Consumer electronics brand boAt, led by co-founder and CMO Aman Gupta, has encountered fresh hurdles ahead of its proposed initial public offering (IPO). As per disclosures made in the company’s updated Draft Red Herring Prospectus (DRHP), statutory auditors have flagged financial mismatches and multiple compliance-related concerns across recent financial years, raising questions around reporting accuracy and internal controls.
boAt’s parent company, Imagine Marketing Limited, is planning to raise around ₹1,500 crore through its IPO, which includes a fresh issue and an offer for sale by existing shareholders. While the brand continues to enjoy strong recall in India’s audio and wearables segment, these audit observations have added a layer of caution to its public market ambitions.
Financial Reporting Mismatches Raised by Auditors
The statutory auditor highlighted discrepancies between the company’s quarterly financial statements submitted to banks and the figures recorded in its internal books of accounts for FY23, FY24, and FY25. Such inconsistencies, auditors noted, could potentially impact the reliability of financial disclosures made to lenders and stakeholders.
In addition, the audit report pointed out instances where short-term borrowings were utilised to fund long-term requirements of certain subsidiaries. This practice, while not uncommon in stressed situations, is generally viewed as a financial risk and may draw closer regulatory and investor scrutiny during the IPO review process.
Compliance Issues Across Subsidiaries
Beyond financial mismatches, the auditors flagged several compliance-related lapses. These include delays in clearing undisputed statutory dues, non-compliance with mandatory audit-trail requirements in some accounting systems, and insufficient electronic backups of financial records maintained by overseas entities.
The audit also raised concerns around two Singapore-based subsidiaries, noting material uncertainty regarding their ability to meet liabilities during FY23 and FY24. Such observations indicate potential stress at the subsidiary level, which could have a bearing on consolidated financial health.
Another key issue flagged was director remuneration exceeding statutory limits during FY23. While the company later obtained shareholder approval to regularise this, auditors cautioned that such governance lapses need to be addressed proactively to avoid recurrence.
Company Response and Corrective Measures
In its regulatory filings, boAt acknowledged the auditor observations and stated that it has undertaken corrective actions. The company claimed that financial mismatches have since been reconciled, accounting processes strengthened, and necessary approvals obtained to align with regulatory requirements.
boAt also stated that system upgrades have been implemented to improve audit trails and data integrity across subsidiaries. However, auditors noted that there is no absolute assurance that similar issues will not arise in the future, underscoring the importance of continuous oversight.
Leadership Changes and Operational Challenges
The audit disclosures come at a time when boAt is navigating broader operational challenges. The company has witnessed higher employee attrition levels and recent leadership changes as it prepares for a public listing. These developments have sparked discussions around organisational stability and governance maturity ahead of the IPO.
Despite these concerns, boAt has managed to return to profitability after a period of losses, supported by cost optimisation and stronger offline distribution. The brand remains one of India’s most recognised names in affordable audio and lifestyle electronics.
What This Means for Investors
For potential investors, the audit flags serve as an important reminder to closely examine risk disclosures. While boAt’s scale, brand strength, and market position remain attractive, financial transparency and governance standards will play a critical role in shaping investor confidence.
As the IPO process moves forward, stakeholders will be watching closely to see whether boAt can demonstrate stronger internal controls and sustained compliance, paving the way for a smoother transition to the public markets.