What is Quality of Earnings analysis?

Quality of Earnings (QoE) is a structured analysis of how sustainable, recurring and cash-backed reported profits really are. It strips out one-offs, normalises working capital and adjusts for accounting policy choices to arrive at a defensible 'true' EBITDA.

How long does financial due diligence take?

A focused buy-side or investor-side DD on an Indian SME typically takes 2–4 weeks, depending on entity complexity, number of group companies, and quality of underlying books.

What documents are needed for due diligence?

At minimum: 3 years of audited financials and tax audit reports, ITRs, GST returns and reconciliations, bank statements, payroll registers, major contracts, cap table, ROC filings, and any pending litigation or notices.

Due Diligence

Relevant for:For Startups For Foreign Companies

Financial Due Diligence for Acquisitions and Investment

Before you wire the cheque, know exactly what you're buying. We run buy-side and investor-side financial due diligence on Indian businesses — Quality of Earnings, working capital, tax exposures, regulatory risk — with a clear red-flag report and deal-structuring recommendations.

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What's Included

Quality of Earnings (QoE) and EBITDA normalisation

Working capital analysis and peg setting

Debt, debt-like items and contingent liability review

Tax due diligence — Income Tax, GST, TDS, transfer pricing exposure

ROC, FEMA, labour and regulatory compliance review

Reconciliation of management accounts vs. statutory accounts

Red-flag report with deal-structuring recommendations

Our Process

STEP 1

Scoping

Define materiality, period under review and information request list.

Week 1

STEP 2

Data Room Review

Analyse financials, ledgers, contracts and statutory records.

Week 1–2

STEP 3

Management Q&A

Structured calls with target management to clarify findings.

Week 2–3

STEP 4

Draft Report

Issue draft red-flag report with adjustments and risks.

Week 3

STEP 5

Final Report

Address responses; issue final QoE and DD report for decision.

Week 4

Documents Required

3 years audited financials and tax audit reports
Monthly management accounts (P&L, balance sheet, cash flow)
ITR, computation, AIS / TIS and assessment orders
GST returns, GSTR-2B reconciliation and refund orders
Major customer / vendor / employment contracts
Cap table, ESOP grants and shareholder agreements
ROC filings, FEMA / FC-GPR records, litigation summary

Key Statutory References

Item	Reference
Companies Act Filings	AOC-4, MGT-7, ADT-1
Tax Compliance	Income Tax Act, CGST Act, TDS u/s 192–195
Cross-border	FEMA, FC-GPR / FC-TRS, FLA Return
Accounting Framework	Ind AS / AS / Schedule III