IPO Readiness Assessment

Mainboard IPOs are governed by SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR). SME IPOs fall under Chapter IX of ICDR 2018 (Regulations 229-282). The key eligibility threshold is a post-issue paid-up capital of up to Rs 25 crore for SME and above Rs 10 crore for mainboard. Financial statements in the DRHP must comply with SEBI Circular SEBI/HO/CFD/DIL1/CIR/P/2019/83 on restated financials for the preceding three full years.

SEBI ICDR Regulation 26 requires audited financial statements for the last three financial years, restated to comply with Ind AS or AS as applicable, and limited review financials for stub periods. The statutory auditor must issue a report under the Companies (Auditor's Report) Order, 2020 (CARO 2020) for each year. Internal financial controls under Section 143(3)(i) of the Companies Act, 2013 must be reported upon. Any qualifications in prior audit reports must be resolved or disclosed.

Section 188 of the Companies Act, 2013 requires board and shareholder approval for material related-party transactions (RPTs). SEBI ICDR Regulation 32 and Schedule VIII mandate disclosure of all RPTs in the DRHP, including arm-length confirmation under Accounting Standard Ind AS 24. Post-listing, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR) Regulation 23 requires audit committee approval for all future RPTs above the materiality threshold (2% of annual consolidated turnover or Rs 1,000 crore, whichever is lower).

No. Section 56(2)(viib) of the Income-tax Act, 1961 — which taxed share premium received by a closely-held company above fair market value — was abolished with effect from April 1, 2025 (Tax Year 2025-26 onwards) by the Finance Act, 2025. Pre-IPO ESOP exercises and secondary transactions are therefore not subject to angel tax. However, ESOP perquisites remain taxable in the hands of employees under Section 17(2) of ITA 1961 (or Section 17(2) under ITA 2025 for TY 2026-27 onwards), and the company must deduct TDS under Section 192.

Post-listing obligations are governed by SEBI LODR Regulations, 2015. Key timelines: quarterly financial results within 60 days of quarter end (Regulation 33); annual report within 21 working days of AGM (Regulation 34); appointment of a compliance officer under Regulation 6; continuous disclosure of material events under Regulation 30 within 24 hours. SME-listed companies must also maintain a market-making agreement under SEBI Circular CIR/MRD/DSA/31/2012 for three years post-listing.