Author: Avneep Mehta

Part 3 of the series: The Right IPO Starts with the Right Foundation

One question comes up in almost every IPO discussion: “What is your growth strategy?” Most companies instinctively answer by talking about their past. They highlight revenue growth, expanding market share, new customers, capacity additions and improving profitability. While these achievements are undoubtedly important, I’ve realised over the years that investors are asking a very different question. They are trying to understand whether the business has the ability to continue creating value long after it becomes a listed company. Historical performance provides confidence that a business has executed well. What ultimately influences an investment decision, however, is the credibility of its future. An IPO is not simply an opportunity to monetise years of hard work. It is an invitation for investors to participate in the company’s next phase of growth. That is why a well-articulated growth strategy often becomes just as important as strong financial performance.

A credible growth story is built on clarity, not optimism

Every ambitious business has plans to grow. It wants to enter new markets, launch new products, increase manufacturing capacity or expand into adjacent businesses. The challenge is that investors hear similar ambitions from almost every company preparing for an IPO. What differentiates one company from another is not the ambition itself, but the clarity with which management explains how that ambition will be achieved. One thing I’ve observed across IPO engagements is that management teams usually have a clear view of how much capital they intend to raise. However, when discussions move towards how every rupee will create sustainable shareholder value over the next five or ten years, the conversation sometimes becomes less structured. Investors want to understand the assumptions behind the projections. They want to know how management has assessed market opportunities, competitive risks, execution challenges and capital requirements. A convincing growth strategy is therefore one that is backed by careful planning rather than optimistic assumptions.

Growth plans should be supported by disciplined capital allocation

One of the most closely examined sections of any IPO document is the proposed utilisation of funds. Expansion, technology investments, acquisitions, working capital or debt reduction are all common objectives. However, in my experience, investors are evaluating something much deeper than the list itself. They are trying to understand how management thinks about capital allocation. Does the company invest with discipline? Are priorities clearly defined? Is every investment linked to a long-term strategic objective? These questions become even more relevant after listing because every capital allocation decision will continue to be scrutinised by shareholders. Businesses that inspire confidence are not necessarily those raising the largest amounts of capital. They are the ones that demonstrate a clear and disciplined approach to deploying that capital in a manner that creates sustainable value.

Growth is sustained by people as much as capital

Capital provides the resources to expand, but people determine whether that expansion succeeds. As businesses prepare for life as a listed company, investors increasingly look beyond the promoters and assess the strength of the leadership team. They want confidence that the organisation has the capability to execute its strategy consistently over many years. This is where succession planning, leadership development and employee ownership assume greater significance. A well-designed ESOP framework does much more than reward employees. It aligns leadership with the long-term success of the business and reinforces a culture where value creation is shared across the organisation. Equally important is the alignment between promoters, senior management and investors. Companies that perform consistently after listing are usually those where all stakeholders remain focused on building long-term value rather than pursuing short-term outcomes.

Advisors strengthen a strategy, they do not create one

As IPO preparations gather momentum, companies appoint merchant bankers, auditors, legal counsel, tax advisors and several other specialists. Selecting the right advisors is undoubtedly an important decision, but I have occasionally seen businesses assume that advisors can compensate for gaps in strategy or execution. In reality, their role is very different. Good advisors challenge assumptions, bring an external perspective and help management navigate a highly regulated process. They can improve execution, but they cannot replace strategic clarity. The strongest IPOs are almost always those where advisors work alongside a management team that already has a clear vision for the future. Their role is to strengthen that vision, not define it.

The IPO should accelerate growth, not define it

Companies often think of an IPO as the destination. In my experience, it is simply the beginning of a new chapter. The expectations placed on a listed company are fundamentally different. Every quarter is scrutinised. Every strategic decision is measured against the commitments made during the IPO. Investors expect businesses not only to deliver financial performance, but also to demonstrate consistency in execution and capital allocation. I have seen companies spend nearly two years preparing for an IPO, not because regulatory requirements demanded it, but because management recognised that they needed time to refine their growth strategy, strengthen leadership and ensure that the business was truly ready for public markets. Those discussions often proved to be as valuable as the listing itself because they encouraged leadership teams to think beyond the IPO and focus on building a business that could continue creating value over the next decade.

Ultimately, investors do not buy into a company’s past. They invest because they believe the business has the strategy, leadership and discipline to create value in the future. A successful IPO therefore begins long before the DRHP is filed. It begins when management develops a growth strategy that investors can understand, believe and support.

In the final article of this series, I will explore why operational excellence is one of the most overlooked aspects of IPO readiness, and how strong systems, technology, internal controls and disciplined execution enable companies to deliver on the commitments they make to the public markets.

