A significant number of companies aspiring to go public in India fail to make it past the regulatory approval stage. As of May 2024, PRIME Database reported that only 9 out of 45 IPO filings had received SEBI approval, reflecting an approval rate of just 20%. Most delays or rejections occur due to weak governance, incomplete disclosures, and non-compliance with reporting standards. These issues often surface during SEBI’s review of the Draft Red Herring Prospectus (DRHP), leading to extended review cycles, loss of investor interest, and reputational risk.
At Prudent CFO, we help mid-market enterprises close these gaps through a structured 18–24 month IPO readiness plan. By strengthening governance, reporting, and compliance systems, our virtual CFO model offers expertise without the overhead cost of a full-time hire. This article outlines key IPO requirements, common red flags, and how our approach helps companies move from “IPO hopeful” to “IPO ready” with clarity and confidence.
What Being “IPO-Ready” Truly Means?
Mid-market enterprises often underestimate the complexity of what it means to be “IPO-ready”. To meet public market expectations, companies must adhere to non-negotiable standards in three core areas:
- Governance: A clearly defined board structure, with independent directors, functioning committees (Audit, Risk, NRC Committees), and documented policies aligned with SEBI and Companies Act requirements.
- Controls: Robust internal financial controls, standard operating procedures, and transparent delegation of authority.
- Disclosures: Accurate and timely disclosure of financials, risk factors, business model, litigation, promoter shareholding, and contingent liabilities, usually across 3-5 years.
Failing to meet these standards can halt the IPO process, damage investor confidence, and lead to extended SEBI queries or DRHP withdrawal.
Top 5 Red Flags Businesses Overlook During IPO Initiations
Before you prepare your Draft Red Herring Prospectus (DRHP), it’s important to understand the most common reasons leading to the failure of IPO listings:
1. Poor Financial Infrastructure
Even high-growth companies often operate without structured financial systems. Disorganised records, inconsistent revenue recognition, or outdated accounting software can become serious red flags during due diligence. These can lead to extended regulatory reviews and delays due to lack of board independence or policies.
2. Weak Governance and Compliance
An IPO requires not just financial discipline but also ethical and procedural clarity. This includes:
- A functioning board of directors
- Independent audits
- Defined risk management policies
- Corporate social responsibility disclosures
Investors are quick to disengage when the governance ecosystem appears immature or reactive.
3. Misaligned KPIs and Business Metrics
Many companies make the mistake of tracking top-line vanity metrics (e.g., GMV, downloads) without linking them to sustainable value like EBITDA margins ≥ 15%, ROCE, or unit economics, which raises concerns regarding the long-term profitability of the company.
4. Lack of Market Readiness
Companies not accustomed to regulatory scrutiny, structured investor communications, or timely disclosures may struggle in a public environment. This perceived lack of maturity can lead to investor scepticism and poor listing performance.
5. Leadership Gaps and Internal Misalignment
An IPO exposes your leadership team to public scrutiny. Without clear roles, decision-making structures, and investor communication protocols, even minor coordination failures can derail timelines or damage market perception.
How Prudent CFO Closes These Gaps—End-to-End
At PrudentCFO, we are not a one-person consultancy. We are a multi-specialist team of four seasoned professionals with combined expertise in IPOs, fundraising, and strategic finance, backed by decades of cross-sector experience across fintech, media, F&B, telecom, and capital markets.
Our approach is built around a proven four-stage framework tailored for companies preparing for IPO: Assess > Remediate > Govern > Communicate. This model is designed specifically for mid-market Indian enterprises planning to list within the next 18-24 months.
1. Assess
We begin with a comprehensive IPO-readiness audit that spans financial systems, governance mechanisms, reporting structures, and compliance documentation. This assessment provides a gap-to-goal roadmap, clearly outlining what must be fixed, built, or institutionalised.
2. Remediate
A key reason IPOs are delayed or rejected is disorganised reporting. Our team implements audit-ready financial systems, aligns the chart of accounts, cleans up books, and standardises MIS reports. This foundation not only ensures audit-readiness but also boosts investor confidence in your ability to deliver consistent, transparent reporting post-IPO.
3. Govern
We help formalise board charters, establish risk/audit/NRC committees, and set up whistleblower and CSR policies, ensuring compliance with SEBI’s ICDR framework and Companies Act provisions.
4. Communicate
From Q&A briefings and DRHP input to financial storytelling and investor decks, our seasoned CFOs ensure your leadership team is investor-ready before you meet the markets.
Why Mid-Market Enterprises Choose a Virtual CFO
Unlike large enterprises, fast-growing SMEs and family-run businesses often cannot justify the cost or bandwidth of full-time CFO service. The best virtual CFO services offer the same level of strategic oversight but with greater flexibility and efficiency. In fact, leveraging a VCFO model can reduce external advisory and staffing costs by up to 50% while maintaining the same level of rigour and accountability.
Additionally, IPO preparation is not just about reaching the listing day—it is about sustaining compliance, performance, and investor trust post-listing. Our team ensures that companies are structurally prepared for life after IPO as well.
Final Thoughts
Preparing for an IPO in India requires strategic planning, strong financial systems, and early involvement of experienced leadership. A seasoned CFO or an IPO consultant can help identify and address potential roadblocks, ensuring your company meets the rigorous demands of public markets. With the right support, the complex IPO journey becomes far more manageable and focused.
At Prudent CFO, we view IPO preparation as a long-term transformation, not just a one-time project. Our team of experts is among the best IPO consultants in India that help you build the financial discipline, compliance frameworks, and reporting structures needed to succeed—before and after listing. If you’re aiming to go public, we are here to guide you from ambition to IPO-readiness with clarity and confidence.
Disclaimer: The content of this article is intended for general guidance and informational purposes only. It does not constitute professional financial, legal, or investment advice.
