BoAt IPO: Updated DRHP flags auditor concerns over financial discrepancies

According to BSR & Co LLP, BoAt's quarterly returns or statements filed with banks or financial institutions did not match its books of accounts for fiscal years FY25, FY24, and FY23

BoAt IPO: Imagine Marketing, parent company of consumer electronics maker BoAt, revealed in its updated draft red herring prospectus (UDRHP) that its statutory auditors have raised concerns over discrepancies between the financial information the company submitted to lenders and the figures reflected in its own books. 

 

The observations came as the Gurugram-based company prepares for its second attempt at an initial public offering (IPO). 

 

According to an audit report by BSR & Co LLP, the company's quarterly returns or statements filed with banks or financial institutions did not match its books of accounts for fiscal years 2025, 2024, and 2023. Additionally, short-term borrowings had been used to meet long-term capital requirements for subsidiaries for FY24 and FY23.  Further, it highlighted material uncertainty around the ability of two subsidiaries - Kaha Pte Ltd and Imagine Marketing Singapore Pte Ltd, to meet their liabilities in FY23 and FY24. It also noted that managerial remuneration paid in FY23 breached the limitations prescribed under Section 197 of the Companies Act, arrears in undisputed statutory dues in FY23 and FY25, and failure by subsidiaries to maintain required electronic backups on India-based servers.  The auditors said that physical verification of property, plant and equipment was not carried out in FY23 due to a change in the verification policy. The report also required disclosures under Rule 11(e) regarding investments made through Imagine Marketing Singapore Pte Ltd into subsidiary Kaha Pte Ltd during FY23–FY25.

 

As per the UDRHP, the company has taken corrective steps on some of these issues, including obtaining shareholder approval for excess director remuneration and improving reporting accuracy. However, the filing raised concerns that similar remarks may continue to appear in future audit reports.

 

BoAt aims to raise ₹1,500 crore through its maiden public issue, comprising a fresh issue of ₹500 crore and an offer for sale (OFS) of ₹1,000 crore. Under the OFS, promoters Aman Gupta, Sameer Ashok Mehta and South Lake Investment, and investors Fireside Ventures and Qualcomm Ventures will offload their stake.

 

MUFG Intime India is the registrar for the issue. ICICI Securities, Goldman Sachs (India) Securities, JM Financial, and Nomura Financial Advisory and Securities (India) are the book-running lead managers. 

 

From the net fresh issue proceeds, the company proposes to utilise ₹225 crore for funding working capital requirements of the company, and ₹150 crore for brand and marketing expenses. The remaining funds will be used for general corporate purposes.