DUE DILIGENCE

FLOW OF THE PRESENTATION • What is due diligence  • Need of Due diligence  • Who conducts due diligence  • Due Diligence in IPO • • .

Due Diligence •  “ Due diligence is an investigation of the company's financial and operational health. and other material (important) state of the other party.” • • It is the process of evaluating a prospective business decision by getting information about the financial. lenders or acquirers to ensure that statements about the company's value are accurate. typically requested by investors. legal. .

.• The goal of due diligence is to provide parties to a transaction all possible information.  • It is the act of performing a reasonable investigation into the facts and circumstances of a transaction to ensure a full and complete understanding of the transaction.

Need of Due Diligence Mostly sought for the following transactions: • Disinvestments   • Strategic investments by private equity funds  • Acquisition of an undertaking / business  • Acquisition of shareholding interest  • Inbound and overseas investments  • Listing of securities in overseas markets .

WHO CONDUCTS DUE DILIGENCE • Lead and co-investors • • Attorneys  • Accountants  • Investment bankers  • Loan officers & Other professionals .

Business due diligence is conducted mainly to verify the company’s business strategy and potential for future growth. suppliers and customers to understand fully every aspect of the company’s business and its financial statements. Investment bankers will interview company officials. •  •  •  • .How is Due Diligence conducted?    Due diligence comprises many interrelated processes. Investment bankers will conduct onsite inspections. particularly for manufacturing and property-intensive businesses.

DUE DILIGENCE IN IPO .

 . and that no important information is omitted.Key objectives of a Pre-IPO Investigative Due Diligence • To ensure that offering documents contain all material information about the issuer and its financial condition.  • To provide a more comprehensive understanding of the to be listed company and to identify risks at the earliest possible opportunity.

Due Diligence in IPO •      Purpose of due diligence is to ensure : .Completeness of the company’s registration statement and prospectus .Understand any issues associated with the company.Competitive position .Business strategy .Company’s workforce . The investment bank will focus on the diligence of the .Management .Truthfulness .Historical performance .Company’s operations .The accuracy .Suppliers .Financial prospects .Customers •           .

integrity & reputation of key individuals. owners Reputation of the business and its principals with vendors. relevant history & current activities of the issuer Character.Critical Issues for examination •  The real corporate structure . including regulatory risk •  •  •  •  •  •  •  .key officers. shareholders & subsidiaries as compared to the information disclosed in the draft IPO prospectus Background. associates and local regulators Litigation history of IPO candidate Political connections of key individuals Professional and personal relationships of relevance Other potential risks associated with the IPO candidate.

To conclude • Due Diligence plays an important role in identifying. the aim is not to raise obstacles to transactions. but to facilitate transactions by identifying problems and risks and by devising solutions to problems or mechanisms to reduce or manage the risks involved in any transaction • . quantifying and reducing the risks in any transaction • • Even tough due diligence focuses on negative information.

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