Part 2 of the series: The Right IPO Starts with the Right Foundation

If there is one misconception I encounter frequently while working with companies preparing for an IPO, it is this: governance becomes important only because the company is planning to list.

In reality, the opposite is true.

The companies that command the greatest investor confidence rarely strengthen governance because they are planning to go public. More often, they are able to go public because they have spent years building an organisation that is governed well.

An IPO fundamentally changes the nature of a business. Decisions that were once made by a small group of promoters are now scrutinised by public shareholders, institutional investors, analysts and regulators. Expectations change overnight. Transparency is no longer optional. Accountability becomes continuous. Governance therefore stops being an internal process and becomes one of the strongest indicators of how a company is likely to perform in the years ahead.

Governance creates confidence before it creates compliance

Every successful business begins with entrepreneurial instinct. Decisions are taken quickly, responsibilities evolve naturally and founders remain closely involved in every important aspect of the organisation. That agility is often one of the biggest reasons for early success.

As businesses scale, investors begin evaluating far more than the capability of the founders. They want confidence that the organisation can continue to perform consistently through well-defined decision-making, effective oversight and robust risk management. Good governance provides that confidence. It marks the transition from a founder-led business to an institution that can endure beyond its founders.

A strong board should challenge, not simply endorse. One of the clearest signs of governance maturity is the quality of the board.

Independent directors are often appointed because regulations require them. The more important question is whether they genuinely influence the quality of decision-making.

One thing I’ve noticed across IPO engagements is that companies often spend considerable time identifying well-known names for their boards, assuming that reputation alone strengthens governance. In practice, the real difference comes from how the board functions. The best boards I’ve worked with are the ones where independent directors ask difficult questions, challenge management constructively and bring an objective perspective to key decisions. In fact, some of the most productive board discussions are not those where everyone agrees, but those where differing viewpoints help management evaluate risks more objectively.

Ultimately, investors don’t just look at who sits on the board. They look for evidence that the board genuinely influences the way the company is run. Companies that view independent directors as strategic advisors rather than a regulatory requirement invariably derive far greater value from their boards.

Governance is reflected in everyday decisions

Governance is often associated with board meetings and statutory policies, but its true strength becomes visible in the way an organisation functions every day. Who has the authority to approve major financial decisions? Are responsibilities clearly defined? Is there a documented process for managing conflicts of interest? Are risks reviewed regularly? Does the organisation encourage transparency when issues arise?

These questions rarely receive public attention, yet they often determine how resilient a business becomes as it grows. Governance, therefore, is not demonstrated only in boardrooms. It is reflected in the quality of everyday decisions made across the organisation.

Simplicity builds trust

Many successful businesses accumulate complexity as they grow. Multiple legal entities, overlapping ownership structures and historical commercial arrangements often evolve for perfectly valid reasons. However, as an IPO approaches, this complexity can make due diligence longer, governance more challenging and investor communication less effective.

One of the most valuable exercises during IPO preparation is simplifying where possible. A transparent group structure, clearly documented governance framework and well-defined delegation of authority make it easier for investors to understand how the business operates and where accountability rests. Simplicity reduces uncertainty, and uncertainty is rarely rewarded in the capital markets.

Governance is ultimately about legacy

Companies often measure IPO success by the valuation they achieve or the capital they raise. Those are important milestones, but they are not lasting measures of success. The real test begins after the company becomes public.

Listed companies are expected to deliver consistent performance while maintaining the confidence of shareholders, regulators, employees and the wider market. Governance becomes the framework that enables them to meet those expectations year after year.

In my experience, companies that navigate the IPO journey most smoothly are those that begin strengthening governance well before they file the DRHP. I have seen this firsthand with one of our statutory audit clients, where the IPO due diligence process commenced nearly two and a half years before the proposed listing. That early start gave the management team the time needed to strengthen governance practices, address gaps, simplify processes and build the documentation expected by investors and advisors. By the time formal due diligence gathered pace, governance was already evident in the way decisions were made, responsibilities were defined and risks were managed.

Good governance should never be built merely to complete an IPO. It should become part of an organisation’s DNA, enabling sustainable growth, earning stakeholder trust and creating an institution that continues to thrive long after it becomes a listed company.

The most respected listed companies are rarely recognised only for their financial performance. They are recognised because investors trust the way they are governed. That trust is built gradually through disciplined decisions, transparent leadership and strong institutional processes long before the company enters the public markets.

Building the right governance framework is the next step in creating an IPO-ready organisation. In the next article, we will explore why investors don’t invest only in a company’s past performance. They invest in its future, and that future depends on a clear growth strategy, disciplined capital allocation and a credible roadmap for long-term value creation.

