boAt’s Financial Reporting and Compliance Challenges

boAt, a prominent consumer electronics brand, has revealed multiple issues related to financial reporting and compliance in its revised draft red herring prospectus (DRHP). The statutory auditors of Imagine Marketing, the parent organisation of boAt, identified various unfavourable comments concerning discrepancies in reports, fund utilisation, governance, and internal control systems across FY23 to FY25.

Discrepancies in Financial Statements

The filing indicates that the quarterly returns and statements provided to banks did not align with the company’s financial records for FY23, FY24, and FY25. Furthermore, the auditors highlighted cases where short-term borrowings were misappropriated for long-term purposes during FY23 and FY24, breaching financial regulation standards.

Governance Issues Identified

Governance concerns were also outlined in the DRHP. The company exceeded the remuneration limits established under Section 197 of the Companies Act for its directors in FY23. Additionally, auditors pointed to outstanding statutory dues in FY23 and FY25, along with failures by two subsidiaries to maintain electronic backups of their accounting records for FY23. Moreover, boAt failed to conduct physical verification of its plant, property, and equipment for FY23, which was a result of a policy change regarding verification.

Corrective Measures Taken by boAt

In response to these issues, boAt has implemented corrective actions, including the submission of revised statements and securing shareholder approval for the excess director remuneration.

Revised IPO Details

In October, the company submitted its updated DRHP to SEBI, decreasing its IPO size to Rs 1,500 crore. The IPO will feature an issuance of equity shares valued at Rs 500 crore, while existing shareholders and co-founders intend to sell shares amounting to Rs 1,000 crore through an offer for sale (OFS).

Financial Performance Overview

For the fiscal year ending March 2025, boAt disclosed an operating revenue of Rs 3,073 crore alongside a net profit of Rs 61 crore, reversing a loss of Rs 79.6 crore from FY24. In the initial quarter of FY26, the company reported an operating revenue figure of Rs 628 crore and a net profit of Rs 21.35 crore.