After Deloitte, Mehra Goel Co. resigns as Manpasand's auditors
In light of the investigation in the GST fraud case which has seen the arrest and resignation of the top Manpasand Beverages executive, auditors Mehra Goel and Co. have resigned on Tuesday, being the second auditor to resign as the company's auditor.
 
The company said in a regulatory filing that Mehra Goel and Co. resigned as the company's statutory auditor citing "recent developments, including action and investigation intiated by the Goods and Sevices Tax authorities in relation to Manpasand Beverages..."
 
"..and resignation of Directors and Company Secretary of Manpasand Bevrages Limited". 
 
Manpasand scrips on the BSE closed 4.89 per cent lower at Rs 40.85 apiece.
 
A CGST statement, released in earlier in the year, stated that searches were conducted on various premises of the company on May 23, following which a racket of creating fake/dummy units for availing fraudulent credit and committing tax evasion of Rs 40 crore involving turnover of approximate Rs 300 crore had surfaced.
 
The investigations revealed a nationwide network of 30 dummy companies that were used by Manpasand Beverages for claiming illegal credit. The agencies are still ascertaining the exact beneficiaries of such dubious deals.
 
Manpasand Beverages is country's first listed pure-play beverage company having a market capitalisation of about Rs 1,200 crore. It manufactures fruit juices under the brand names X-Cite, Mango Sip, Siznal, Aprilla etc
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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IndiGo: Co-founder Rakesh Gangwal Seeks SEBI Intervention on Corporate Governance Issues
Rakesh Gangwal, one of the founders of lnterGlobe Aviation Ltd (IndiGo), has raised several issues on corporate governance in the carrier. In a regulatory filing, the carrier has said that Securities and Exchange Board of India (SEBI) has forwarded it a letter from Mr Gangwal and asked for response by 19 July 2019.
 
In the letter to the market regulator, which is shared by IndiGo, Mr Gangwal says, he "is constrained to seek SEBI's intervention to direct the Company to amend its articles of association to comply with SEBI Regulations, to strictly follow the requirements prescribed by SEBI in letter and in spirit on board matters and proceedings and to direct the Company to allow for the extraordinary general meeting (EGM) resolution to be placed in front of all the shareholders of the company."
 
In effect Mr Gangwal has declared war by sending the letter to the finance minister, the minister of commerce and industry, aviation minister, DGCA (Directorate General of Civil Aviation), secretary of ministry of corporate affairs (MCA) and the stock exchanges. 
 
Interestingly Mr Gangwal anticipates that IndiGo, with its powerful board members will try and dismiss the allegations as being procedural or trivial and seems to have decided to take the entire dispute into the public domain. It will be interesting to see how the government reacts at a time when the entire industry itself is roiled in turmoil.
 
Mr Gangwal points out to SEBI that he and Rahul Bhatia, the other co-founder have about equal shareholding of around 37-38% in IndiGo while the balance stake is held by public shareholders. But he entered into an agreement that allows Mr Bhatia and his affiliates (IGE group) 'unusual controlling rights over IndiGo' out of 'a deep trust built over a decade long friendship' and because he had “no desire” to have any meaningful control of the company.
 
Essentially he accuses Mr Bhatia of “building an ecosystem of other companies that would enter into dozens of related party transactions with IndiGo” and doing this without proper checks and balances.
 
He also alleges questionable practices leading to a failure of corporate governance and goes on to highlight what these are in precise bulleted points:
  • Violations of various corporate governance regulations prescribed by SEBI and violations of the Company's Code of Conduct for Directors and Senior Management. 
     
  • In a split vote, the Board taking the decision to not allow an Extraordinary General Meeting of shareholders (EGM) upon being requisitioned by shareholders with approximately 37% of shareholding in the Company and also refusing to cooperate and provide the necessary information for the requisitionists to conduct the EGM themselves despite this right being available under law. 
     
  • Board decisions and resolutions on critical matters being implemented without basic governance protocols and laws being followed. 
     
  • Significantly diminishing and taking away the authority vested by SEBI to the Nomination and Remuneration Committee (NRC} for identifying persons who may be appointed in senior management. This was done by pushing through a Board resolution that now gives IGE Group the right to identify and screen the candidates for Managing Director, the Chief Executive Officer and the President of the Company. And, also the right to propose to the NRC the appointment, the job profile, qualifications and remuneration of such candidates and require the Company's HR organization to provide all necessary support to the IGE Group on these matters. 
     
