As Rosmerta Digital Services gears up to launch its SME IPO next week to raise ₹200 crore, serious complaints have emerged against the company, leading to regulatory concerns. Allegations of concealing essential information and misrepresenting financial figures have been raised, sparking investigations from multiple regulatory bodies, including SEBI, the Finance Ministry, CBI, and the Enforcement Directorate.
Allegations Against Rosmerta’s Promoters and Key Figures
Complaints have primarily targeted the company’s promoters, Karthik Vivek Nagpal, Karan Vivek Nagpal, trust promoter Aarti Nagpal, and other unidentified individuals. Mumbai-based investor Rohit Vijay Nirmal filed a complaint claiming that the promoters intentionally hid significant details and distorted financial data in the company’s Draft Red Herring Prospectus (DRHP).
Nirmal’s complaint also ties Vivek Nagpal, father of the primary promoters, to organized financial crimes, including capital market manipulation, insider trading, and money laundering. According to these allegations, Vivek Nagpal remains actively involved through various channels, which raises questions about the integrity of Rosmerta’s financial disclosures and corporate activities.
A Controversial History: Past Allegations Against Vivek Nagpal
This isn’t the first time the Nagpal family has faced scrutiny. Vivek Nagpal has previously been accused of fraudulent activities, including stock market manipulation, money laundering, and misappropriation of bank loans. The Joint Parliamentary Report of 2001 highlighted his involvement in the infamous Ketan Parekh stock market scam. Following these accusations, SEBI imposed a five-year ban on Vivek Nagpal, barring him from the securities market.
Rosmerta Digital Services is part of the larger Rosmerta Group, with Vivek Nagpal involved in various other group businesses. Over recent years, the group has faced numerous legal challenges, including alleged fraudulent bank guarantees worth crores.
The Financial Surge Raises Questions
A key concern raised by investors is the rapid increase in Rosmerta’s revenue and profit. On March 31, 2022, the company reported a modest revenue of ₹20 lakh, with a net loss of ₹3 lakh. Just a year later, by March 31, 2023, Rosmerta reported a sudden revenue jump to ₹84 crore and a net profit of ₹10.56 crore. In the September 2023 quarter alone, the profit has reportedly crossed ₹14.83 crore. This rapid financial growth has raised eyebrows among investors and regulators, with allegations that it may not be sustainable or accurately reported.
Discrepancies in IPO-Related Information
Further raising concerns, Rosmerta Digital Services’ IPO price band, lot size, and key dates have reportedly been circulated in the market without SEBI approval. Information related to the anchor bidding date (November 14, 2024), issue opening date (November 18, 2024), and issue closing date (November 21, 2024) has allegedly been shared prematurely on the company’s website. This premature disclosure has raised questions about the company’s adherence to IPO regulations and the transparency of its financial reporting.
Linked Companies and Promoter Affiliations
Page 75 of the company’s DRHP reveals an interesting connection with Reena Rai, who received 30,000 equity shares of Rosmerta Digital Services between 2021 and 2024. Reena Rai, a former director at Reba Security Solutions and a current partner at Reba & Sons LLP and Reba Industries LLP, shares the same registered address in Gurugram as Rosmerta’s promoters. Given these connections, investors are questioning whether these affiliations have been adequately disclosed and whether they could pose a conflict of interest.
Investors’ Concern: SEBI’s Role and Potential Investigations
The rapid surge in Rosmerta’s revenue and profit, paired with the company’s controversial history and promoter associations, has raised concerns among potential investors. SEBI and other regulatory bodies, including the Finance Ministry, CBI, and ED, may examine these complaints more closely in the days leading up to the IPO.
As SEBI considers tightening regulations around SME IPOs to prevent financial misconduct and ensure greater transparency, Rosmerta Digital Services’ case could influence future regulatory measures.
