This series comprises eight articles offering practical insights into the Indian IPO journey, authored by lawyers with extensive experience in the capital markets space. Designed as a consolidated resource, the series aims to assist promoters, founders, and emerging businesses considering an Initial Public Offering by providing a practical perspective on key legal and regulatory aspects of the listing process.
This collection brings together and expands upon insights in a single, structured guide to help stakeholders navigate the path to an IPO more effectively.
This series of articles has been prepared by the Capital Markets team as a practical guide to key aspects of the Indian capital markets framework. Presented in multiple parts, the series aims to provide concise insights into important regulatory and transactional considerations. This article constitutes Part I of the series.
- Part I: Preparing for a Main Board IPO: What Promoters Should Fix 18 Months Before Filing the DRHP.
- Part II: From Private Company to Listed Public Company: The Governance Transition Most Founders Underestimate
- Part III: The Hidden Risk in IPO Timelines: Why Delayed Regulatory Clean-Up Can Derail Market Windows
- Part IV: The DRHP Is Not a Marketing Document: Managing Disclosure Liability in Indian IPOs
- Part V: The Legal Architecture of a Successful IPO: Lawyers, Merchant Bankers, Auditors and Promoters Working Together
- Part VI: IPO Readiness for PE-Backed Companies: Alignment Issues Between Founders and Investors
- Part VII: Corporate Governance Before IPO: Why “Founder-Led” cannot mean “Founder-Controlled?”
- Part VIII: Use of IPO Proceeds: Why SEBI Questions “General Corporate Purpose” More Closely Today
This article has been authored by Mallika Agrawal, Associate.
Preparing for a Main Board IPO: What Promoters Should Fix 18 Months Before Filing the DRHP
IPO Preparation Starts Much Earlier Than Most Promoters Think
For many promoters, the IPO journey appears to begin once merchant bankers are appointed and the Draft Red Herring Prospectus (“DRHP”) starts taking shape. In reality, however, the most important IPO work begins much earlier.
By the time legal due diligence commences, the company is expected to demonstrate operational discipline, regulatory preparedness, governance maturity, and documentation consistency across several years. The challenge is that many businesses scale commercially much faster than their internal compliance and governance systems.
In practice, companies that begin preparing 18 to 24 months before DRHP filing are usually in a significantly stronger position than those attempting to regularise years of gaps immediately before filing.
Why the Last Three Financial Years Become Critical During Diligence
One of the first things diligence teams examine is whether the company’s operational records properly support the business story being presented to investors.
Merchant bankers, legal counsel, and auditors typically review customer arrangements, supplier contracts, machinery purchases, property records, employee documentation, licences, statutory filings, and financial statements to assess whether the company’s business operations are adequately documented and legally supported. This is often where gaps begin to surface.
Companies frequently discover that major customer relationships were never formally documented, machinery reflected in the books lacks supporting invoices, warehouses are occupied without registered leave and license agreements.
While such issues may not affect day-to-day business operations in a private company environment, they become difficult to defend once the company prepares to access public markets. Investors, regulators, and intermediaries increasingly expect disclosures to be backed by proper records and documentary evidence.
The Documentation Clean-Up That Usually Takes Longer Than Expected
One of the most time-consuming aspects of IPO preparation is document regularisation.
In many promoter-led businesses, commercial arrangements evolve informally over time. However, IPO diligence requires documentation discipline.
In several IPO exercises, companies have had to retrospectively execute lease deeds, regularise leave and license agreements, pay differential stamp duty, renew expired licences, reconstruct missing approvals, or formalise undocumented business arrangements before the DRHP stage.
Improperly stamped agreements can become particularly problematic because they may face evidentiary limitations under applicable stamp laws and the Registration Act, 1908. Consequently, even operational documents such as office leases, factory premises agreements, logistics contracts, and equipment arrangements become important during IPO diligence.
Manufacturing businesses often face additional scrutiny relating to title verification, land-use permissions, environmental clearances, factory licences, fire NOCs, and operational approvals. In some cases, companies realise during diligence that the constitutional documents of the company do not even adequately cover the actual business activities being undertaken. This may require amendment of the objects clause in the Memorandum of Association (“MoA”) before proceeding further.
