Due Diligence Advisory Services in India

Due diligence is one of the most important stages of a merger, acquisition, strategic investment, private equity transaction, business purchase or joint venture. Before committing capital, a buyer or investor should understand not only the target company’s reported financial performance but also its tax exposures, liabilities, regulatory compliance, working capital requirements, customer concentration and other transaction risks.

EzyBiz India Consulting LLP provides Due Diligence Advisory Services in India to Indian companies, foreign investors, strategic buyers, promoters, private investors and businesses evaluating acquisitions, investments and other corporate transactions.

Our due diligence work focuses on financial, tax, corporate, regulatory, compliance and transaction-related matters. Where formal legal due diligence, title verification or legal opinions are required, we coordinate with appropriately qualified legal professionals.

For broader acquisition and transaction support, clients can also review our Mergers & Acquisitions Advisory Services in India.

What Is Due Diligence?

Independent Review Before a Transaction

Due diligence is a structured review of a target business before an acquisition, investment, merger, joint venture or other major transaction.

The objective is to verify important information provided by the target, identify potential risks and understand matters that could affect transaction value, structure or completion.

Due Diligence Is More Than a Compliance Checklist

An effective due diligence exercise should not merely confirm whether documents exist. It should evaluate whether financial information is reliable, reported earnings are sustainable, tax positions are supportable and material compliance risks could create future liabilities.

Why Is Due Diligence Important?

Identify Risks Before Committing Capital

A business may appear profitable while carrying undisclosed tax liabilities, customer concentration, overdue receivables, weak internal controls, litigation or regulatory non-compliance.

Identifying these issues before closing gives the buyer an opportunity to evaluate whether the transaction should proceed and on what terms.

Improve Transaction Negotiation

Due diligence findings can influence valuation, purchase consideration, working-capital adjustments, warranties, indemnities, escrow requirements, conditions precedent and other transaction terms.

Businesses considering an acquisition can also review our guide on Buying an Existing Business in India.

Types of Due Diligence We Provide

Financial Due Diligence

Financial due diligence evaluates historical performance, earnings quality, working capital, cash flows, debt, receivables, inventory and other factors affecting the economic position of the target business.

Tax and Regulatory Due Diligence

Tax and regulatory due diligence examines income tax, GST, TDS, transfer pricing, corporate filings and other compliance matters relevant to the transaction.

Transaction-Focused Due Diligence

The scope may also be tailored to the transaction. For example, an acquisition may require emphasis on historical liabilities, while an investment transaction may focus more heavily on financial controls, governance, shareholder rights and use of funds.

Financial Due Diligence

Quality of Earnings and EBITDA

A buyer should determine whether reported profits represent sustainable operating performance.

Review may include unusual income, non-recurring expenses, promoter-related expenses, related-party transactions, accounting estimates and adjustments required to arrive at normalised EBITDA.

Working Capital and Cash Flow

Reported profitability does not necessarily mean strong cash generation. Due diligence should review receivables, inventory, payables, working-capital cycles and historical operating cash flows.

These matters can directly affect purchase-price adjustments and additional funding required after acquisition.

Debt, Liabilities and Financial Commitments

Borrowings, guarantees, security interests, lease commitments, overdue liabilities and contingent obligations should be reviewed to understand the target’s actual financial position.

Tax Due Diligence

Income Tax and TDS Review

Tax due diligence may include review of income-tax returns, tax audit reports, assessments, notices, appeals, TDS compliance, carried-forward losses and significant positions adopted by the company.

Official income-tax information is available through the Income Tax Department.

GST Due Diligence

GST review may cover registration, returns, output tax, input tax credit, reverse-charge liability, reconciliations, e-invoicing, e-way bills, notices, refunds and significant compliance exposures.

Businesses may refer to the GST Portal for official GST services and information.

Transfer Pricing and International Tax

Companies having international or specified related-party transactions may require review of transfer-pricing documentation, inter-company agreements, pricing methodology, withholding tax and international tax positions.

Corporate, Secretarial and Regulatory Due Diligence

Corporate Records and ROC Filings

The review may include incorporation documents, share capital, shareholding, statutory filings, charges, board and shareholder records and other corporate information available for review.

Official company-law information and filings are administered through the Ministry of Corporate Affairs.

Licences and Regulatory Approvals

A target may require sector-specific licences, registrations, approvals or consents to conduct its business. Their validity, renewal status and transferability should be considered during the transaction review.

