The standard IPO advisory framing starts too late
Most companies that engage IPO advisors do so in the 12–18 months before they intend to file. At that point, the conversation focuses on the prospectus financial history, risk factors, business description, and the information required for the offer document.
The problem with starting at 12 months is that you are already trying to solve problems that should have been prevented three years earlier.
SEBI’s requirements for an IPO are not just about what you disclose. They are about the quality and consistency of the financial records you disclose from. Those records need to cover a minimum of three financial years. And if those three years were maintained under accounting standards, systems, and internal controls that were not designed for a public company which is true for most private companies the remediation work at 12 months is significant, expensive, and sometimes impossible to complete in time.
What the three years before filing actually need to include
Year 3 (three years before target IPO): Financial reporting foundation
The first year of genuine IPO preparation is about building the financial reporting infrastructure that will underpin the prospectus. This includes:
• Selecting and implementing accounting standards appropriate for a public company context (Ind AS for Indian companies, IFRS for those with international ambitions)
• Establishing a close process that is consistent, documented, and defensible
• Putting in place an internal audit function with sufficient independence
• Ensuring that the board and audit committee have the governance structures that regulators and institutional investors expect.
Companies that reach the prospectus stage without having done this work find themselves trying to restate accounts, establish governance retroactively, and explain to their investment bankers why their financial records look different in year three of the review than they did in their management accounts.
Year 2 (two years before target IPO): Systems and control
• ERP implementation or upgrade most companies approaching an IPO need financial systems capable of supporting consolidated reporting, segment reporting, and the granularity of disclosure that institutional investors expect
• Internal control documentation not just controls that exist, but controls that are documented, tested, and supported by evidence of operation
• Revenue recognition review particularly important for companies with multi-element arrangements, subscription models, or long-term contracts where revenue recognition under Ind AS requires careful analysis
• Related-party transaction review all transactions with promoter entities, associated companies, and other related parties need to be identified, documented, and assessed for arm’s length pricing and disclosure requirements
Year 1 (one year before target IPO):
Prospectus preparation and pre-filing readinessThe final year is the one most people think of as IPO preparation — working with investment bankers, lawyers, and auditors on the offer document. But the quality of this work depends entirely on the foundation built in years two and three.
A company with clean three-year financials, documented controls, and clear related-party disclosure has a streamlined year-one process. A company without these finds year one overwhelmed with remediation work that should have happened years earlier.
The most common gaps we find when companies come to us at 12 months
Inconsistent accounting policies across years. Companies that changed accounting treatment for specific items mid-stream — revenue recognition, capitalisation policies, treatment of provisions — find that their three-year financials tell an inconsistent story that needs explanation or restatement.
Related-party transaction disclosure. SEBI requires comprehensive related-party transaction disclosure. Companies with informal promoter lending arrangements, shared services with group companies, or property arrangements with promoter entities often find that the documentation required
for disclosure does not exist.
Insufficient audit trail. Statutory auditors can sign off on accounts without the granularity of audit trail that a SEBI filing requires. Companies often find gaps between what their auditors have seen and what the prospectus disclosure standards require.
Weak internal controls. Institutional investors and SEBI expect to see evidence of operating internal controls, not just a description of controls that theoretically exist. Companies without documented control testing struggle to satisfy this requirement.
When to start
The answer is: earlier than feels necessary.
If you are three years from a potential IPO, this is the right time to begin the financial infrastructure work. Not because the prospectus is imminent, but because the quality of what you disclose in the prospectus is determined by decisions being made in your business right now.
If you are 12–18 months from filing and have not started, the work is still possible but the timeline is compressed and the cost of remediation is higher.
