New Delhi. BoAt, a company that makes affordable and trendy headphones, earphones, speakers and smartwatches, is once again preparing for an IPO. But, some information revealed in the Draft Red Herring Prospectus (DRHP) recently filed by the company may increase the problems of the company. Auditors in DRPH have pointed out several irregularities and violations of rules in the functioning of the company and its subsidiaries. According to auditors BSR & Co LLP, the quarterly financial reports sent by the company to banks do not match its FY23, FY24 and FY25 accounts. It also came to light that the company used short-term loans to meet the long-term needs of its subsidiaries, which is wrong. The audit also found lax financial controls at many places.
The audit has revealed that in many cases the boat did not follow the rules. Statutory liabilities were not discharged, proper backup of records was not maintained, mandatory audit-trail system was not in place and physical of plant and equipment was also not conducted properly. Apart from this, the salary and allowances given to the directors in the financial year 2023 also exceeded the limit prescribed in the Company Law. However, later the company rectified the deficiencies in salary and allowances with the approval of the shareholders. BoAt was founded by Aman Gupta and Sameer Mehta in 2016.
BoAt’s claim- Steps taken to remove the flaws
On the shortcomings pointed out by the auditors, the company has said that steps have been taken to remove the problems that have arisen. The company has done work like data matching, implementing new accounting system and taking necessary approvals. However, auditors say that there is no guarantee that such problems will not recur in the future. BoAt needs to further strengthen internal processes.
Will these disclosures affect the IPO?
These disclosures are related to BoAt’s Rs 1,500 crore IPO proposal. In this issue, new shares worth Rs 500 crore will be issued, while shares worth Rs 1,000 crore will be sold by existing investors through offer-for-sale. Through OFS, company founders Aman Gupta, Sameer Mehta and early investors Warburg Pincus, Fireside Ventures and Qualcomm Ventures will sell their shares.
Investors will now look at the strength of the company’s brand and its rapidly growing business combined with these audit findings. These reports have put forward the true state of operation and control system of the company, which will help the investors to understand how the company works and how strong is its governance system. Before launching the IPO, the company will have to convince investors that it is serious about removing these shortcomings and is strengthening its internal processes. Failure to do so may have a negative impact on the IPO.
The size of BoAt IPO has been reduced
BoAt had earlier planned to launch an IPO of Rs 2,000 crore. But, now it has reduced its size to Rs 1500 crore. The company has now returned to profit after two years of losses, but it is facing tough competition in India’s wearables and electronic accessories market. Price war in smartwatches and audio products has increased the pressure on the company.
