Due Diligence Checklist for Buying an Indian Company

Due diligence is where most cross-border deals are won or lost. For foreign acquirers, an Indian target carries layers of statutory compliance, tax history and contractual obligation that are not always visible from the outside. A disciplined, multi-workstream review protects your valuation and shapes the indemnities you negotiate.

This checklist is organised the way we run diligence for MNCs: financial, tax, legal and commercial, with regulatory threads running through each.

Why diligence matters more in cross-border deals

When you buy shares in an Indian company, you inherit its history — including historical tax positions, pending litigation and any gaps in statutory filings. Diligence converts unknown risk into priced, allocated risk: findings drive purchase-price adjustments, escrow, specific indemnities and conditions precedent. Skipping it rarely saves money.

Financial due diligence checklist

• Audited financial statements for recent financial years (per agreed deal scope) and interim management accounts.
• Quality-of-earnings review: one-off items, revenue recognition, related-party transactions.
• Working-capital trend analysis and normalised working-capital peg.
• Debt and debt-like items, guarantees and off-balance-sheet exposures.
• Capex history and committed future capex.
• Cash-flow reliability and bank reconciliations.
• Management forecasts versus historical performance.

Tax due diligence checklist

• Corporate income-tax returns, assessments and pending appeals.
• Goods and Services Tax (GST) registrations, returns and reconciliations.
• Withholding-tax (TDS) compliance on payments to residents and non-residents.
• Transfer-pricing documentation for related-party dealings.
• Tax notices, demands and contingent tax liabilities.
• Availability and continuity of any tax incentives the business relies on.

Note: confirm applicable tax rates, thresholds and filing deadlines — these are subject to professional review and change periodically.

Legal due diligence checklist

• Corporate records: incorporation documents, statutory registers, board and shareholder minutes.
• Cap table, share-transfer history and any encumbrances on shares.
• Material contracts, change-of-control clauses and assignment restrictions.
• Licences, permits and sector registrations — validity and transferability.
• Litigation, arbitration and regulatory proceedings (pending and threatened).
• Intellectual property ownership, registrations and assignments.
• Real estate: title, leases and land-use compliance.
• Foreign-exchange (FEMA) compliance and any prior foreign-investment reporting.

Commercial and operational due diligence checklist

• Customer concentration and contract stickiness.
• Supplier dependencies and input-cost exposure.
• Market position, competitive landscape and growth assumptions.
• Technology stack, data and cybersecurity posture.
• Operational KPIs and capacity utilisation.
• Environmental, social and governance (ESG) and regulatory compliance for the sector.

Human-resources and compliance review

• Employment contracts, key-person dependencies and notice/non-compete terms.
• Statutory labour and social-security compliance (provident fund, gratuity and similar).
• Pending employment disputes and retention risk through transition.
• Payroll accuracy and benefits liabilities.

Turning findings into deal protection

Diligence findings should feed directly into the definitive agreements: price adjustments for confirmed exposures, escrow for contingent items, specific indemnities for identified risks, and conditions precedent for matters that must be cured before closing. A clear findings log, ranked by severity, keeps negotiations grounded in evidence.

Our team runs coordinated, cross-workstream reviews through our mergers, acquisitions and due-diligence service.

Frequently asked questions

How long does due diligence on an Indian target take? A focused mid-market review typically runs several weeks once data-room access is granted. Timelines extend with poor record-keeping, regulated sectors or unresolved litigation.

What is the single most common red flag? Gaps in statutory and tax filings. They are common, often fixable, but must be quantified and allocated between buyer and seller before signing, subject to professional review.

Can we rely on the target’s own audit? The statutory audit is a starting point, not a substitute for buyer-side diligence. Independent review tests assumptions the audit was not designed to address.

Talk to our India desk

Planning an acquisition in India? Our India desk can scope and run diligence across every workstream and translate findings into deal protection. Book a strategy call to get started.

Disclaimer: general information only, not legal/tax/financial advice. Rules, rates and thresholds change and are subject to professional review; engage appropriate professionals before acting.