Restated Financial Statements in an IPO: How to Read the Numbers

Every IPO document you open has a thick section called “Restated Financial Information”, and most retail investors scroll straight past it to the price band. That’s a mistake. Restated financial statements in an IPO are the numbers SEBI makes the company rebuild so that three years (and sometimes a few extra months) can be compared like for like. If you want to know whether the growth story in the roadshow is real, this is where you check.

We’ll go through what “restated” means under SEBI’s rules, what the company must show, the reconciliation table most people never read, and a simple worked example of how a restatement can change the growth picture. Everything regulatory here comes from SEBI’s Issue of Capital and Disclosure Requirements (ICDR) Regulations, as amended up to March 2026, mainly Schedule VI, Part A, item (11) on financial statements.

What restated financial statements in an IPO actually are

A company’s normal annual accounts are prepared one year at a time. Accounting policies change, errors get spotted late, line items get regrouped. So if you just staple three years of annual reports together, you are often comparing apples with slightly different apples.

SEBI’s fix is restatement. Under the ICDR rules, where Ind AS applies to the latest period, the consolidated financial statements (CFS) for three years and the stub period, if there is one, have to be restated so that presentation, disclosures and accounting policies are consistent across all the periods, in line with the latest financial year or stub period. Significant errors, non-provisions, regroupings and other adjustments go back into the period they actually belong to.

There’s one notable exception. Changes in accounting estimates need not be restated, because the regulation treats them as events of that year. So a revised estimate of, say, useful life stays where it fell. Changes in accounting policy and corrections of errors, on the other hand, have to be disclosed as Ind AS 8 requires.

The financial section of the offer document is split into two parts: restated financial information and “other financial information”. Both are meant to be complete, with cross-references allowed to avoid repeating the same disclosure twice.

Who signs off, and why the peer review line matters

The restated CFS have to be audited and certified by the statutory auditor or chartered accountants who hold a valid certificate from the Peer Review Board of the Institute of Chartered Accountants of India (ICAI). The auditor then issues an examination report on the restated and audited financial information, following ICAI’s Guidance Note.

The peer review rule has teeth. If a new auditor with a valid peer review certificate is brought in for the stub period, and the earlier auditor did not hold a valid certificate when it signed the last annual accounts, those last annual accounts have to be re-audited by the new auditor. SEBI lets that re-audit leave out CARO reporting, internal financial controls and other purely regulatory matters, but the numbers themselves get a second look.

For a reader, that’s a useful clue. If the offer document mentions a re-audit, or a change of auditor just before the filing, read that part slowly and look at what moved.

The stub period: why some IPOs show three years and a few months

You’ll often see a column for something like “six months ended September 30” next to the three full years. That’s the stub period. Under the ICDR rules, a stub-period CFS is required if the latest full-year Ind AS CFS in the offer document is older than six months from the date the draft offer document or offer document is filed. And the stub period can’t end on a date earlier than six months before that filing.

The stub period CFS has to be complete, in line with Ind AS 34 on interim financial reporting. The issuer can choose whether to show comparatives for the stub period, so don’t be surprised if the matching period of the previous year is missing.

One practical warning. A stub period is a part year. If a business is seasonal, six months of revenue tells you very little on its own, and multiplying it by two can be badly misleading. SEBI’s MD&A requirements specifically ask companies to discuss the extent to which the business is seasonal, so check that paragraph before annualising anything.

The audited numbers tell you what the company reported at the time. The restated numbers tell you what those years look like once they are put on today’s rules. The gap between the two is where the questions start.

The reconciliation table nobody reads

This is our favourite part of any offer document, and it’s usually a single page. SEBI requires a reconciliation explaining the differences between the audited CFS equity and profit (or loss) and the restated CFS, presented in columns.

In plain terms: here’s what the company originally reported, here’s every adjustment, and here’s the restated figure. If the list of adjustments is short and the amounts are small, fine. If you see large prior-period items, repeated corrections or a big policy change, ask yourself why the original accounts needed so much fixing.

Audit qualifications get similar treatment. SEBI’s rules refer to SA 705, the auditing standard on modified opinions, which covers qualified opinions, adverse opinions and disclaimers. Where an audit modification can be quantified or estimated, it has to be adjusted in the restated financial information in the right period. Where it can’t, the notes must explain why. And the offer document summary has to list auditor qualifications that have not been given effect to in the restated financial statements. If that list isn’t empty, it deserves your attention.

What else the restated numbers feed into

Restated figures aren’t a standalone annex. A lot of the offer document is built on top of them, which is exactly why they matter.

• The offer document summary. It has to show share capital, net worth, revenue, profit after tax, earnings per share, net asset value per equity share and total borrowings, as per the restated consolidated financial statements, for the past three years and the stub period.
• Management’s discussion. The MD&A has to be based on the restated financial information for the last three years and the stub period. It must compare major profit and loss heads and explain significant changes, including unusual items, changes in accounting policy and dependence on a few customers or suppliers.
• Capitalisation statement. The table of total borrowings, total equity and borrowing-to-equity ratios, before and after the issue, is prepared on the restated CFS for the latest year or the stub period.
• Related parties. Related party transactions of the consolidated entities, whether eliminated on consolidation or not, have to be disclosed in the restated financial information, along with all funding arrangements among the consolidated entities, including inter-se guarantees (equity contributions are excluded).
• Contingent liabilities. The summary has to carry a table of contingent liabilities, cross-referenced to those disclosed in the restated financial statements.

