Due Diligence Services in India

Say a private equity fund is looking at a manufacturer incorporated in Delhi, running a second plant in Pune, and shipping through a warehouse in Bengaluru. A due diligence team that only checks the Delhi entity’s books will miss whatever’s sitting in the other two states — an expired factory licence, a labour law lapse, a charge on the Pune plant that was never satisfied on record. That’s the problem pan-India due diligence is built to solve.

Sapient Services runs due diligence services in India for corporates, banks, NBFCs, PE and VC investors, and foreign companies entering the Indian market. Financial, legal, tax, operational, and technical review run as one coordinated engagement rather than separate exercises per city, drawing on a multidisciplinary team of Chartered Accountants, IBBI-registered valuers, and sector specialists.

What Is Due Diligence?

Due diligence is a structured review of a company’s financial, legal, tax, and operational position, carried out before an acquisition, investment, or lending decision. It differs from an audit: an audit gives assurance on historical financial statements, while due diligence investigates the risks and facts relevant to a specific transaction. For a business with operations in more than one state, it also means checking whether compliance holds up in each location, not just at the registered office.

What Changes When a Deal Spans More Than One State

The core work — verifying financials, checking contracts, testing compliance — stays the same. What changes is coordination: reconciling entity-level corporate filings with location-specific records — state registrations, licences, GST registrations, factory approvals — and, where relevant, differences in accounting policies between entities, into one report a decision-maker can actually use.

Two regulatory points are worth knowing before scoping any review right now:

• Income Tax Act, 2025 — effective 1 April 2026, it renumbers provisions due diligence teams have cited for years: Section 70 now covers what Section 47 did, and Section 77 replaces the old Section 50B on slump sale. Reports should cite the current section for periods after 1 April 2026; historical tax periods and legacy transactions may still need the 1961 Act.
• CCI deal value threshold — introduced in September 2024, it can bring a deal above ₹2,000 crore within CCI’s notification requirements where the target also has ‘substantial business operations’ in India, even where standard turnover or asset thresholds aren’t met. Whether a specific deal is actually notifiable depends on the facts and applicable exemptions.

Single-Location vs Multi-State: What Actually Changes

Timelines are typical ranges, not guarantees — actual duration depends on document readiness and how many entities are involved.

Who Actually Needs This

• PE and VC firms funding portfolio companies across more than one state
• Banks and NBFCs running pre-sanction credit checks outside their home branch network
• Corporates on either side of an M&A deal where the target isn’t confined to one location
• Foreign companies acquiring or investing in an existing Indian business
• Listed companies needing an independent review for a capital-raising or transaction process
• Startups preparing for fundraising who want issues identified ahead of investor diligence
• Real estate developers acquiring land across more than one state

The Disciplines We Cover — and Where the Risk Actually Sits

Many M&A, investment, and lending engagements involve more than one of these running at once, depending on the transaction and risk profile. Here’s what each looks for, and where it typically catches something the others wouldn’t:

• Financial due diligence — tests whether earnings and cash flow are sustainable, not just correctly recorded: normalised EBITDA, working capital, and contingent liabilities, often summarised as a quality-of-earnings view. A common miss: working capital that looks fine consolidated but is actually one profitable location subsidising a loss-making one.
• Legal due diligence — contracts, litigation, and statutory compliance, checked against whichever regime the relevant state or sector applies. A company can be compliant at head office and still be carrying an expired approval at a branch nobody’s checked in two years.
• Tax due diligence — direct and indirect tax exposure and transfer pricing, reviewed against the Income Tax Act, 2025 for periods after 1 April 2026, and the 1961 Act for earlier periods.
• Operational and technical due diligence — supply chain, internal controls, and technology infrastructure, assessed for whether the business can run at the scale it’s being valued on.
• Property due diligence — title, encumbrances, and, for covered real estate projects, RERA registration status; a check run only at the registered office won’t catch an undisclosed charge on a plant two states away.
• Commercial due diligence — market position and customer concentration tested against the specific market the business competes in, not the national average.
• Vendor and third-party due diligence — counterparty risk and background checks, including MCA/ROC searches that follow the promoter’s other companies.

