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A technology company approaching a ₹500 crore IPO found, during due diligence, that three years of Form 26AS TDS credits had not been reconciled to the books — ₹38 lakh in TDS receivable was either unclaimed or misclassified. The DRHP was delayed by 6 weeks while the restatement was corrected and the statutory auditor’s report was updated.
This is a preventable delay. IPO reconciliation preparation starts 12–18 months before the DRHP filing date, not 3 months before.
What the DRHP Requires from Finance Teams
SEBI’s ICDR Regulations require the DRHP to contain three years of restated financial statements. “Restated” means the prior-year audited figures have been adjusted for material errors, accounting policy changes, and restatement adjustments — and a reconciliation is provided explaining every difference.
The merchant banker (lead manager) and the statutory auditor both review this reconciliation. Any unexplained variance is either disclosed as a risk factor or requires restatement.
DRHP Reconciliation Requirements
| Reconciliation | Scope | Reviewer |
|---|---|---|
| Restated financials vs audited financials | 3 years, all line items | Statutory auditor + SEBI |
| TDS receivable vs Form 26AS | 3 years, all deductors | Statutory auditor |
| ITC claimed vs GSTR-2B | 3 years, each FY | GST auditor |
| Related party transactions | 3 years, all RPT disclosure items | Merchant banker |
| Working capital statement | As at IPO date | Merchant banker + SEBI |
| Outstanding litigation and contingent liabilities | All open demands | Legal counsel + auditor |
Restated Financial Reconciliation
The restatement process starts with the originally audited financial statements and systematically adjusts them. Common adjustments in Indian IPOs:
- Revenue recognition restatements: Deferred revenue that was incorrectly recognised in the original audit
- TDS receivable restatement: TDS credits that were booked as income rather than as receivables
- GST ITC adjustment: ITC claimed in excess of GSTR-2B entitlement — reversal required with interest
- Related party corrections: Transactions at non-arm’s length rates requiring disclosure or adjustment
- Depreciation restatement: Change from WDV to SLM method or vice versa — requires restating all prior-year depreciation charges
Each adjustment requires a reconciliation note in the DRHP explaining the amount, the period, and the reason for restatement.
TDS Reconciliation for DRHP
What Must Be Reconciled
For each year in the DRHP, the finance team must produce a reconciliation showing:
- Opening TDS receivable balance
- TDS credited in books during the year (by section and deductor)
- TDS credit reflected in Form 26AS during the year
- Difference — explained as timing difference, deductor error, or amount mismatch
- TDS set off against advance tax in the ITR
- Closing TDS receivable balance, reconciled to Form 26AS
Unexplained differences become either a restatement (if the books are wrong) or a demand note disclosure (if Form 26AS is incorrect and a correction return is pending).
Deductor Correction Timeline
TDS correction returns by deductors take 4–8 weeks to appear in Form 26AS after the correction is filed. For DRHP purposes, corrections must be initiated and confirmed before the DRHP filing date — not after.
GST Reconciliation for DRHP
GSTR-9 annual returns must be filed for all years covered by the DRHP before filing. Any excess ITC claimed, reversed under GSTR-9, carries 18% interest under Section 50 — this interest is a P&L charge and must be reflected in the restated financials.
Pending GST demands not already adjudicated are disclosed as contingent liabilities. The merchant banker will ask for a status update on each demand — with date, amount, stage, and management’s assessment of outcome.
Related Party Transaction Reconciliation
All transactions with related parties — directors, subsidiaries, group companies, and promoter entities — must be reconciled across all three years. The reconciliation confirms:
- Each RPT is disclosed at the correct amount
- Balances outstanding at year-end match the counterparty’s books
- Pricing is at arm’s length or a deviation is disclosed
Intercompany balances that were not reconciled before the DRHP process create audit observations — the statutory auditor cannot sign the restated financials until intercompany eliminations reconcile to zero.
Working Capital Statement
SEBI requires a working capital statement as at the date of filing, showing current assets, current liabilities, and the working capital position. This statement must reconcile to the last audited balance sheet with a bridge showing all movements since the audit date.
Finance teams that have maintained continuous bank reconciliation, AR/AP reconciliation, and GST matching enter the working capital statement preparation with clean numbers. Teams that have been managing reconciliation as a quarterly or annual batch process typically find that the working capital statement preparation requires 3–4 weeks of reconciliation cleanup.
Investing in reconciliation software India that produces an audit-ready trail for each period — rather than recreating it retrospectively for the DRHP — compresses the IPO preparation timeline significantly.
TDS reconciliation software that maintains a deductor-level match history for all prior years eliminates the manual reconstruction of Form 26AS vs books reconciliation for the three-year DRHP period.
The Securities and Exchange Board of India publishes the ICDR Regulations governing DRHP content requirements, including the scope of restated financials and the disclosure obligations for contingent liabilities and related party transactions.