Auditors Flag Financial and Compliance Irregularities at BoAt Group Firms

BoAt’s Audit Flags Raise Governance Questions as the Company Renews Its IPO Journey

As consumer electronics brand BoAt moves forward with its second attempt at a public listing, fresh scrutiny has emerged from the company’s updated draft red herring prospectus (DRHP). The filing reveals that BoAt auditors flagged financial mismatches, compliance issues, and control gaps across several group entities during FY23 to FY25. The detailed observations come at a critical juncture, as investors evaluate the company’s governance practices alongside its operational performance and sector outlook.

Audit Observations Reveal Financial Mismatch and Compliance Gaps

According to the updated DRHP, auditors BSR & Co LLP identified several discrepancies in the financial information BoAt submitted to lenders. Quarterly statements provided to banks did not match the company’s audited books for FY23, FY24 and FY25, indicating inconsistencies in reporting and reconciliation processes.

The auditors also highlighted that short-term borrowings were used for long-term requirements of certain subsidiaries. This practice signals liquidity management concerns and potential risks in financial planning. Additionally, gaps in internal controls were observed across various operations during the review period.

These disclosures provide an important insight into how BoAt managed its finances while expanding aggressively across product categories and international markets. For potential investors studying the BoAt IPO, such findings raise questions about the maturity and robustness of the company’s governance systems.

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Compliance Issues Surface Across Domestic and Overseas Subsidiaries

The audit remarks extend beyond financial mismatches and move into compliance-related challenges. Two overseas subsidiaries — Kaha Pte Ltd and Imagine Marketing Singapore Pte Ltd — showed material uncertainty in meeting their liabilities during FY23 and FY24. Such uncertainty may impact BoAt’s consolidated financial stability and its ability to sustain global operations.

Further, auditors flagged arrears in statutory dues, non-compliance with mandatory audit-trail (edit log) requirements, and insufficient backups of accounting records in some subsidiaries. Improper or incomplete physical verification of plant and equipment was also noted in FY23.

Another key observation involved remuneration paid to directors exceeding the limits under the Companies Act during FY23. Although the issue was later rectified through shareholder approval, it signals governance lapses that investors may weigh carefully.

For BoAt, these compliance issues highlight areas requiring rigorous strengthening, especially at a time when transparency and accountability are paramount for companies approaching public markets.

Company Response: Steps Taken to Strengthen Internal Controls

In its filing, BoAt stated that it has already initiated corrective actions. These include:

• Reconciliation of mismatched financial information submitted to lenders

• Implementation of compliant accounting systems across subsidiaries

• Enhancing audit-trail features and record-keeping procedures

• Obtaining necessary shareholder approvals for regulatory deviations

While these steps demonstrate the company’s efforts to improve governance, the auditors noted that they cannot provide assurance that similar issues will not recur. This caveat underscores the importance of continuous monitoring and strengthening of internal processes.

IPO Context: Smaller Issue Size and a Competitive Market Landscape

The audit observations come as part of broader disclosures surrounding the upcoming ₹1,500-crore BoAt IPO, which includes a ₹500-crore fresh issue and a ₹1,000-crore offer for sale (OFS) by founders Aman Gupta and Sameer Mehta, along with key early investors such as Warburg Pincus, Fireside Ventures, and Qualcomm Ventures.

The issue size is smaller than BoAt’s previous planned ₹2,000-crore IPO, reflecting a more measured approach amid evolving market conditions.

BoAt’s financial recovery — returning to profitability after two consecutive loss-making years — offers optimism. However, its core wearables and audio accessories market is moderating, with rising competition and price pressure in segments such as smartwatches, earbuds, and other lifestyle tech products.

Investor Sentiment: Balancing Brand Strength with Red Flags

For investors evaluating the BoAt IPO, the company’s strong brand presence and scale in India’s wearables and audio markets remain compelling. Yet, the audit observations introduce governance considerations that could influence demand, pricing, and overall sentiment.

As market participants assess the disclosures, the narrative around BoAt is likely to center on whether the company can demonstrate consistent compliance, improve internal controls, and sustain profitability in a competitive landscape.

Conclusion: Audit Findings Add a New Layer to BoAt’s IPO Story

The financial mismatches, compliance issues, and audit-trail lapses flagged by BoAt auditors paint a more complex picture of the company’s internal workings. While corrective measures are underway, the renewed IPO attempt will require investors to balance BoAt’s strong consumer appeal with a realistic understanding of its governance challenges.

With the DRHP now in focus, the coming months will determine whether BoAt’s improved financial performance can outweigh concerns raised by the audit findings—and how the market ultimately responds to one of India’s most prominent consumer-tech stories.

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