boAt's draft IPO papers flag auditor concerns over financial discrepancies

boAt's updated draft red herring prospectus reveals 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, flagged in the DRHP filed by parent company Imagine Marketing a little over a month ago, surface as the Gurugram-headquartered brand prepares for its second attempt at an IPO.

According to auditors BSR & Co LLP, several quarterly statements shared with banks did not match the financial records for FY23, FY24 and FY25.

They also pointed out that short-term borrowings had been diverted to meet long-term funding needs of subsidiaries, pointing to broader shortcomings in financial controls during the review period.

The audit further said that material uncertainty surrounding the ability of two overseas subsidiaries like Kaha Pte Ltd and Imagine Marketing Singapore Pte Ltd to meet their obligations in FY23 and FY24.

Other findings included delays in statutory payments, non-compliance with mandatory audit trail requirements at subsidiaries, inadequate data backups and lapses in physical verification of plant and equipment in FY23.

Auditors also observed that director remuneration breached the limits prescribed under the Companies Act in FY23, though the company later regularised it through shareholder approval.

boAt said it has taken corrective actions, such as reconciling inconsistent data, upgrading its accounting systems to comply with requirements and securing necessary approvals. However, the auditors cautioned that they cannot guarantee that similar issues will not arise again, underscoring the need for stronger internal processes.

The document also details the environment in which the company is gearing up to list. boAt has returned to profitability after two years of losses, but it continues to operate in an increasingly competitive wearables and audio accessories market, where pricing pressure has intensified and growth has moderated.

The proposed IPO comprises equity shares with a total value of ₹1,500 crore, including a ₹500 crore fresh issue and a ₹1,000 crore offer for sale.

The OFS includes shares worth ₹75 crore from Sameer Ashok Mehta, ₹225 crore from Aman Gupta, ₹500 crore from South Lake Investment, ₹150 crore from Fireside Ventures and ₹50 crore from Qualcomm Ventures.

The company plans to deploy ₹225 crore from the net proceeds for working capital, ₹150 crore for brand building and marketing initiatives, with the remainder earmarked for general corporate purposes.

boAt operates over 115 third-party service centres across India and maintains a presence in the Middle East and South Asia. The company has produced more than 75 million units domestically, with India accounting for 75.83% of its total output in Q1 FY26.

Imagine Marketing commands a 26% market share by value and 34% by volume in FY25.

ICICI Securities, Goldman Sachs (India) Securities, JM Financial and Nomura are the bankers to the IPO.