Mandhana Industries minus Being Human may be risky for investors

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Mandhana Industries is locked in lower circuit for third trading sessions, down 10 per cent at Rs 160 on the BSE, with no buyers  seen in the counter. The stock is currently trading at its lowest level since October 2010.
Till 11:06 AM, a combined 25,742 shares changed hands and there were pending sell orders for 1.16 million shares on the BSE and NSE.
Shares of Mandhana Industries, which has an exclusive licence agreement with Salman Khan’s non-governmental organisation Being Human, plunged 20 per cent on Tuesday, to a 52-week low.
According to a report in The Economic Times: Investors who wish to take advantage of the fallen stock price by making fresh purchases need to consider a few risk factors. After the demerger of the retail business, Mandhana may not offer much value to shareholders.
The report continues: In the last few years, the stock has enjoyed good investor interest due to the company’s tie-up with ‘Being Human’, which although smaller in size was the most profitable and high growth business. The retail business had operating margin before depreciation (EBIDTA margin) of as high as 25 per cent and contributed 10-15 per cent of the consolidated sales. The EBIDTA margin of the remaining business was only 14 per cent.
The Mumbai-based company has the global licence to distribute and market Being Human clothing and merchandise.
The selloff in Mandhana Industries shares is being attributed to a downward rating of the company’s debt by CARE Rating last week.
“The revision in the ratings assigned to the bank facilities and debt instruments of Mandhana Industries Limited (MIL) takes into account its stretched working capital cycle on account of elongation in its receivables position,” CARE said in a statement.
Meanwhile, in clarifications and updates to investors’ queries, the company on said Tuesday, June 21, 2016: “We have already received the approval to its scheme of demerger of the retail business from the High Court vide order dated March 29, 2016. Pursuant to the said order, the company is in the process of demerging its current retail business into the Resulting Company, Mandhana Retail Ventures Limited (MRVL). All current and future retail businesses of Mandhana Industries Ltd will henceforth be carried out in the Resulting Company.”
Mandhana Retail Ventures Limited is in the process of signing a new contract with the Being Human – The Salman Khan Foundation, the specifics of which are under negotiation with them, the statement added.

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