IPO Readiness Assessment — The Gaps That Actually Stop Listings

The uncomfortable truth about IPO readiness is that most companies asking the question are two to three years away, and the assessment exists to say so early enough for it to be useful. Companies that discover this at the drafting stage have already appointed bankers, engaged lawyers and told their staff.

The gaps are also predictable. In our experience they are almost never about the business — the company is usually profitable, growing and well run commercially. They are about whether three years of financial statements will survive restatement, whether internal controls exist in a form anyone can test, whether the cap table reconciles to the statutory records, and whether the related party arrangements that made sense in a family company can be disclosed in a public document.

N D Savla & Associates carries out IPO readiness assessments for companies across Mumbai, Navi Mumbai, Thane and Goa — testing eligibility against the current criteria, examining the financial reporting and control position, reviewing the capital history, and producing a prioritised remediation plan with realistic timelines. Where the company is genuinely close, that feeds straight into DRHP preparation. Where it is not, saying so is the value.

What Does the Assessment Actually Test?

Six areas, in the order they tend to cause problems.

Main Board — the Track Record Route

The ICDR Regulations set thresholds on net tangible assets, operating profit and net worth across specified preceding years, with a restriction on how much of the net tangible assets may be held in monetary assets. The restriction exists so that a company cannot satisfy an asset test by holding cash raised elsewhere. Where a company has grown through acquisition or restructuring, establishing the historical figures on a comparable basis is itself part of the work.

Main Board — the Institutional Route

A company that cannot meet the track record thresholds may still list, provided the issue is made through the book building process with a specified minimum allotted to qualified institutional buyers. The regulatory logic is that institutional investors performing their own analysis substitute for a financial track record. In practice this route depends on demand that a company cannot assume.

SME Platforms

The SME route was substantially tightened for draft offer documents filed on or after 19 December 2024. An issuer must show operating profit of at least one crore rupees in two of the three preceding financial years — replacing an earlier position that could be satisfied through equity infusion into a loss-making entity. Post-issue paid-up capital is capped, with migration to the main board on crossing the threshold, subject to a route permitting further issuance without migration where the issuer undertakes to comply with main board listing obligations. SME IPO advisory given before the amendment should be reassessed.

What the Tightening Changed Structurally

• Offer for sale capped at twenty per cent of issue size, with no selling shareholder offloading more than half their pre-issue holding
• General corporate purposes capped at fifteen per cent of issue size or ten crore rupees, whichever is lower
• Proceeds may not be used to repay loans from promoters, the promoter group or related parties
• Promoter minimum contribution locked in for three years, with holdings above it released in phases after one and two years
• Minimum application size increased, and the number of allottees raised
• The SME draft offer document published for public comments for twenty-one days
• SME listed entities brought within the related party transaction norms applicable to main board companies

Indian listing requirements have oscillated between opening access and restricting it, and each swing followed a period in which the previous position was exploited.

Until 1992 the question did not really arise in this form. The Controller of Capital Issues under the Capital Issues (Control) Act, 1947 decided whether a company could raise capital at all and at what price, so eligibility was an administrative judgement rather than a rule. When that office was abolished and the Securities and Exchange Board of India took over the public issue market on a disclosure basis, the regulator needed objective criteria to replace official discretion.

The first attempt at free entry produced a sharp lesson. In the mid-1990s, with entry norms minimal, a very large number of small issues came to market and a substantial proportion of those companies disappeared, taking retail money with them. The response was the introduction of entry norms based on financial track record, and subsequently the alternative institutional route for companies that could not meet them but could attract qualified institutional demand. That two-route structure has survived every subsequent revision.

The SME platforms were created in 2012 precisely to reopen access for smaller companies that the main board thresholds excluded, with lighter eligibility and a separate exchange segment. For a decade the segment was modest. From around 2022 it grew very rapidly — issue numbers and amounts multiplied, retail participation surged, and oversubscription levels became extreme. A significant part of that activity involved companies with thin or manufactured profitability, promoters selling substantial holdings into the issue, and proceeds described loosely.

SEBI responded through a consultation paper in November 2024 and its 208th Board Meeting on 18 December 2024, with amendments to the ICDR and Listing Regulations notified in March 2025. The exchanges moved first — the National Stock Exchange applied the tightened criteria to draft documents filed from 19 December 2024, the day after the board meeting, ahead of formal notification. The package addressed each observed practice directly: an operating profit test replacing a net worth test that equity infusion could satisfy, a cap on the offer for sale to stop promoter cash-outs, a restriction on repaying promoter loans from proceeds, longer and phased lock-in, a larger minimum application size to limit retail exposure, and a public comment period on the draft document.

The main board framework was revised in the same cycle, with additional disclosure of shareholding patterns before and after the issue, of criminal proceedings and material civil litigation involving key managerial personnel, voluntary proforma financial disclosure where businesses have been acquired or divested, and a longer promoter lock-in where the issue funds capital expenditure.

We tell you when the answer is not yet. A readiness assessment that confirms what the board hopes is worth nothing. The value is in an honest timeline, produced early enough that the intervening years can be used properly.

Eligibility tested against the current framework. The SME criteria changed for draft documents filed from 19 December 2024 and the main board disclosure requirements were revised in the same cycle. A great deal of published guidance still describes the earlier position.

Audit and controls expertise, not a checklist. Whether a control can be evidenced on a sample is a question answered by people who test controls for a living. Readiness work done as a questionnaire exercise finds the gaps that are easy to see and misses the ones that stop a filing.

A roadmap sequenced by dependency. Some remediation requires completed financial years and cannot be accelerated. Distinguishing that from what can be fixed immediately is what makes a roadmap usable rather than aspirational.

Six offices across Maharashtra and Goa. Andheri, Charni Road, Vashi, Thane, New Panvel and Panaji. Readiness assessment means examining records at operating locations and group entities, and that is not a document request exercise.