Labour Law Compliance Has Become a Serious IPO Focus Area
Labour and employment compliance has become one of the most closely reviewed areas in IPO transactions, particularly for businesses with large employee bases, factory operations, logistics infrastructure, or multi-state operations.
Merchant bankers and legal counsel increasingly examine whether companies have appropriately complied with laws relating to provident fund contributions, employee state insurance, gratuity, bonus payments, minimum wages, labour welfare requirements, and Shops and Establishments registrations.
Manufacturing businesses are also expected to maintain proper factory licences and operational approvals under applicable laws. In several diligence exercises, gaps have emerged where businesses scaled operations without adequately updating licences, registrations, or labour-related documentation.
Compliance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (“POSH Act”) has also become an important diligence area. Companies preparing for IPOs are generally expected to have Internal Committees properly constituted, policies implemented, complaint records maintained, and annual compliance requirements completed.
Why Secretarial Governance Suddenly Becomes Important Before Listing
One of the most underestimated aspects of IPO preparation is secretarial governance.
Many private companies function for years with relatively informal governance practices. However, once IPO preparation begins, companies are expected to demonstrate proper maintenance of board minutes, statutory registers, shareholder approvals, committee records, related party approvals, and governance documentation under the Companies Act, 2013.
The role of the Company Secretary therefore becomes particularly significant during this phase. In practice, many IPO-bound companies strengthen their secretarial and compliance functions well before DRHP filing because reconstructing historical governance records at a later stage can become both difficult and time-consuming.
Companies preparing for listing also typically begin operationalising governance structures required under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”), including Audit Committees, Nomination and Remuneration Committees, Stakeholders Relationship Committees, and Risk Management Committees.
Intellectual Property and Brand Ownership Issues Frequently Surface During IPO Preparation
Intellectual property ownership issues frequently emerge during IPO diligence, particularly in founder-led businesses where brands and products evolved before formal legal structures were put in place.
Legal advisors typically examine whether trademarks, domain names, product branding, software rights, copyrights, patents, and technology assets are legally owned by the issuer company itself.
In several businesses, trademarks continue to remain in the personal names of promoters or group entities rather than the company proposing to list. Similarly, software or technology-driven businesses may discover that licensing arrangements, assignment agreements, or ownership documentation are incomplete.
For consumer-facing businesses especially, investors increasingly associate enterprise value with ownership and protection of intellectual property. As a result, many IPO-bound companies undertake IP restructuring exercises before DRHP filing, including assignment arrangements, trademark transfers, licensing regularisation, and fresh registrations.
Promoter Group Structuring Requires Early Attention
Another area that often creates complications during IPO preparation is promoter group structuring.
Many promoter groups operate through multiple entities including LLPs, partnerships, investment vehicles, and family-owned businesses. During diligence, merchant bankers and legal advisors examine whether promoter group entities have overlapping business activities, operational dependencies, related party arrangements, or common branding with the issuer company.
Promoter group disclosures themselves can sometimes create practical challenges because promoter group members are often required to provide confirmations and consents for inclusion in the IPO documents. In situations where such consents are not forthcoming, companies may need to explore exemption routes or alternative disclosure mechanisms under the applicable regulatory framework.
Investor Readiness Is No Longer Limited to Financial Performance
IPO preparedness today extends well beyond financial metrics. Investors increasingly examine whether a company appears operationally organised, governance-focused, and institutionally prepared for public scrutiny. This includes evaluating the company’s investor-facing website, governance disclosures, management communication standards, public messaging consistency, and overall transparency practices.
Many companies underestimate the importance of having a professional website containing updated information relating to business operations, management, policies, governance structures, and investor disclosures. In practice, investor perception often begins forming well before listing day.
The 18-Month Window Often Determines the Success of the IPO Process
Companies that begin preparations early are generally able to resolve compliance gaps, strengthen governance systems, organise records, regularise contracts, streamline promoter arrangements, and improve disclosure quality in a structured manner.
By contrast, companies attempting to compress years of clean-up exercises into a few months frequently face avoidable delays, prolonged diligence processes, increased regulatory observations, and higher execution costs.
Preparing for IPO is ultimately not just about satisfying eligibility conditions under the ICDR Regulations. It is about transforming a privately managed business into an institution capable of operating under continuous public scrutiny, regulatory oversight, and investor expectations over the long term.
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