Rose Merc Ltd Forensic Report - SOIC x StockScans Report

as of Sep 2026

Rose Merc's record carries seven consecutive clean audit opinions, but the clean opinions sit on top of a structure that deserves scrutiny: loans have been routed to the promoter through a board-controlled subsidiary with shareholder approval sought only after the fact, and the group has been built through a web of subsidiaries where control rests on nominee-director majorities at stakes as low as 24.65%. Operating cash flow has also persistently failed to back reported profit, with cumulative cash from operations negative over four years even as dividends were introduced and increased.

Key findings

  1. Loans routed to promoters through a subsidiary, with approvals sought after the fact Critical - Emirates Holding FZ LLC, a board-controlled subsidiary, advanced loans in tranches aggregating ₹9.16 crore to promoter Mohammed Hanif Shaikh, ratified by the Audit Committee and Board and approved by shareholders on 2 March 2026. The Audit Committee had granted omnibus approval on 27 June 2025 for future loans to the promoter up to ₹20 crore. Rose Merc also sought shareholder approval for inter-corporate loans of up to ₹10 crore to Virtual Gain Technologies and ₹8 crore to Navi Mumbai Premier League, both board-controlled subsidiaries, with an earlier ₹3 crore loan to the latter approved without shareholder approval as it fell below the 10% of turnover threshold. The Board approved the acquisition of Abaca Care Private Limited, a related-party transaction with a seller who is a director of the target, which had turnover of Nil in FY2023-24 and ₹20,755.78 in FY2024-25.
  2. A 12-entity subsidiary web built in three years, with control via nominee directors Major - Rose Merc had no holding, subsidiary, associate or JV as of March 31, 2021, 2022, or 2023, but listed 8 subsidiaries as of March 31, 2026. Control of four entities, Outcry Media Solutions (46.67%), Navi Mumbai Premier League (24.65%), Moda Orama Ventures (29.77%), and Emirates Holding FZ LLC (30.07%), rests on appointment of majority nominee directors rather than majority shareholding. Five companies ceased to be subsidiaries or associates as of March 31, 2026, with Kaale and Rose Merc Advisors sold for ₹49,000 against a net worth of negative ₹1.66 lakh. Consolidated PAT was ₹17.05 crore versus standalone PAT of ₹0.81 crore in the latest FY, with 95% of profit at subsidiaries.
  3. Large ESOP and warrant allocations to directors and relatives as promoter stake rises Major - Promoter and Promoter Group shareholding increased from 7,200 shares (0.16%) as of July 07, 2023 to 18,311 shares (0.29%) as of July 10, 2026. Promoters cast 0 votes on Resolution (1) at the postal ballot concluded 14 August 2026. Ms. Vaishali Parkar Kumar, Whole-time Director & CFO, was granted up to 10,00,000 options, and Ms. Eshwari Purvesh Shelatkar, daughter of Executive Director Mr. Purvesh Krishna Shelatkar, was granted up to 15,00,000 options under RML ESOP 2024 via postal ballot notice dated 4 April 2025, before her appointment as Additional Executive Director on 20 January 2026. Ms. Shelatkar, born 14 January 2007, was appointed Additional Executive Director effective 20 January 2026 with basic salary of ₹4,20,000 per annum. Ms. Parkar Kumar's appointment as Non-Executive Director was rejected by shareholders at the postal ballot concluded 11 April 2023 with 98.58% votes against, but she was subsequently appointed to a series of roles culminating in Managing Director & CFO effective 29 January 2026.
  4. Operating cash flow has persistently failed to back reported profit Major - Cumulative CFO over four years was ₹-10 crore against cumulative PAT of ₹34 crore, with CFO/PAT of 0.06x in FY2025-26, -0.02x in FY2024-25, and -21.55x in FY2023-24. The Board recommended a dividend of ₹0.35 per share for FY2025-26, up from ₹0.12 in FY2024-25 and ₹0.10 in FY2023-24, with expected payout of \~₹22,96,570.50 payable on or after September 10, 2026. Rose Merc raised ₹4.18 crore through preferential allotment during FY2025-26, fully utilized as of March 31, 2026.
  5. Gratuity booked only when claims are recognized, not on an actuarial basis Major - Rose Merc's gratuity accounting policy deviates from prescribed AS-15/Ind AS treatment, with management stating gratuity "will be accounted in profit & loss A/c in each financial year when the claim is recognized by the company which is against the prescribed treatment of AS-15". No actuarial valuation was performed, and the company stated the quantum of gratuity provision "could not be gathered" in FY2023-24, noting "to the extent of such amount, the reserve would be lesser". Average effective tax rate was 0.7% versus statutory 25.2% over 4 years.
  6. Seven years of clean opinions with recurring exceptions on statutory dues and audit trail Major - The statutory auditor issued unqualified opinions on the standalone Ind AS financial statements for each year from FY2020 through FY2026, with no Key Audit Matters reported in any year, and the internal financial controls opinion was also unqualified for every year. CARO clause (vii) reported disputed statutory dues as of 31 March 2026, 2024 and 2023 with amounts and forums specified, such as ₹254.60 Lakhs before the CPC for FY2026 and ₹121.98 Lakhs before CIT A (14) for FY2024. The FY2024 auditor's report stated the accounting software's audit trail feature "has not been operated throughout the period for all transactions recorded in the software". The FY2026 consolidated opinion on nine subsidiaries, with total profit after tax of ₹1,722.33 Lacs, was based solely on other auditors' reports.
  7. Long-running disputed tax matters disclosed but unquantified Minor - Rose Merc disclosed an income tax dispute where Settlement Commission proceedings abated, with the matter pending in the Supreme Court with a stay order granted, as of the FY2022-23 annual report. An income tax dispute for A.Y. 2009-10 amounting to 1.31 crore was pending before CIT-A (14) as of the 3 Aug 2023 annual report. The FY2025-26 auditor's report again noted disputed statutory dues without specifying amounts or forums.
  8. A 17-year trading suspension is historical; recent matters are administrative Minor - Rose Merc was suspended from trading on BSE from December 21, 2004 due to non-compliance with the Listing Agreement/SEBI LODR, and was relisted on April 25, 2022 after a revocation process that began with an application on January 23, 2018. The Secretarial Auditor observed the company had not filed the Declaration of Non-Applicability of Large Corporate Entity for FY2022-2023. On 28 Apr 2025, the company submitted a Revised Limited Review Report following a BSE Discrepancy dated 22 Apr 2025 because the Consolidated Results Limited Review Report was not in the SEBI-prescribed format, with no change to the financial results filed on 14 Aug 2024.

What to watch

Bottom line: This is a record of clean audit opinions layered over a group structure where control is exercised through nominee directors at minority stakes, loans flow to the promoter through a subsidiary with approvals sought after the fact, and operating cash flow has not backed reported profit for four years. The risk is concentrated in governance mechanics, how the board approves related-party transactions and how the subsidiary web is controlled. The omnibus approval for loans to the promoter up to ₹20 crore was already granted by the Audit Committee on 27 June 2025, and the loans were ratified by the Audit Committee, Board, and shareholders on 2 March 2026; the next concrete event is the dividend payment of ₹0.35 per share for FY2025-26, payable on or after September 10, 2026.