IPO Advisory · Stage 1
IPO Readiness Audit
A structured pre-IPO gap assessment covering financial, secretarial, legal, and governance requirements — typically run 12 to 24 months before the planned DRHP filing date.
Companies that start the readiness audit 18 to 24 months before the target listing date consistently have smoother DRHP processes. Companies that arrive at Stage 2 (DRHP drafting) without a completed readiness review spend 3 to 6 additional months on corrections that SEBI or the lead manager raises during due diligence. The readiness audit identifies those gaps early — before they become blocking issues on the DRHP timeline.
- • Financial readiness review — three-year P&L, balance sheet, and cash flow against SEBI ICDR Regulation 26 criteria
- • Profitability track record assessment — operating profit (EBITDA) in 3 of 5 preceding years, or QIB route eligibility (Regulation 6)
- • Pvt Ltd to Public Ltd conversion support — Section 14 special resolution, MGT-14, INC-27 filing with ROC
- • Board restructuring — independent director appointment (minimum 2 for unlisted; ⅓ of board for listed), audit committee, NRC per SEBI LODR
- • ESOP audit and cleanup — valuation, Section 56(2)(viib) angel tax status, ESBI scheme review
- • Related party transaction review — 3-year look-back, arm's length documentation, AOC-2 disclosures
- • ROC compliance health check — pending annual returns (MGT-7), financial statements (AOC-4), charge filings (CHG-1)
- • Share capital and cap table review — clean share register, SH-4 transfers verified, no disputed transmission
- • Litigation and regulatory review — pending NCLT matters, SEBI enquiries, tax assessments
- • Gap report with prioritised action list and timeline to DRHP-ready status
- • Audited financial statements for the last 3 financial years
- • Board composition details — current directors with DIN, designation, and appointment dates
- • Statutory registers — Register of Members, Register of Directors, Register of Charges
- • ROC filing history — MCA21 filing index for the last 5 years
- • ESOP scheme documents and grant register
- • Related party transaction schedule for the last 3 years
- • Share capital history — all allotments, transfers, and buybacks since incorporation
- • Pending litigation and regulatory correspondence
- • MOA / AOA (current version)
See the fee table below for the statutory filing charge and common delay logic.
- • SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018 — Regulation 26 (eligibility), Regulation 6 (QIB route)
- • Companies Act 2013 — Section 14 (alteration of articles), Section 18 (conversion), INC-27 (conversion form)
- • SEBI (LODR) Regulations 2015 — pre-listing governance requirements
- • SEBI Master Circular on ICDR (latest)
- • Companies Act 2013 — Section 149 (independent directors), Section 177 (audit committee), Section 178 (NRC)
Process
How the service works
The workflow is built to be predictable: document collection, legal review, filing, and post-filing follow-through.
Document collection and data room setup
Gather 3-year financials, ROC filing index, statutory registers, cap table, ESOP records, and litigation summary into a structured data room.
Financial track record assessment
Map actual EBITDA figures against SEBI ICDR Regulation 26 criteria. Determine whether the profitability route or QIB route (Regulation 6 — 75% of issue reserved for QIBs) applies. Identify restatement risk in historic financials.
ROC and secretarial compliance review
Pull the company's MCA21 filing history. Flag all overdue forms, pending charges, and register gaps. Compute late fees and prepare a filing catch-up plan.
Board and governance gap analysis
Check current board composition against SEBI LODR requirements for a listed company — minimum ⅓ independent directors, audit committee (majority independent, at least one financial expert), NRC, and risk management policy.
ESOP and share capital cleanup
Review all ESOP grants against the ESBI scheme. Identify exercises before the DRHP to simplify the cap table. Check Section 56(2)(viib) angel tax exposure on any premium allotments and DPIIT recognition status.
RPT review and documentation
List all related party transactions for the last 3 years. Verify arm's length pricing, board/shareholder approvals, and AOC-2 disclosures in the Board's Report. Identify any transactions that need to be wound down or restructured before listing.
Gap report delivery
Deliver a prioritised gap report with: (a) blocking issues (must fix before DRHP), (b) disclosure-only items (SEBI will ask about these), and (c) recommended timeline to DRHP-ready status.
Pvt Ltd to Public Ltd conversion
File INC-27 and MGT-14 with ROC after passing a special resolution under Section 14. Update AOA for public company requirements. Minimum 7 shareholders and 3 directors post-conversion.
AEO summary
IPO readiness in India means meeting the financial track record requirements under SEBI ICDR Regulation 26 (three years of audited financials, profitability criteria or QIB route), converting from Private Limited to Public Limited under Section 14 and INC-27, restructuring the board to include independent directors and mandatory committees, cleaning up ESOPs and related party transactions, and resolving any pending ROC filings before the DRHP is drafted.
Why most IPOs slip at Stage 2
The most common reason an IPO timeline slips is not market conditions — it is internal compliance gaps that were not caught until the lead manager started due diligence. By that point, the company has already paid retainers, signed the MOU with the merchant banker, and started telling investors about the timeline.
The readiness audit catches these gaps 12 to 18 months earlier. The most frequent issues: pending ROC filings (which require paying late fees before MCA21 will accept new filings), board composition that does not meet SEBI LODR requirements, ESOP schemes that were not properly documented, and related party transactions that do not have arm's length documentation. None of these are fatal — but all of them take time to fix.
The three-year financial track record requirement
SEBI ICDR Regulation 26 requires that the company or its promoters have a track record of at least three years. For a company taking the profitability route under Regulation 26(1), the company must have operating profit (EBITDA) of at least INR 15 crore in at least 3 of the last 5 financial years.
The three-year audited financial statements filed with SEBI must be prepared in compliance with Indian Accounting Standards (Ind AS) or Indian GAAP (whichever is applicable) and must be restated if there were any material accounting policy changes. Restatement is one of the most time-consuming pre-IPO tasks — and one that the readiness audit identifies early.
Government fees
Fee breakdown
| Item | Fee | Notes |
|---|---|---|
| INC-27 (conversion Pvt Ltd → Public Ltd) | INR 1,000 – 9,000 | Depends on authorised capital slab under Companies (Registration Offices and Fees) Rules 2014. |
| MGT-14 (special resolution filing) | INR 300 – 600 | Standard ROC fee for special resolution forms. |
| DIR-12 (director appointment) | INR 300 – 600 per director | For each new independent director appointment. |
Timeline
Typical turnaround
Audit duration usually means a 3 to 6 weeks turnaround, assuming documents are complete and any board or shareholder approvals are already in place.
Readiness audit fee. Conversion (INC-27), board restructuring, and ongoing pre-IPO compliance are quoted separately based on scope.
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FAQ
Frequently asked questions
What financial track record does SEBI require before filing a DRHP?
When must a company adopt Ind AS for IPO prep, and what does the transition involve?
What is promoter lock-in and how long are promoter shares locked after an IPO?
What is the minimum issue size and post-issue paid-up capital for a mainboard IPO?
How early should a company start IPO readiness work, and what does the audit usually find?
Canonical reference: https://www.pvtltd.co/services/ipo-readiness
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