Then there’s the “other financial information” part. SEBI requires earnings per share (basic and diluted), return on net worth, net asset value per share and EBITDA to be computed as per ICAI’s Guidance Note. That matters because “EBITDA” in a press release can be defined however the company likes. In the offer document, it follows a set method. We covered the separate operating metrics companies disclose in our piece on KPI disclosure in an IPO.

Restated numbers also decide who can do a regular IPO

Here’s a link many investors miss. SEBI’s main eligibility test for an IPO, in Regulation 6(1) of the ICDR rules, is calculated on a restated and consolidated basis. An issuer qualifies if it has:

• net tangible assets of at least ₹3 crore in each of the preceding three full years, of which not more than 50% are held in monetary assets (with provisos covering firm commitments to use the excess, and offers made entirely through an offer for sale);
• an average operating profit of at least ₹15 crore during the preceding three years, with an operating profit in each of those years;
• a net worth of at least ₹1 crore in each of the preceding three full years; and
• if it changed its name within the last year, at least 50% of revenue for the preceding full year earned from the activity its new name indicates.

A company that doesn’t meet these can still list under Regulation 6(2), but only through book building, and it must allot at least 75% of the net offer to qualified institutional buyers, refunding the full subscription money if it fails to do so. So a restatement that drags one year’s operating profit below zero isn’t just cosmetic. It can change the route the IPO has to take. Our explainer on IPO eligibility norms has more on the two routes.

Subsidiaries, foreign units and the materiality thresholds

Big groups get extra scrutiny. The separate audited financial statements of the issuer and all its material subsidiaries for the past three full financial years have to be made available on the issuer’s website (or linked from it), and the offer document has to give the link to the issuer’s own separate statements.

For this purpose a consolidated entity is “material” if it contributes 10% or more of turnover, net worth or profit before tax in the annual CFS of that year. Foreign entities’ statements are translated into rupees under Ind AS 21 and must be audited unless they are immaterial and local rules don’t require an audit. Even then, the total unaudited information inside the CFS can’t exceed 20% of turnover, net worth or profit before tax for that year.

If an IPO’s proceeds are going to buy a material business, SEBI wants the target’s audited financials too. An acquisition counts as material if it would add 20% or more, in aggregate, to turnover, net worth or profit before tax in the latest annual CFS. Separately, where the issuer or its subsidiaries made a material acquisition or divestment after the latest period in the offer document but before filing, proforma financial statements are required, for at least the last completed financial year and the stub period, certified by a peer-reviewed auditor or chartered accountant. That 20% test applies there as well.

A worked example: how restatement can change the growth story

Let’s take a made-up company, call it Example Industries, so the arithmetic is easy to follow. These figures are entirely hypothetical, and we’re ignoring tax to keep the maths clean.

Its audited profits, as originally reported, were:

• FY24: ₹40 crore
• FY25: ₹50 crore
• FY26: ₹62 crore

On those numbers, profit grew 25% in FY25 (₹10 crore on ₹40 crore) and 24% in FY26 (₹12 crore on ₹50 crore). Two years of steady mid-20s growth. Nice pitch.

Now suppose that while preparing the restated statements, the auditor finds that a ₹6 crore provision charged in FY25 actually related to FY24. It was a non-provision in FY24 that got caught a year late. Under SEBI’s rules it moves back to the period it belongs to.

• FY24 restated: ₹40 crore minus ₹6 crore = ₹34 crore
• FY25 restated: ₹50 crore plus ₹6 crore = ₹56 crore
• FY26 restated: ₹62 crore, unchanged

Now look at growth again. FY25 profit rises ₹22 crore on ₹34 crore, which is about 64.7%. FY26 rises only ₹6 crore on ₹56 crore, about 10.7%. Total profit over three years is the same ₹152 crore either way. But the shape is completely different: a big jump followed by a sharp slowdown, rather than smooth 25% growth.

Same total profit, very different story. The latest year’s growth fell from 24% to under 11% once the numbers were put in the right years.

Which version should drive your valuation? The restated one, because it’s the comparable one. If a company or a broker note keeps quoting growth from the originally reported figures, that’s worth noticing. And the reconciliation table is where this ₹6 crore shift would show up, line by line.

A quick checklist for reading the restated section

1. Start with the reconciliation. How many adjustments are there, and how large are they relative to profit and net worth?
2. Read the auditor’s examination report. Check who signed it and whether there was a change of auditor or a re-audit.
3. Look for unadjusted qualifications. The summary has to list auditor qualifications not given effect to in the restated statements.
4. Recompute growth from restated figures. Don’t rely on growth rates quoted elsewhere.
5. Treat the stub period carefully. Check the seasonality discussion in the MD&A before annualising.
6. Scan related party transactions and funding arrangements. Especially guarantees between group companies.
7. Check the capitalisation statement. See how borrowing-to-equity changes after the issue.

Where this fits in your IPO homework

Restated financials are one piece of a bigger picture. You’ll find them in the draft offer document and again in the final document; our guide to the red herring prospectus explains how that document is laid out, and the wider IPO investing in India guide covers pricing, subscription and allotment.

The short version: the restated section is where the company’s history gets cleaned up and put on one set of rules. Read the clean version, but also read the list of what had to be cleaned. That list often says more about a business than the glossy pages up front.

Disclaimer: This article is for educational purposes only and is not investment advice. The worked example uses hypothetical figures. Regulatory details are summarised from SEBI’s ICDR Regulations as amended and may change; always read the latest rules and the actual offer document, and consult a SEBI-registered adviser before investing.