BoAt’s auditors have flagged mismatch in financial information submitted to lenders, compliance issues and operational lapses across subsidiaries, the consumer electronics maker’s updated draft red herring prospectus (DRHP) shows.
The remarks in the document, filed over a month ago, have come to light as the Gurugram-based firm moves ahead with its second shot at an initial public offering (IPO).
Auditors BSR & Co LLP said quarterly statements submitted to banks did not align with the company’s FY23, FY24 and FY25 books.
The reports also pointed to instances when short-term borrowings were used for long-term requirements of subsidiaries, alongside other financial-control gaps during the review period.
What are the compliance issues?
The audit also flagged material uncertainty over the ability of two overseas subsidiaries — Kaha Pte Ltd and Imagine Marketing Singapore Pte Ltd — to meet their liabilities in FY23 and FY24. Other observations include arrears on statutory dues, non-compliance with the mandatory audit-trail (edit log) requirement subsidiaries, inadequate backups of accounting records and improper physical verification of plant and equipment in FY23.
Remuneration to directors also exceeded Companies Act limits in FY23, an issue subsequently resolved through shareholder approval.
Boat said it took steps to address several of the issues, including reconciling mismatched information, implementing compliant accounting systems and securing necessary shareholder approvals.
The auditors, however, said there is no assurance that similar issues will not recur, indicating the need for continued focus on strengthening internal processes.
What does this mean for BoAt’s IPO plans?
These observations accompany broader disclosures in the DRHP for BoAt’s Rs 1,500-crore offer, which includes fresh issue of Rs 500 crore and Rs 1,000-crore offer of sale by founders Amman Gupta and Sameer Mehta along with early investors such as Warburg Pincus, Fireside Ventures and Qualcomm Ventures. The issue size is smaller than the earlier plan for a Rs 2,000-crore float.
What is the market backdrop?
The filing also outlines the backdrop in which Boat is heading to the bourses.
The company has returned to profit after two loss-making years but faces a moderating wearables segment in India, its core category, where competition and pricing pressures have been rising across audio accessories and smartwatches.
How will investors react?
As investors assess the upcoming offer, BoAt’s scale and brand strength will be viewed in conjunction with the audit findings and compliance gaps, which offer a fuller picture of the company working and governance framework.
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