Talking about going public the people focus primarily just on valuation, bankers, and the day the company gets listed. The mundane but extremely vital part that everyone overlooks is the company’s books of accounts. After the company files the draft red herring prospectus (DRHP) with The SEBI, every figure, registry, and old contract becomes open to questions. If these documents are not clean one not only loses the time in cleaning these documents but also the entire process of listing gets delayed.
Many management teams start thinking about IPO readiness only after the bankers are appointed. By then it’s a scramble. In this article we present the lists of financial records the companies should keep and arrange them at very early stage so that listing becomes a non-charged event.
1. Clean, Audited Financial Statements
Your audited financials are the backbone of the offer document. SEBI expects restated financial information for the last three financial years, plus a stub period if your last audit is old. The auditor signing those restated numbers also needs a valid peer review certificate from ICAI, so it’s worth checking that early.
One more thing. Companies that are listing or about to list need to follow Ind AS. If you’ve been on Indian GAAP all this time, the shift takes longer than most people think.
Start by pulling together:
- Signed financial statements for every year with complete notes
- Auditor’s reports, including CARO reporting
- Accounting policies, and a record of every time they changed
- Explanations for any audit qualification or emphasis of matter
2. Restatement Readiness
Restatements are where old mistakes return to haunt you. If you fix an error later on, change a policy, or reclassify an expense, your offer document has to show those numbers as if you’d gotten them right from day one. Do yourself a huge favor: keep a simple, running log of every prior period adjustment, noting the reason and the supporting math. Years down the road, nobody is going to remember why a specific provision was reversed. Having a simple, one-page note ready will save you endless back-and-forth with your auditors and merchant bankers
3. Statutory Registers and Secretarial Records
Secretarial gaps are very common, as well as easy to solve if you spot them soon enough. A lot of them can be caused by small things like a missing signature or a form filed late.
•Registers: Maintain up-to-date lists of members, directors, and charges.
•Minutes: Board and shareholder meeting minutes shall be signed and dated.
•ROC Filings: Gather all filing documents like AOC-4, MGT-7, and SH-7 for changes in share capital.
•Allotments: For each allotment, get PAS-3 return form.
In case you’ve filed after the time limit, to get it legal you might have to do some type of compounding or seek a condonation for a mistake, and it won’t come cheap. Therefore, you really don’t want it as a filing deadline hangs over your head.
4. Share Capital and Cap Table Records
Every share ever issued will be looked at. Bankers and their legal counsel will trace the whole history from incorporation to today, and your cap table has to match your ROC filings exactly.
• Board and shareholder resolutions for each allotment
• Valuation reports used for pricing
• Share certificates, transfer forms, and demat records
• Shareholder agreements and ESOP grant documents
• Details of any shares pledged by promoters
If a number doesn’t reconcile, find out why now. Fixing a 2016 allotment is much easier before the DRHP is filed.
5. Tax Records: Income Tax, GST and TDS
Tax disputes go straight into the litigation and risk factor sections of the offer document. Investors read those pages carefully, so you want to know your exposure before they do.
• Income tax returns, assessment orders, and pending appeals
• GST returns reconciled with books of accounts (GSTR-1, GSTR-3B, and input credit)
• TDS returns matched against Form 26AS
• A list of every open notice with its current status
Reconciliations are boring, we know. But a clean set of them makes the due diligence far smoother.
6. Related Party Transactions
This is the section that attracts the most questions. Loans to promoters, sales to a group company, rent paid to a director’s family. All of it needs to be listed, priced fairly, and approved properly.
• A complete list of related parties, updated every year
• Written agreements with the pricing basis explained
• Board and audit committee approvals under Section 177 and Section 188 wherever applicable
• Transfer pricing documentation for international transactions
If a transaction was done on a handshake, put it on paper now. Better late than never.
7. Loan Agreements, Contracts and Contingent Liabilities
Most loan agreements need lender consent before you can go public. If you haven’t read your covenants in a while, now is a good time. Getting a no-objection letter from a bank can take weeks.
• Sanction letters, loan agreements, and security documents
• Corporate guarantees given or received
• Key customer and supplier contracts
• A working list of contingent liabilities and pending litigation
8. Audit Trail and Internal Controls
Since 1 April 2023, accounting software used by companies must have an audit trail (edit log) that cannot be switched off. Your auditor now reports on this every year. If your ERP or Tally setup isn’t configured properly, fix it before the next audit.
Internal financial controls matter too. Listed companies get scrutinised far more than private ones, and the habits you build now carry over.
• Monthly bank reconciliations, closed on time
• Fixed asset register matched to physical verification
• Inventory records and stock count reports
• A clear approval matrix for payments and journal entries
How Professional Guidance Can Help
IPO preparation touches accounts, tax, secretarial records and legal documents all at once. Having one team look at the full picture early saves a lot of rework later.
At JD Shah Associates, we help companies with:
- Gap assessment of financial and statutory records before the IPO process begins
- Ind AS implementation and restated financial information support
- Tax and GST reconciliations, and review of pending notices
- Coordination with merchant bankers, legal counsel and auditors
Final Thought
Nobody gets excited about reconciliations and registers. Still, a clean set of records is what keeps an IPO on schedule. Start a year or two before you plan to file, fix things one at a time, and the DRHP stage will feel a lot less stressful.
If you are thinking about listing, our team offers IPO readiness and listing consultancy, along with Ind AS and tax advisory support. Reach out to the experts at JD Shah Associates and we’ll help you get your books in shape.
