Rosmerta Digital Services Limited

Draft Red Herring Prospectus dated July 20, 2024

Summary

Rosmerta Digital Services Limited is making an initial public offer. The document does not yet state the price.

About 63% of the amounts stated for the objects go to funding the Working Capital Requirement of the company, and about 17% to funding the capital expenditure for purchase of office space in Mumbai, with smaller amounts for other objects. The amount for funding expenditure for inorganic growth through acquisitions & other strategic initiatives and general corporate purposes is not yet stated.

The review found 6 points to read closely and 19 worth checking.

Read closely

1. Criminal proceedings against the company, its directors or individual promoters
2. Short corporate history
3. High share of proceeds for working capital
4. Working-capital need is justified by stretching holding periods
5. Profits are not converting into operating cash
6. Licences and approvals pending, expired or not renewed

How the capital was built

• The last priced issue of shares was a fundraise in 2 allotments between 9 Jul 2024 and 16 Jul 2024: 40,00,000 shares to non-promoter investors at ₹110 each, 10.2% of the pre-issue capital, at 38556 times the price of the previous issue about 3 years earlier; it came 0 months before this prospectus.
• From the first priced issue (14 Sept 2021, ₹0.0029 in today's shares) to the last, the price per share rose 38556 times over 3 years.

Conclusion

Of the 6 points to read closely, 2 concern the promoters, management and their dealings (criminal proceedings against the company, its directors or individual promoters; short corporate history), 2 concern how the IPO money will be spent, 1 concerns the financial statements and 1 concerns the business, the valuation or the quality of disclosure. These could not be scored automatically and need reading: guarantees given for group entities; tax demands; payments to insiders are high relative to profit. These wait for the price and the final share count: shares issued shortly before the IPO at a deep discount to the issue price; issue price is a large multiple of promoters' cost. The pages to read are 1–2, 91–92, 120, 305, 313, 315 and 350.