Home / Industry / Banking /  Deposit-taking firm MPS plans to sell stake in food processing business

Kolkata: One of eastern India’s biggest deposit-taking enterprises, the MPS Group, is looking to sell its profitable food processing business in the wake of mounting pressure from regulators to wind down its disputed collective investment schemes. The group says the aim is to infuse cash to expand operations.

Eastern Indian firms such as MPS Greenery Developers Ltd, which collected small deposits from the public promising attractive returns, faced regulatory clampdown after one of them, the Saradha Group, went aground in early 2013 defrauding at least 1.7 million people.

For years, the Securities and Exchange Board of India (Sebi) has been pressuring MPS to foreclose its schemes and repay depositors. In October, the capital market regulator asked MPS Group’s bank accounts to be frozen in a bid to recover at least 1,520 crore for depositors in its disputed schemes.

Group chairman P.N. Manna said on Monday that the group was looking to sell at least a 30% stake in MPS Food Products Ltd, which sells fruits, vegetables, cereals, dairy products, bottled drinking water, and provides catering services at hotels.

In fiscal year 2011-12, MPS Food Products generated close to 100 crore in revenue and posted a net profit of 10 crore, according to the firm’s latest regulatory filings with the Registrar of Companies.

The group wants to hand control of the food processing business to a new management, Manna said in an interview.

MPS Greenery Developers, the group’s flagship firm at the centre of the controversy for raising public deposits, owns a substantial stake in the foods business—it held 46.5% at the end of March 2012.

To secure depositors’ dues, the state government of West Bengal had last year restrained some groups such as MPS from alienating their assets, but Manna claims he has obtained favourable ruling from the Calcutta high court which allows him to weigh the possibility of selling the food processing business.

Mint couldn’t independently verify his claim.

MPS’s food processing business had grown fast within a few years, according to a former employee who did not want to be named. Even its relatively new bottled drinking water business has been “doing quite well" thanks to the group’s strategy of offering an “attractive" distribution margin to take on more established brands, this person said.

However, in the wake of the Saradha Group’s collapse and the regulatory pressure it has been facing since, MPS has been struggling to provide financial resources that the food processing business needs, this person said.

MPS’s deposit-taking business has taken a hit, though in the absence of regulatory filings for 2012-13 it isn’t known to what extent. That apart, Sebi has already secured the title deeds of the farmland that MPS owns and uses for cultivation of fruits and vegetables.

Though these are not its own assets, the food processing business may not remain viable if regulators were to seize MPS’s farmland, the former employee said. The group is legally contesting Sebi’s action against its so-called collective investment schemes, and until lately had managed to keep money flowing into them on the strength of district court orders.

Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less

Recommended For You

Trending Stocks

Get alerts on WhatsApp
Set Preferences My ReadsWatchlistFeedbackRedeem a Gift CardLogout