Pending Notices and Compliance Exposure

Outstanding notices, adjudication proceedings, regulatory correspondence and unresolved compliance matters may create financial or operational exposure after acquisition.

Labour and Employment Due Diligence

Employee and Payroll Compliance

The review may include employment records, payroll practices, statutory deductions, employment benefits and material employee-related obligations based on the agreed scope.

PF, ESI, Gratuity and Employee Liabilities

Potential exposures relating to provident fund, ESI, gratuity, bonus, leave encashment and other employee obligations can affect the economics of an acquisition.

Employee-related liabilities should therefore be considered together with transaction structure and post-closing obligations.

Commercial and Operational Due Diligence

Customer and Supplier Concentration

A business dependent upon a small number of customers or suppliers can carry significantly higher commercial risk than headline revenue figures indicate.

Due diligence should identify material concentration and assess whether important commercial relationships are likely to continue after the transaction.

Promoter and Key-Person Dependency

Some businesses depend heavily on promoter relationships, technical knowledge or a small number of key employees.

The buyer should assess whether these capabilities will remain available after closing and whether retention arrangements may be required.

Legal Due Diligence and Specialist Coordination

Legal Review Should Be Conducted by Qualified Counsel

Matters such as title verification, contractual enforceability, legal opinions, intellectual-property ownership, litigation analysis and drafting of transaction agreements should be reviewed by appropriately qualified legal professionals.

Integrated Transaction Coordination

EzyBiz India can coordinate financial, tax and regulatory due diligence findings with the client’s legal advisors, Company Secretaries, Registered Valuers and other specialists so that material issues are considered together during transaction negotiations.

Due Diligence in Mergers and Acquisitions

Buy-Side Due Diligence

A buyer uses due diligence to understand what is actually being acquired and whether the proposed valuation reflects the underlying financial and commercial position of the business.

Sell-Side or Vendor Due Diligence

A seller may undertake a pre-transaction review to identify and resolve financial, tax or compliance issues before approaching potential buyers.

This can improve transaction readiness and reduce surprises during buyer due diligence.

Due Diligence Findings and Deal Structure

Material findings may influence whether the transaction is structured as a share purchase, asset purchase, business transfer or another arrangement.

Our Business Buy & Sell Advisory Services in India can assist with the wider transaction process.

Due Diligence for Private Equity and Strategic Investment

Investment Due Diligence

Private equity, venture capital, family offices and strategic investors may undertake due diligence before acquiring a minority or controlling interest in a company.

Governance and Financial Controls

Investment transactions may require particular attention to management information systems, financial controls, related-party transactions, governance, shareholder arrangements and the reliability of financial reporting.

Where fund raising and valuation support are also required, see our Fund Raising & Business Valuation Services.

Cross-Border Due Diligence in India

Foreign Investor Acquiring an Indian Business

Foreign buyers should evaluate financial and tax matters together with foreign-investment rules, sectoral conditions, pricing requirements, beneficial ownership and applicable reporting requirements.

FEMA and RBI Considerations

Transactions involving non-residents may require analysis under FEMA and applicable RBI regulations.

Clients can review our FEMA & RBI Advisory Services and the official Reserve Bank of India website.

Our Due Diligence Process

Step 1 – Understand the Transaction

We first understand whether the proposed transaction involves an acquisition, strategic investment, merger, business sale, joint venture, fund raising or another transaction.

Step 2 – Define Scope and Information Request

The due diligence scope and information request list are prepared according to the transaction, industry, size of business and areas of potential risk.

Step 3 – Review Documents and Financial Data

Relevant financial statements, tax returns, statutory filings, reconciliations, ledgers, agreements and other records are reviewed according to the agreed scope.

Step 4 – Management Discussions and Risk Analysis

Material observations may be discussed with management to understand their background, financial impact and possible mitigation.

Step 5 – Reporting and Transaction Support

Findings are communicated through the agreed reporting format, which may include an executive summary, detailed observations, risk classification, red flags and recommendations.

Key Documents Reviewed During Due Diligence

Financial and Tax Documents

Depending on scope, information may include:

• audited financial statements;
• trial balance and general ledger;
• management accounts;
• bank statements;
• receivable and payable ageing;
• inventory records;
• loan and borrowing documents;
• income-tax returns;
• tax audit reports;
• GST returns;
• TDS returns; and
• tax notices and assessments.

Corporate and Commercial Documents

Relevant records may include incorporation documents, shareholding information, ROC filings, licences, major customer and supplier contracts, financing agreements, employee information and other transaction-relevant documents.

