Due Diligence Services in India

Due Diligence Services in India are generally used as pre investment tool, in order to obtain an independent report concerning the company’s (the investee) credentials. The Efficiency of a due diligence report is a major decisive factor for investors looking to go ahead with investment.

At AnBac Advisors, we undertake a strict legal and Tax Due diligence as it is the foremost step to successful fund raising, and also plays an important role in the development of relationship between the investor and start-up.

What is Due Diligence?

The due diligence process involves a thorough examination of a company’s legal, financial operational, and any other records before important transactions, such as mergers, acquisitions, or partnerships. The goal is to assess risks, check the information, and ensure that is it compliant with relevant laws and regulations.

What are the types of Due Diligence?

Financial Due Diligence (FDD)

Financial Due Diligence is a extensive process that involves evaluating a company’s financial health, historical performance, and future projections. It helps investors, lenders, and buyers understand the financial risks, opportunities, and underlying value of the company. The financial due diligence process involves the below:

1. Reviewing Financial Statements: Examine income statements, cash flow statements and balance sheets for the past 3–5 years.
2. Analyzing Revenue Streams: Understand how the company is generating revenue and assess its sustainability.
3. Debt and Liabilities: Identify debts, liabilities, and obligations (if any).
4. Profitability Metrics: Assess gross margins, return on investment, and cost structures.
5. Auditor’s Reports: Review audit reports for any red flags.

Legal Due Diligence

For an investor, legal due diligence is very important in decision making. In a merger or acquisition, a clear assessment of all possible risks related to corporate status, assets, contracts, Loans, borrowings, Intellectual Property, etc. is required of the target company.

AnBac Advisors provides full fledge due diligence services in India which help in determining liabilities, negotiating a lower valuation and managing risks.

Majorly, a legal due diligence is a study of the target company, focusing on the following:

1. Corporate Compliance
2. Employment Law compliance
3. Title over intellectual property and the risk associated
4. Industry laws and environment compliance
5. Material Contracts
6. Litigations
7. CRM Database

Tax Due Diligence

When a company acquires a business or dispose of any non-core business, or undergoes a merger they need to manage the tax risk associated with it by a tax due Diligence.

Since tax is an unavoidable costs, it can’t be ignored. AnBac Advisors provide tax due diligence services to understand the tax profile of the Target and identify any tax benefits that may be available with the target and can be claimed.  During an M&A, tax due diligence plays a significant role.

Typically a tax due diligence is important due the following reasons –

1. Identification of any material Tax Exposure
2. Evaluation potential acquisition structure in a tax-efficient manner
3. Review and evaluate execution compensation matters
4. Identify any material upside (Potential tax benefits, not being claimed)
5. Validating assumptions made by the buyer
6. Validating the representation made by the seller

Why are Due Diligence Services Important?

The importance of due diligence services in India has grown because of the rapidly changing business environment as well as economic regulations. These services are crucial for stakeholders, investors and companies to make decisions, minimize risks, and ensure compliance. It helps to identify the business risks and any financial or operational risk that could impact the business operations. It will support in detecting discrepancies, undisclosed liabilities and fraudulent activities in financial records. Due diligence services will help to provide a clear understanding of the financial health and operational efficiency of a business.

In India’s changing business environment, due diligence services are extremely valuable for ensuring informed decision-making, risk mitigation and regulatory compliance. They provide a foundation for sustainable growth, for investors, businesses and stakeholders involved in transactions and partnerships.

What is the Process Followed During VC Due Diligence?

Venture Capital (VC) due diligence is the process that VCs use to evaluate startups before making an investment. It involves assessing the startup’s business model, team, market potential, financial parameters and risks to determine the scalability of the business. Due diligence is critical for making investments in startups.

Step 1: Initial Screening

• Reviewing pitch decks, executive summaries, and founder pitch decks.
• Conduct preliminary assessments for assessing fund’s investment strategy.

Step 2: Data Collection

Reviewing key documents, including:

• Financial projections, balance sheet, profit and loss statements
• Corporate governance documents.
• Contracts, agreements, and any regulatory filings.
• Customer and sales projections.

Step 3: Analysis and Validation

• Data Research: Analysing market conditions and competitor analysis
• Third-Party Verification: Cross-check critical information with experts from the industry

Step 4: Risk Assessment

• Identifying risks in operations, finances, and compliance.
• Risk Assessment their impact on the business and investment.

Step 5: Decision Making and Final Report

• Collecting findings in a due diligence report with:
  • Strengths and Potential Risks
  • Recommendations for deal structuring.
  • Suggested terms for the investment.

We provide expert Company Valuation Services in India and due diligence services in India to all our clients in order to save their time and help them in making the right decisions in terms of investment, merger and acquisitions, business takeovers etc.