Aman Gupta-led boAt auditors flag financial mismatch, compliance issues ahead of IPO

Aman Gupta-founded boAt’s statutory auditors have flagged multiple governance, compliance and financial-control issues at the consumer electronics maker, according to disclosures in its updated draft red herring prospectus (DRHP), filed as the Gurugram-based company makes a second attempt at going public.

Auditors BSR & Co LLP noted several instances where quarterly statements submitted by Imagine Marketing, the parent company of BoAt, to lenders did not align with its audited books of account for FY23, FY24 and FY25.

The mismatch, the auditors said, meant that information shared with banks differed from the company’s internal financial records over multiple years.

The updated DRHP also records concerns around the utilisation of borrowings. In particular, the auditors flagged instances in FY23 and FY24 where funds raised on a short-term basis were used for long-term requirements of subsidiaries, pointing to gaps in financial discipline and internal controls.

The audit observations extend to overseas subsidiaries as well. The auditors flagged material uncertainty over the ability of two Singapore-based units, Kaha Pte Ltd and Imagine Marketing Singapore Pte Ltd., to meet their liabilities in FY23 and FY24. The DRHP also disclosed that certain transactions routed into Kaha Pte Ltd through Imagine Marketing Singapore were not reported between FY23 and FY25.

Other compliance issues highlighted include arrears on statutory dues, non-compliance with the mandatory audit-trail or edit-log requirements at subsidiaries, inadequate backups of accounting records, and improper physical verification of plant and equipment in FY23.

The auditors also pointed out that BoAt paid remuneration to directors in excess of limits prescribed under the Companies Act, 2013, during FY23. In its response, the company said it subsequently obtained shareholder approval to regularise the excess payments.

“Our company took steps to rectify some of the observations which included obtaining a waiver, through shareholders’ resolution for the excess remuneration paid to directors of our company and ensuring that accurate numbers are reported from the current financial year to minimise the differences between the books and returns,” the company said in the DRHP.

BoAt added that it has reconciled mismatched financial information, implemented compliant accounting systems and taken corrective steps on several operational issues. However, the auditors cautioned that there is no assurance similar issues will not recur.

These disclosures form part of BoAt’s updated prospectus for its proposed Rs 1,500-crore initial public offering. The issue comprises a fresh issue of shares worth Rs 500 crore and an offer for sale of Rs 1,000 crore by founders Aman Gupta and Sameer Mehta, along with early investors including Warburg Pincus, Fireside Ventures and Qualcomm Ventures. The proposed issue size is lower than the Rs 2,000-crore IPO the company had earlier planned before withdrawing its 2022 filing.

The prospectus has drawn scrutiny on social media, with several aspects of the company’s governance and operations being debated publicly. Queries sent to the company did not elicit a response till press time.

Financially, BoAt has returned to profitability after two loss-making years. For the quarter ended June, it reported operating revenue of Rs 628 crore, up 11% year-on-year, and a net profit of Rs 21 crore, compared with a net loss of Rs 31 crore in the same period last year.

For FY25, the company posted a net profit of over Rs 60 crore, against a net loss of Rs 80 crore in the previous year, attributing the turnaround to product innovation and cost controls. Consolidated revenue for FY25 declined marginally to Rs 3,098 crore from Rs 3,122 crore in FY24.

The DRHP also highlighted rising employee attrition. BoAt reported an attrition rate of 34% among full-time employees for the year ended March 31, up from 28% a year earlier. The number of exits has increased steadily since FY23.

The filing also outlined recent leadership changes. Co-founder Sameer Mehta has moved from CEO to executive director, while COO Gaurav Nayyar has taken over as CEO. Co-founder Aman Gupta has transitioned from chief marketing officer to a non-executive director role.