  • IndiGo has since its inception had an "independent director" as its Chairman. However, the provision in the articles of association stating "The Chairman of the Board shall be appointed on the nomination of the IGE Group... " has the real potential to take away the independence of the Chairman. It has been a common practice at IndiGo that IGE Group nominates or "recommends" a single person for appointment as IndiGo's Chairman and, from this candidate pool of only one person, that individual is then appointed and designated as an "independent director". While, we aren't questioning the independence of the current Chairman in his decision making, we are questioning the designation of such an individual as "independent". This process of appointing an "independent Chairman" at IndiGo is the classic "Hobson's choice" and a sophisticated way to circumvent SEBI rules and avoid the requirement of designating such a Chairman as non-independent which would then have required IndiGo to have a  majority of Directors to be independent. It simply does not meet the requirements and spirit of the regulations prescribed by SEBI. 
     
  • Not having appointed an independent woman director, a requirement that SEBI gave time to the Company since May 2018 to comply. 
 
"In closing, we recognize that there are influential and powerful people on the Company’s Board who will use their position to influence the outcome of the campaign that the RG Group has embarked upon. Their biggest arguments to downplay the issues will be that these are minor “procedural irregularities” and the Company is addressing them. However, we take comfort in the fact that no one is above the law and India is changing for the better," Mr Gangwal concludes.
 
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Q1 Revenue Growth To Be the Slowest in Two Years: CRISIL
Corporate revenue is seen growing 5%-6% in the first quarter of FY19-20, the slowest pace in two years, because of a broad-based slowdown in consumption, which has affected sectors such as automobiles and fast-moving consumer goods (FMCG), says a research note. That compares with an average revenue growth of 14%-15% in the past four quarters.
 
The estimate is based on CRISIL Research's analysis of 295 companies which account for about 60% of the market-capitalisation of the National Stock Exchange (NSE). The analysis excludes banking, financial services and insurance (BFSI) and oil sectors.
 
 
Miren Lodha, director at CRISIL Research, says, "Automobiles, one of the key sectors driven by consumption spending, continues to reel under a demand slowdown. Higher cost of ownership continues to dampen consumer sentiment for passenger vehicles, while commercial vehicle sales are being impacted by new axle norms, inventory build-up and liquidity crunch. This also impacts ancillary sectors such as auto components and tyres, which are expected to report lower growth. As for FMCG, weakened rural consumption and a high base are expected to cause a moderation in growth." 
 
Adding to the pain from a slowdown in consumption, according to the ratings agency, is a fall in realisations in key commodity categories, which supported revenue growth in FY18-19, especially the first half. 
 
It says, an expected softening in commodity prices will moderate growth in sectors such as steel, aluminium, natural gas and petrochemicals.
 
"A slower weakening of the rupee, at around 4% on-year compared with about 8% on average over fiscal 2019, is also expected to scrape some growth off key export-linked sectors such as information technology (IT) services. Revenue growth for the latter is expected to moderate to about 12% on year compared with the 17% average growth rate over the past four quarters," it added.
 
 
According to CRISIL, the decline in revenue growth, is cushioned somewhat by sectors such as airline services, cement, and sugar where price hikes have aided realisations and consequently topline growth.
 
Prasad Koparkar, senior director at CRISIL Research, says, “With lower topline growth, India Inc is also staring at lower profitability at the operating level. Growth in operating profit, or EBITDA, is expected to be lower at about 3% on-year compared with around 13% on average in the preceding four quarters. Operating margin is seen contracting up to 50 basis points to about 19.5% as topline shrinks.”
 
 
However, the ratings agency feels an expected softening in prices of most of the common commodities and crude oil on-year is expected to limit margin erosion as end-use sectors benefit from lower input prices.
 
Domestic prices of flat steel and aluminium are lower by around 5% and 15%, respectively, while long steel prices will report only a marginal increase of about 1% year-on-year (y-o-y) in the first quarter. Additionally, oil prices are estimated to lower by 8% y-o-y. Thus, while lower realisations for commodities will impact revenue growth this quarter, a fall in commodity prices will lend support to profitability for end-use sectors, CRISIL concludes.
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