Part 1 of the series: The Right IPO Starts with the Right Foundation

An IPO is often viewed as the culmination of a company’s growth journey. The focus tends to be on the DRHP, roadshows, valuation discussions and, ultimately, the listing day. While these milestones define the public phase of the journey, they are rarely where success is determined. In my experience, the strongest IPOs are built long before the company begins engaging with investors or regulators. They are the outcome of disciplined preparation that typically starts 18 to 24 months before listing, when leadership begins transforming the organisation from a promoter-led business into an institution capable of operating in the public markets.

Every company approaching an IPO has a compelling growth story. It may have expanded into new markets, built a differentiated product or achieved impressive financial milestones. But public market investors look beyond the narrative. They want confidence that the business is supported by reliable financial reporting, sound governance and disciplined decision-making. Ultimately, investors invest in future performance, but they rely on historical financial credibility to assess whether that future is believable.

Financial reporting is the first test of credibility

One of the biggest misconceptions about IPO readiness is that financial reporting can be strengthened once advisors are appointed. In reality, financial discipline cannot be built overnight. By the time merchant bankers, auditors and legal advisors begin their due diligence, the expectation is that the company already has robust financial processes in place.

Financial reporting is much more than a compliance requirement. It is the language through which investors understand a business. Every revenue figure, margin, cash flow statement and disclosure contributes to an investor’s assessment of management quality. Companies that consistently produce timely, transparent and reliable financial information inspire confidence because they demonstrate control over their business. Conversely, frequent adjustments, inconsistent accounting practices or weak documentation often raise questions that extend well beyond the finance function.

One thing I’ve consistently observed is that IPO readiness challenges rarely arise because of accounting; they arise because the business has grown faster than its financial reporting framework. In one engagement, converting historical financials from an LLP structure into a format suitable for the DRHP took much longer than expected. In another, multiple acquisitions completed shortly before the IPO made consolidation a significant exercise. I have also seen overseas acquisitions add another layer of complexity, where financial statements prepared under local regulations had to be aligned with Indian reporting requirements before they could be consolidated. These are challenges that cannot be addressed in a few months and reinforce the importance of preparing well in advance.

Building the right financial foundation

Financial readiness begins with establishing processes that deliver accurate information consistently, not just during the annual audit. Monthly financial closures, disciplined management reporting, audit-ready documentation and clearly defined accounting policies create the foundation on which every successful IPO is built. These practices enable leadership teams to make informed decisions throughout the year while ensuring that the organisation is prepared for the increased scrutiny that accompanies a public listing.

As businesses grow, financial complexity also increases. Multiple subsidiaries, diverse business lines and expanding operations often result in different accounting practices evolving across the organisation. While these differences may appear manageable in a private company, they become significant during IPO due diligence. Standardising accounting policies, aligning group reporting and ensuring consistency across entities are therefore not merely accounting improvements, they are essential steps in building investor confidence.

Transparency matters as much as accuracy

Another area that deserves early attention is related party governance. Most successful businesses operate within broader promoter ecosystems, and commercial relationships between group entities are often entirely legitimate. However, public market investors expect these transactions to be transparent, well documented and demonstrably conducted on an arm’s length basis. Questions around related party transactions rarely arise because they exist. They arise when the rationale, documentation or governance around them is unclear.

The same principle applies to the transition towards Indian Accounting Standards (Ind AS). Many companies initially approach Ind AS as a regulatory requirement, but its impact extends far beyond compliance. It influences how financial performance is measured, reported and interpreted. Starting this transition early allows management teams to strengthen internal capabilities, refine reporting processes and avoid unnecessary pressure closer to the IPO.

Financial excellence reflects organisational maturity

Strong financial reporting is never the responsibility of the finance team alone. It reflects the maturity of the organisation as a whole. Reliable reporting depends on accurate operational data, disciplined internal processes, appropriate technology and leadership that values transparency. Finance brings these elements together, but it cannot compensate for weaknesses elsewhere in the business.

This is why IPO readiness should never be viewed as a project that begins with the DRHP. It is an enterprise-wide transformation that requires sustained focus well before listing. Companies that invest in strengthening their financial foundation early spend less time resolving historical issues and more time demonstrating the long-term value they can create as a public company.

The public often remembers an IPO for its listing gains or valuation. Those involved in the journey remember something different: the months of preparation, the countless decisions and the discipline required to build an organisation that can withstand public scrutiny. In the end, successful IPOs are not defined by how well a company performs on listing day. They are defined by the quality of the financial foundation built long before the market notices.

Ultimately, an IPO is a milestone, not the destination. While valuation and listing day often attract the headlines, long-term success depends on the strength of the financial foundation built well before the company enters the public markets. In the end, trust is earned through consistency, transparency and financial discipline, not just growth.

Building the right financial foundation is the first step towards IPO readiness. In the next article, we will examine why governance has become one of the strongest indicators of investor confidence, valuation and long-term market success.