the latter got embroiled in a Rs 5,574 crore payment crisis. Thus the past experiences indicate that unless it is something very serious, Deloitte is not the kind to generate publicity with a resignation.

When an auditor resigns, he is legally obliged to inform the company about the circumstances of his resignation. If, for example, the auditor has resigned because he suspects fraud, malpractice or mismanagement which he has not been able to resolve with the company's management, the 'interested parties' will feel that they need to know. And in the past that is what has happened all along. Failure to comply with this obligation is an offence and could have far reaching consequences for the auditor.

In contrast, the company's management may be at pains to avoid any adverse publicity. They may wish to avoid publication of a resignation statement for reasons like protecting company's reputation or its share price against what they may see as unjustified criticism. Or else, it could be for protecting their own position. It has happened in the past and happens all the time when the management exerts pressure on the auditor to water down the circumstance of resignation or withdraw the resignation statement completely.

Despite the stock price tanking to a new low, the management of Manpasand did not bother to issue any statement, not explaining the circumstances of resignation. Keep a very vigilant watch – all does not seem to be well.

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