IPO readiness checklist for promoters

Most IPO delays come from records that were not ready when someone asked for them. Almost every item below can be fixed in advance, but some need time: eligibility tests look back two or three years, and some rules need a full year to pass after a change.

Start 12 to 24 months before you plan to file the DRHP (draft red herring prospectus, the first draft of the offer document). Go through each item with your CA, company secretary and legal counsel. Mark each one as done, in progress or not started. The items that are not started are your plan for the next quarter.

• Convert to a public limited company. A private company's articles restrict share transfers and cap its members at 200. Conversion needs a special resolution and filings with the ROC (Registrar of Companies) under Section 14 of the Companies Act.
• Firm or LLP? If the business runs as a proprietorship, partnership or LLP, convert it to a company early. At least one full financial year as a company must pass before filing.
• Share capital history. Collect every allotment, transfer, bonus and split since incorporation, with board and shareholder resolutions, ROC forms and proof of payment. Gaps here are among the most common causes of delay.
• Cap table today. A clean list of every shareholder, with promoter and promoter group clearly identified.
• Demat. All promoter shares in demat form, and the company connected with both depositories.
• Stable promoters. Avoid changes in promoters in the year before filing.
• Group structure. Know every subsidiary, associate and group company, and why each exists.

• Independent directors. A listed public company needs at least one-third of its board to be independent directors. Choose people with relevant experience who can give real time.
• Woman director on the board.
• Audit committee. At least three directors, with independent directors in the majority. Most members, including the chair, must be able to read financial statements. It approves related-party transactions and the KPIs disclosed in the offer document.
• Company secretary. Appoint one. For an SME issue, the compliance officer must be a company secretary.
• Board minutes. Regular meetings, signed minutes and registers kept up to date.

Family members can stay on the board. The board is simply planned with the independence rules in mind.

• Three years of audited accounts, closed on time, with as few audit qualifications as possible.
• Restated financial statements. The offer document uses restated figures (three years presented on one consistent basis, with errors and policy changes corrected). Do a trial restatement early, so surprises are found while there is time.
• Peer-reviewed auditor. The restated statements are examined by an auditor holding a valid peer review certificate from ICAI. If your auditor does not hold one, plan the change well in advance.
• Eligibility on restated numbers. Check operating profit (EBITDA of at least Rs 1 crore in two of the last three years), net worth, and the exchange tests on net tangible assets, leverage or free cash flow to equity.
• Personal and business expenses clearly separated.

• ROC filings complete and on time: annual returns, financial statements and event filings such as allotments and charges.
• Tax returns filed: income tax, GST and TDS, with reconciliations.
• Provident fund and ESI. Paid and filed on time. The offer document must now give details of these payments.
• Licences and approvals for every factory, office and product, valid and in the company's name.
• Charges and borrowings. Every loan with its sanction letter, security and ROC charge filing, plus lender consent for the IPO where the loan terms need it.

• Related-party transactions listed, priced at arm's length, and approved by the board, audit committee or shareholders as the law needs.
• Loans from promoters and relatives. IPO money cannot repay loans from promoters, the promoter group or related parties. Settle or convert them from the company's own resources, with approvals, well before filing.
• Promoter disclosures. Each promoter's background, other businesses, holdings, and any regulatory action or default.
• Group companies. Financial and litigation details, and any business that competes with or deals with the company.

• Title to property. Title deeds, or registered leases at a fair rent, for every site the business depends on. Land in a family member's name is common, and can be dealt with by a registered lease or a transfer.
• Litigation register. Every pending case involving the company, promoters, directors and subsidiaries, with status and amount.
• Tax notices. Outstanding tax claims are disclosed as a total of cases and amounts. Reply to old notices and close what can be closed.
• Materiality policy. A board-approved policy deciding which other cases are large enough to disclose.
• No defaults on interest or principal to lenders, bond or deposit holders.

• Choose your KPIs (key performance indicators): the measures that describe your business, such as customer count, repeat orders, capacity use or margin per unit.
• Define them simply and track them the same way for the full three-year period.
• Keep the evidence. KPIs in the offer document are approved by the audit committee and certified by the statutory auditor or a peer-reviewed chartered accountant. Any KPIs shared with investors in the three years before the IPO must also be disclosed.
• Customer and supplier data. Concentration, length of relationships and contracts.
• Industry data and a clear comparison with listed peers.
• Use of the money. Specific plans with quotations, since general corporate purposes are capped at 15% of the amount raised or Rs 10 crore, whichever is lower.

This is where preparation before meeting a merchant banker helps most. Mansukhbhai works with promoters on exactly this: the data, KPIs and story, ready before the file is opened.

• Monthly closing of books, so half-yearly results can be produced on time after listing.
• Documented processes for purchase, sales, cash and inventory, with approvals.
• Use-of-funds tracking in a separate account, ready for reporting to the exchange.
• Insider trading rules and a list of people with price-sensitive information.
• A document room: every certificate, approval and agreement scanned and filed, so each query is answered with a document.

None of this needs to be done in a week. Done steadily over a year, it makes the IPO calmer, and it helps with banks and investors whether or not you list.