We were surprised by the resignation of Deloitte Haskins & Sells India and once the Q4 results are out, everything will be crystal clear, said Abhishek Singh, Director, Manpasand Beverages.
"Everything was on track. This resignation happened just three days back and we were also surprised," Singh said.
Watch: Manpasand Beverages blames system upgrades for delay in providing data to Deloitte
Speaking to CNBC-TV18, Singh said our new auditors are very well respected auditing firm and in future, company will be working with Deloitte.
Edited Excerpts: What is the reason that Deloitte resigned as the auditor?
It was largely because of the fact that both of us were very keen to get our results on time for Q4 as part of regulatory requirements. We had provided all information also. But, much more information was required by the auditors for which there were some general delays due to setting up and upgrading of our enterprise resource planning (ERPs). But, we feel that all relevant information has been passed on reasonably well on time. Also, we need to understand that the fast moving consumer goods (FMCG) industry is highly unorganised and this is not like information technology sector or banking sector, where everything has been formalised. So, getting data from all these 4,000 odd distributors and compiling it every quarter to quarter, it requires huge resource and huge systems.
All companies do this, you are not unique in this space. We have got companies who have got thousands more distributors than you have and they are able to give the data as required by their auditors on time. So that reasoning would not cut ice with many who are watching probably? So can you be more specific, what is the issue here?
As I told that, all information has been already shared and more information was required, which we were ready to share. But, there were some delays, there were some things with ERP setting, upgradation, all the things were going on. We are hardly a 1,400-1,500 days old company, we are listed very recently and systems are already in place.
Is this a first quarter in which this issue has occurred that the auditors asked for information, which wasn’t entirely provided, is this something that you would had to deal with in previous quarters as well, how has this been done earlier?
We were working with our auditors for the past eight years successfully. We have crossed around 30 odd quarters with them. We have shared each and every information properly on time and everything is recorded and documented. For the last eight years, there were no problems, no issues and no delays.
What was this information that they required this quarter which could not be provided?
There were some distribution related information, some things were pending, which we were little bit – because of this ERP process and upgradation and all those things – that was the main reason for delay but still significant information has already been provided. Whatever things they had asked for the last 8 years, we used to follow, we used to record it and document it and we used to supply them on time.
Why exactly did you not disclose this with the press release that you gave to the exchanges yesterday and why have you said that this is just a minor hiccup and doesn’t represent any long-term business impact and the fact that this happened is purely coincidental, has nothing to do with the results when you yourself are now saying that you wanted to report your results on time, you wanted to give some data to them which they wanted and you couldn’t furnish them on time. So it doesn’t cut ice, doesn’t sound very congruent, can you elaborate further on that, why did you not disclose it earlier?
Everything was on track. This resignation happened just three days back and we were also surprised. Three days back, we were working with them for the entire month and everything was well set up also. So, we were providing all the details, all documents, all requirements, everything we were answering. So, whatever has happened in the last three days, we all were surprised.
This is not going to impact our future business. We are working at 6 lakh outlets and you already know that we are going to enroll another 4.5 million outlets. So on distribution front, on factory setting front, we are setting up factories in record time.
Can you be very specific in terms of what was the information sought?
It was all recording, some distribution number.
What exactly is I am asking? The reason I am pressing on that point is, not very long back, there was this write up in the social media, which had raised questions about Manpasand. You would well remember that episode. The thrust of that particular blog, which went pretty viral at that point was also the fact that – these were completely allegations and they basically said that the numbers in terms of sales, revenues etc. which Manpasand puts out, it doesn’t quite square with the Nielson data or the touch points or the what people see on the ground. That is the reason I am pressing the point, you are saying this is about data about distribution but what exactly?
First of all, regarding blog, I would not like to comment on some specific blog.
I get that. But since you said it is about distribution, I just like you to be clear and very specific in terms of what exactly was the data that was sought?
It is just about distribution. We are getting information – the process is that we are getting information about all the shares from all the distributors. Now, due to some logistical problems, due to ERP setting, many things were not able to be provided on time, which now we are ready and once the results are out, everything will be crystal clear and it will be all on records.
You seem to suggest that this information is very minor in nature – that sounds little contradictory to what Deloitte has been saying because for an auditor to stepdown after eight years of relationship doesn’t seems to quite match. In any case, you have appointed new auditors now. Have they agreed to work and release the earnings for this quarter and the FY in the absence of this very same information that Deloitte refused to do?
We are working with the new auditors and results will be shortly declared.
So they will declare and signoff on the results without this very information on distribution which you could not provide to Deloitte?
They are also best of the best Indian auditors. I mean, they will also do all this audit process.
I am not asking you that. I am saying have they agreed to work without this missing link of information regarding distribution that Deloitte….
I am answering that, they will conduct this audit process on their own model. It is not if they have agreed or they have not agreed.
So basically you will not be providing that information to the new auditors as well?
Whatever new auditor information is required, we 110% will definitely share all the information with the new appointed auditors.
Why couldn’t you do that with your existing auditor and since you said they have been doing your numbers for the last 30 quarters. Why couldn’t you retain them? You said just up to three days ago they were working with you - that is not how relationships break, right?
Every year business is growing, every quarter business is growing, every quarter new things are coming, new distributors are getting enrolled, new documentations are there, new agreements are there, so it takes time.
As a company shouldn’t you be prepared to handle that onslaught of data?
We are a very small company and definitely after this, I will be much more ready and prepared for the future work.
Have you heard from the Ministry of Corporate Affairs?
Because my colleague reported yesterday that Deloitte has sent in a report to the Ministry of Corporate Affairs and sources in the Ministry of Corporate Affairs are saying that what they have been told is that this is a case of ‘misreporting’ and I am using that exact word. There is a case of misreporting of financial information by Manpasand. How would you like to respond to that?
I would like to clarify that there is no such statement issued by anyone of this sort and your information regarding this thing is little bit wrong. You need to check about this thing.
I am just putting to you what sources at the Ministry of Corporate Affairs have told us and they are telling us based on what Deloitte has told them?
I have not seen anything like this.
Are you aware that Deloitte, your ex-auditor have send their findings to the Ministry of Corporate Affairs?
Not at all.
In this whole hullaballoo that you are talking about, what happened with Deloitte. You are a growing company, they did not give you data. You have new auditors. Investors have lost Rs 1,500 crore of your market capitalisation. A word on that?
If investors have made money with me from the last four years, I am much more confident that once everything is on track, new factories are starting production and we are gaining many more outlets, everything will be again….
Why didn’t you come out earlier and clarify on all these processes then. In the last two days there has been massive wealth destruction?
In the last two days, we had meetings with our distributors. We do not allow all these things to affect our distribution channel and our sales planning. This month end is closing and new month is starting, so we are planning all that things and I am not that too late.
In this letter that Deloitte has written to you, they have written, “that significant information requested by us from the company at various points in time for the purpose of audit were not provided.” Yet you seem to suggest that the information itself is not significant and was asked of only very recently. They seem to suggest that they have been asking for this for a long time now.
I am again repeating, last 32 quarters we are working together and it's not that factories are made in one quarter only. All this things, all these sales activity have been started 18-24 months back.
Would you consider getting a reputable firm to conduct a forensic audit done of the company, so that all the information, all these doubts are put to rest once and for all?
No, all that is not required. The new auditors is also very well respectable audit firm. Once I have my system in place, all ERPs are in place, again in future I will be working with Deloitte. I am confident of that.
When are your results due now?
Just few more days.
Not yet, but we will declare it shortly.
A date that you can give us?