The five questions an FDD answers
| Workstream | The question | What we do |
|---|---|---|
| Quality of earnings | What does this business actually earn in a normal year? | Rebuild EBITDA by period, remove one-off, non-recurring, non-business and related-party items, correct cut-off and recognition errors, and separate growth from price or mix changes |
| Working capital | How much cash does the business need to stand still? | Build a monthly net working capital series, show the seasonal swing, and set out a normalised level for a working capital peg |
| Net debt and debt-like items | What does it really owe on completion? | Borrowings, interest accrued, unpaid statutory dues, gratuity and leave liabilities, customer advances, unpaid capex, promoter loans and other items that behave like debt |
| Cash and revenue evidence | Do the numbers tie to the bank and to the customers? | Trace revenue to invoices, GST returns and collections; reconcile the ledger to bank statements; test the top customers and the ageing |
| Tax and statutory exposures | What can come back after closing? | Open assessments, appeals and notices, TDS defaults, GST mismatches between books, returns and the annual return, and positions taken in earlier years |
Where Indian FDD findings actually concentrate
Four areas produce most of the adjustments we report.
- Revenue that does not reconcile. Books, GST returns and the annual return disagree, or revenue is recognised on order rather than on delivery. We reconcile the three and quantify the gap: see GSTR-9 annual return and GST filing.
- TDS and GST compliance leakage. Short deduction, late deposit and mismatched credits are cheap to find and expensive to inherit. GST interest on delayed payment runs at 18 per cent a year under section 50(1). See TDS filing and GST notice reply.
- Open tax positions. An assessment, appeal or notice with no provision against it is a price adjustment, not a footnote. FY 2025-26 assessments run under the Income-tax Act, 1961; from Tax Year 2026-27 the Income-tax Act, 2025 applies, so exposures straddle two Acts and we state which year sits where. See income tax notice reply and tax audit.
- Share-issue history in a startup. Past priced rounds need a defensible valuation. The angel tax charge on share premium was abolished from AY 2025-26, but earlier years remain open until assessments close, so we check the valuation reports that supported those allotments: see valuation under Rule 11UA and angel tax exemption.
Related-party dependence, founder remuneration, ESOP accounting and unrecorded liabilities round out the list. Where equity instruments are involved, see ESOP scheme drafting.
Buy-side, sell-side or founder-side
| Buy-side FDD | Sell-side (vendor) FDD | Founder readiness | |
|---|---|---|---|
| Who commissions it | Investor, acquirer or lender | The seller or the company | The company, before going to market |
| Purpose | Price, structure and protect the deal | Give every buyer one tested set of numbers | Find and fix the problems first |
| Output | FDD report with adjustments and exposures | Vendor report, shared with buyers, plus a Q&A pack | Findings list, cleanup plan and the data room |
| Typical use | Working capital peg, net debt, indemnities | Fewer repeat requests and one version of the numbers | Cleaner first impression, fewer surprises |
We do not act for both sides in the same transaction.
FDD, audit and legal DD are three different things
| Financial DD | Statutory audit | Legal and secretarial DD | |
|---|---|---|---|
| Purpose | Inform a transaction decision | Give an opinion on the financial statements | Test ownership and compliance of records |
| Standard | Agreed scope with the client | Auditing standards under the Companies Act | Companies Act, FEMA and contract review |
| Output | Findings and adjustments | Audit report | Rated red-flag report |
| Covers periods | Usually the last two to three years, monthly | The financial year | Since incorporation |
| Page | This page | Tax audit and statutory audit services | Legal and secretarial DD |
An audited set of accounts does not answer an FDD question. Audit opines on the statements as a whole; FDD reworks them for the deal.
Related services: CMA data · internal audit
What it costs
Fee on quote. The drivers are the number of years and entities in scope, whether the accounts are audited, the state of the books, and how many workstreams you want. We scope it, then quote a fixed fee for that scope, and we say in the engagement letter what is out of scope.
| Item | Amount |
|---|---|
| Professional fee | Fee on quote, after scoping |
| Government fee | No government fee for a due diligence review |
Professional fees exclude GST at 18%. Government fees, where they apply, are paid at actuals to the department and are shown separately. Fees verified on 22 September 2026.
What we need from you
Monthly trial balances and ledgers for the periods in scope; audited financial statements; GST returns including the annual return; TDS statements; income-tax returns, assessment orders and any notices; bank statements; the cap table with allotment and transfer records; customer and vendor contracts; payroll data and employee liabilities; the fixed asset register; and the current year's management accounts. Missing pieces are not a blocker, they are a finding, and we say so in the report.