Mandhana tanks again as MRVL goes on Failing the Street

It was only few days ago that Mandhana Industries share price was soaring high on the IPO of its retail arm Mandhana Retail ventures. On the first day of its IPO after its demerger from Mandhana Industries, MRVL was locked in the upper circuit of 5 per cent on the BSE. On NSE, the stock was locked on the upper price band of Rs. 224. Two days later, the stock had traded on its new lifetime high of Rs. 247 taking the Mandhana Industries share price on an extended rally as well. It had gained over 10% in two trading sessions after listing on December 14 on the back of news that Rakesh Jhunjhunwala had bought 12.73% in the company. MRVL traded at its new lifetime low on two straight trading sessions on 20^th and 21^st December.

The Latest Scenario:

A little less than a week after its listing, the share price of MRVL was locked in the 5% lower circuit for the third successive day on little volumes. But the deal size, which is yet to be declared, has sparked rumors that Jhunjhunwala had bought the stake at a considerable discount in an 'off-market' deal to the listing price. At the peak price of Rs 246, MRVL was evaluated at about Rs 500 crore. Although such a disclosure is not authorized by market regulator SEBI, it however acts as confidence booster among shareholders. 

Also, the fact that stock exchanges had wanted a clarification from MRVL's parent company Mandhana Industries over the sudden spike in share price weighed on sentiment. As per the takeover regulations of SEBI, company promoters have to notify shareholders in two working days if there has been any material change of above 2% in the shareholding pattern of a company.

Even though MRVL was first traded on December 14, no change in promoter shareholding was put out by the stock exchange till December 16. However, it was revealed by the company that Jhunjhunwala had picked up stake in an off-market deal on the same day of listing, which led to the initial ecstasy. On the listing day, complete details of off-market trades were not revealed in MRVL, which has caused anxiety among investors.

Media reporting of Jhunjhunwala's stake purchase in MRVL created a positive prejudice, but problems at the parent company have not been highlighted. Mandhana Industries that recently went through the resignations in the board had to withdraw its dividend and is headed for debt restructuring. In the light of this, the price at which the stake was sold to Jhunjhunwala becomes vital.

MRVL said it had made sufficient disclosures and no questions have been raised by the regulator. MRVL said shareholding pattern has to be declared within 21 days from the end of each quarter. Promoters have revealed that they sold over 14% stake in MRVL, of which 12.7% was acquired by Jhunjhunwala.

Impact on Mandhana:

On December 19^th, Mandhana Industries share price opened at a discounted price of Rs. 41.15 as compared to its previous close of Rs. 45.70, slipping approximately 10 per cent. The stock traded at the same price all day. Yesterday, on 20^th December, Mandhana Industries share price further declined 10 per cent more and traded at Rs. 37.05. Today on 21^st December 2016 Mandhana yet again declined another 10 per cent and traded at the low of 33.35 while it had opened at Rs. 34.50.

However, Mandhana has strong fundamentals and hence it is recommended among the top 500 performing stock of the quarter. For the details on Mandhana Industries, visit Mandhana Industries share price history page of Dynamic Levels website.