boAt Auditors Flag Discrepancies and Compliance Gaps Across FY23 to FY25
The consumer electronics brand boAt (Imagine Marketing) has disclosed a series of financial reporting and compliance lapses in its updated Draft Red Herring Prospectus (DRHP), which was filed as the company prepares for its second attempt at an Initial Public Offering (IPO).
The statutory auditors, BSR & Co LLP, issued several unfavorable remarks concerning financial statements, fund utilization, governance, and internal controls for the fiscal years FY23, FY24, and FY25.
Key Audit Observations and Discrepancies:
| Area of Concern | Specific Discrepancy/Lapse | Affected Fiscal Years |
| Financial Reporting Mismatch | Quarterly returns and statements submitted to banks/lenders were not in agreement with the company's internal books of accounts. | FY23, FY24, and FY25 |
| Fund Utilisation | Instances where short-term borrowings were used for long-term capital requirements of its subsidiaries, violating standard financial discipline. | FY23 and FY24 |
| Governance Lapses | Excess remuneration was paid to directors, breaching the limits prescribed under Section 197 of the Companies Act. | FY23 |
| Statutory Dues | Arrears of undisputed statutory dues were flagged. | FY23 and FY25 |
| Subsidiary Risks | Auditors noted a material uncertainty regarding the ability of two overseas subsidiaries (Kaha Pte Ltd and Imagine Marketing Singapore Pte Ltd) to meet their liabilities. | FY23 and FY24 |
| Internal Controls | Failure by certain subsidiaries to maintain electronic backups of books of account on India-based servers and non-compliance with the mandatory audit-trail (edit log) rules. | FY23 (for backups) |
| Asset Verification | The company did not conduct physical verification of Plant, Property, and Equipment due to a change in verification policy. | FY23 |
Company's Corrective Action and IPO Context:
boAt's parent entity, Imagine Marketing, acknowledged the observations in the DRHP and stated that it has taken or is taking corrective steps to address them:
Remuneration: The company has since obtained shareholder approval to regularize the excess remuneration paid to the directors in FY23.
Reconciliation: It has initiated steps to reconcile the mismatched financial information submitted to lenders and is upgrading its accounting systems to improve reporting accuracy.
Internal Controls: Efforts are underway to strengthen internal controls, though the auditors cautioned that they cannot guarantee that similar lapses will not recur in the future.
These disclosures come as boAt prepares for its revised IPO attempt. The company's proposed IPO size has been reduced to ₹1,500 crore, comprising a fresh issue of ₹500 crore and an Offer For Sale (OFS) of ₹1,000 crore by founders and existing investors. The company has also turned around its financials, reporting a net profit of over ₹60 crore in FY25 after incurring losses in the preceding two years.
The audit findings provide a detailed look into the company's financial governance and internal controls as it seeks to go public.