boAt’s DRHP reveals auditor concerns over financial discrepancies, subsidiary risks: Report

IPO-bound boAt’s auditors have flagged multiple compliance lapses and mismatches in financial information submitted to lenders, according to a Moneycontrol report citing disclosures in the company’s revised Draft Red Herring Prospectus (DRHP).

Audit firm BSR & Co LLP highlighted discrepancies between the quarterly statements submitted to banks and the company’s books for FY23, FY24 and FY25. The auditors also noted that short-term borrowings were diverted for long-term requirements of certain subsidiaries, in violation of standard financial norms.

Further, the report said the auditors found compliance issues across two overseas subsidiaries--Kaha Pte Ltd and Imagine Marketing Singapore Pte Ltd--including material uncertainty over their ability to meet liabilities in FY23 and FY24.

Other red flags included: Arrears on statutory dues; Non-compliance with the mandatory audit-trail requirement; Inadequate backup of accounting records; Improper physical verification of plant and equipment in FY23, and directors’ remuneration exceeding limits prescribed under the Companies Act in FY23.

boAt said it has taken corrective steps, including reconciling mismatched information, deploying compliant accounting systems, and securing shareholder approvals to regularise remuneration. However, auditors cautioned that there is no assurance similar issues will not recur, underscoring the need for tighter internal controls.

As per the revised DRHP, boAt plans to raise Rs 1,500 crore through its IPO, comprising a Rs 500 crore fresh issue and a Rs 1,000-crore offer for sale, lower than the Rs 2,000 crore it sought in 2022.

The company intends to use the proceeds for working capital (Rs 225 crore), brand-building and marketing (Rs 150 crore), and general corporate purposes.

In FY25, boAt reported a profit of Rs 61.08 crore, with revenue from operations at Rs 3,070.38 crore. The audio segment remained its biggest contributor, generating Rs 2,586.04 crore (84.23%), followed by wearables at Rs 330.41 crore (10.76%), and other products at Rs 153.93 crore (5.01%).