Ahead of the initial public offering (IPO) of computing solutions provider, Netweb Technologies India which is all set to hit the D-Street on July 17, the company’s red herring prospectus (RHP) has shown some potential red flags for investors.
As per the RHP filed, the documentary evidence of educational qualifications of two of the company’s promoters of directors of the company including the company’s ‘management’ is not traceable.
Netweb Tech in its RHP said, ‘’The degree certificates pertaining to the educational qualifications of our Promoters who are also the Directors of our Company, Navin Lodha (being the bachelors’ degree in commerce from Shaheed Bhagat Singh College, University of Delhi), and Vivek Lodha (being the bachelors’ degree in commerce from Shaheed Bhagat Singh College, University of Delhi) are not traceable.”
It has further added that the promoters have taken the requisite steps in order to obtain the relevant supporting documents which includes making a written application to the aforementioned university/college, “they have not been able to procure the same,” as per the statement in RHP.
“Accordingly, our Company has placed reliance on affidavits furnished by these Promoters to us and the Book Running Lead Managers, and copies of the correspondences with the relevant university, to disclose the details of their educational qualifications in this Red Herring Prospectus,” said Netweb Tech.
The RHP has been filed with the market regulator Securities and Exchange Board of India (SEBI).
Apart from the stated risk, the RHP has also flagged more risk factors before its IPO hits the market. The company’s success will be in proportion to its long term relationship with its customers. The company generally does not enter with long term contracts which makes it unable to retain long term customers and establish customer base, as per the RHP.
As per the details emerged, in the offer for sale (OFS), Sanjay Lodha will be selling up to 28.6 lakh shares, whereas Navin Lodha, Vivek Lodha and Niraj Lodha will be offloading their 14.3 lakh shares each. Ashoka Bajaj Automobiles LLP will also sell off 13.5 lakh shares in the OFS. As per the company, the price band of the upcoming public issue is set at Rs 475-500 per share. The IPO which will be open till July 19 consists of issue of shares worth Rs 206 crore and an offer for sale of up to 85 lakh shares by the existing shareholders and promoters of the company. The company also expects to raise Rs 631 crore through the IPO at the upper band.
The allotment will be finalized on July 24 and process to initiate refunds will take place on July 25 whereas shares will be credited to the Demat accounts of allottees on July 26 and shares will be listed on BSE and NSE on July 27.
As per the RHP, Netweb Technologies will use the fresh issue in funding capital expenditure worth Rs 32.3 crore while Rs 128.02 crore will be used for funding long-term working capital requirements, Rs 22.5 crore will be utilized in repaying of outstanding borrowings.
