Fundraises in India often slow down in due diligence, not in the pitch. An investor likes the business and signs a term sheet. Then the lawyers and accountants find what the company never tidied up: missing filings, a cap table that does not match the records, code the company does not own. Each finding costs weeks, and some cost valuation. Fixing them before you start costs far less.
What investors check
| Area | What they look for |
|---|---|
| Company records | Board and shareholder minutes, Registrar filings up to date, share certificates that match the cap table |
| Past funding | A valuation and the right filings behind every allotment, including RBI reporting for foreign investors |
| Finance | Audited accounts, how revenue is recognised, GST returns that match the books, TDS deducted and paid |
| Contracts | Key customer and supplier contracts, change-of-control clauses, anything agreed only by email |
| IP | Assignment of IP from founders, employees and contractors to the company |
| People | Appointment letters, PF and ESI, and an ESOP plan approved the way the law requires |
| Disputes | Tax notices, court cases and letters from regulators |
The findings that hurt most
The company does not own its product. If the first version was built by a founder before incorporation, or by freelancers without an assignment clause, the IP may sit with them. Fix it with assignment deeds before diligence starts.
Foreign money without the paperwork. Shares issued to a foreign investor must be priced at or above fair value under FEMA, and reported to the RBI on Form FC-GPR within 30 days of allotment. Late filings can usually be regularised with a late submission fee, but it takes time.
An ESOP plan nobody approved. An ESOP scheme needs a special resolution of shareholders. Options granted without one are a problem for every holder.
GST that does not reconcile. If sales in the books differ from sales in the GST returns, the investor starts questioning revenue itself.
A data room index
- Corporate
- Certificate of incorporation, memorandum and articles, minutes, statutory registers, Registrar filings.
- Capital
- Cap table, share certificates, valuation reports, RBI filings for foreign investment, ESOP plan and approvals.
- Finance
- Three years of audited accounts, latest management accounts, GST and TDS returns, tax assessments.
- Commercial
- Top customer and supplier contracts, partnership and distribution agreements.
- IP and technology
- Trademark filings, IP assignment deeds, licences for key software.
- People
- Organisation chart, senior appointment letters, PF and ESI filings.
- Disputes
- Notices, cases and correspondence with regulators.
When to start
Three to six months before you plan to raise. A problem you find yourself is a to-do list. A problem the investor finds is a negotiation.