Common Red Flags Identified During Due Diligence

Financial Red Flags

Examples may include overstated revenue, unusual year-end transactions, weak receivable recovery, obsolete inventory, aggressive capitalisation, unsustainable EBITDA or significant off-balance-sheet commitments.

Tax and Compliance Red Flags

Potential issues can include unpaid taxes, incorrect GST positions, TDS defaults, ongoing tax disputes, regulatory filing gaps or inadequate supporting documentation.

Commercial Red Flags

High customer concentration, promoter dependency, declining margins, unusual related-party relationships or dependence on non-transferable licences or contracts can materially affect transaction value.

How Due Diligence Findings Affect the Deal

Valuation and Purchase Price Adjustments

Material financial or tax exposures identified during review may affect the price the buyer is willing to pay or the mechanism used to determine final consideration.

Warranties, Indemnities and Escrow

Specific risks may be addressed through contractual protection, escrow, holdbacks, indemnities, conditions precedent or remediation before closing in consultation with legal counsel.

For transactions potentially requiring competition approval, parties should also consider the current combination framework of the Competition Commission of India. Sharing competitively sensitive information during due diligence should be appropriately structured with legal and competition-law advice where relevant.

Why Choose EzyBiz India for Due Diligence?

Multidisciplinary Financial and Tax Experience

Our team combines experience in financial analysis, taxation, GST, corporate compliance, regulatory advisory and transaction support.

Commercially Focused Reporting

Our objective is not merely to identify compliance exceptions. We focus on explaining the potential financial and transaction impact of material findings so that buyers and investors can make informed decisions.

Businesses evaluating broader corporate transactions can also review our guide on Merger and Acquisition Companies in India.

Frequently Asked Questions on Due Diligence

What Is Due Diligence in an Acquisition?

Due diligence is a structured review of the target company’s financial, tax, corporate, regulatory and other material matters before completing an acquisition or investment.

How Long Does Due Diligence Take?

The timeline depends upon transaction size, scope, availability of information, complexity of the business and responsiveness of management. A focused review may take one or two weeks, while larger or more complex assignments may require several weeks.

What Is a Red Flag Due Diligence Report?

A red flag report focuses on the most material risks or potential deal-breakers rather than reproducing every item reviewed during the exercise.

Can Due Diligence Change the Purchase Price?

Yes. Findings relating to sustainable EBITDA, debt, working capital, tax liabilities, contingent obligations or other risks can affect valuation and transaction negotiations.

Is Due Diligence Necessary Before Buying a Business?

Comprehensive due diligence is strongly advisable before acquiring a business because historical liabilities, financial misstatements and regulatory exposures may otherwise become apparent only after closing.

Related Corporate Finance Services and Guides

• Mergers & Acquisitions Advisory Services in India
• Merger and Acquisition Companies in India
• Business Buy & Sell Advisory Services in India
• Buying an Existing Business in India
• Fund Raising & Business Valuation Services
• Fast Track Merger in India
• Advantages and Disadvantages of Mergers and Acquisitions
• FEMA & RBI Advisory Services
• India Market Entry Consulting Services
• Corporate Finance Advisory Services

Official Resources

• Ministry of Corporate Affairs
• Income Tax Department
• GST Portal
• Reserve Bank of India
• Competition Commission of India – Regulation of Combinations
• Securities and Exchange Board of India

Reviewed By

Anil Agrawal, Chartered Accountant
Founder, EzyBiz India Consulting LLP
More than 20 years of professional experience in taxation, corporate finance, due diligence, transaction advisory, regulatory compliance and business consulting.

Last Reviewed: September 2026

Disclaimer

This page is intended for general informational purposes and describes the broad scope of due diligence advisory services. It should not be construed as investment, legal, valuation, tax, financial or regulatory advice for any specific transaction.

The scope and findings of a due diligence exercise depend upon the transaction, documents made available, management representations, agreed procedures, review period, applicable laws and specific circumstances of the target business.

Due diligence does not constitute an audit or assurance engagement unless expressly agreed otherwise. It also does not guarantee that every liability, fraud, error, legal issue or future business risk will be identified.

Legal due diligence, title verification, legal opinions, transaction-document drafting and other services reserved for appropriately qualified legal or regulated professionals should be obtained from the relevant professionals. EzyBiz India coordinates with legal counsel, Company Secretaries, Registered Valuers and other specialists wherever required.