M&A, PE, and Startup Due Diligence

M&A Due Diligence

M&A due diligence — sometimes called acquisition or transaction due diligence — usually starts before a term sheet is signed. Buy-side teams use the findings to adjust price, deal structure, or the conditions precedent in the agreement. Sell-side due diligence — increasingly common as sellers try to avoid mid-negotiation surprises — fixes issues before a buyer finds them first. If the deal value crosses ₹2,000 crore and the target has substantial business operations in India, check whether a CCI filing applies early.

Private Equity, VC, and Startup Due Diligence

This looks different: verifying the cap table, checking founder and promoter background, and testing whether growth projections hold up against the company’s actual unit economics rather than sector-wide assumptions. Founders can also use a pre-fundraise review to identify issues before investor diligence begins — though each investor may still apply its own review requirements.

Banks and NBFCs Lending Outside Their Home Branch

Lenders extending credit outside their home network combine financial due diligence with a KYC/EDD layer. In November 2025, the RBI replaced the 2016 KYC Master Direction with sector-specific KYC Directions for banks and NBFCs, setting out CDD and EDD obligations for higher-risk borrowers — a separate KYC/AML obligation sitting alongside, not replacing, the transaction-specific due diligence covered here. For syndicated lending, we structure the report so each credit committee can use it without a separate re-verification.

Cross-Border and FDI Due Diligence

Foreign companies acquiring or investing in an existing Indian business, or entering a joint venture, need a few checks a domestic buyer doesn’t: FEMA compliance, sectoral FDI caps and approval routes where applicable, and whether related-party transactions and board approvals meet Companies Act, 2013 requirements. We work alongside the client’s international legal counsel rather than duplicating their scope. Setting up a new Indian subsidiary from scratch is scoped separately, as entity structuring rather than transaction review.

Where We Work

Headquartered in New Delhi, we run engagements across India — Mumbai, Bengaluru, Hyderabad, Chennai, Kolkata, Pune, Ahmedabad, Gurugram, and Noida included. For a deal spanning more than one city, one engagement lead owns the consolidated report, rather than leaving the client to reconcile separate documents themselves.

Due Diligence Timeline and Cost

Due diligence fees are generally scope-based rather than fixed, driven mainly by the number of entities and locations, document readiness, and how many disciplines the scope covers. A single-entity financial review with clean records can close in three weeks; a five-state, multi-discipline engagement with scattered filings can run past eight — indicative Sapient timelines, not an industry-wide figure.

For an actual quote, scope needs discussing directly — figures here are directional, not a price list.

Our Due Diligence Process

What the Due Diligence Report Includes

Findings organised by workstream and risk level (high/medium/low), open items still needing resolution, and — for transactions — what each finding means for the deal: a price adjustment, a condition precedent, an indemnity, or further investigation. Written to be acted on, not decoded.

Why Sapient

• A multidisciplinary team — Chartered Accountants, IBBI-registered valuers where valuation work is required, cost accountants, and engineers — so financial, technical, and property due diligence run together, not across separate vendors.
• Reports built for more than one audience at once: a credit committee, an investment committee, and deal counsel, without separate re-verification.
• Confidentiality arrangements documented for engagements, with client information restricted to the assigned team.

FAQs

Q1: Why does pan-India coverage matter if the target’s registered office is in one city?

Because risk doesn’t stay at the registered office. A branch, plant, or warehouse elsewhere can carry a compliance gap or property issue a single-location review never reaches.

Q2: What does financial due diligence for investors and lenders actually test?

Whether earnings, cash flow, and working capital are sustainable — not just accurate. That includes debt structure, contingent liabilities, and the assumptions behind any projections shared with the deal.

Q3: How does the CCI deal value threshold affect M&A timelines?

A deal above ₹2,000 crore can fall within CCI’s notification requirements where the target has substantial business operations in India, even if turnover or asset thresholds aren’t met. Whether it’s actually notifiable depends on the facts and exemptions — worth checking early.

Q4: Do you handle vendor and third-party due diligence at a national scale?

Yes — reviewing a counterparty’s financial health and compliance standing everywhere it operates, not just near the client’s headquarters.

Q5: Can you support a foreign company acquiring or investing in an Indian business?

Yes. We review the Indian entity’s financial, operational, and compliance position — FEMA and FDI considerations included — working alongside the client’s own international counsel.

Q6: How long does a pan-India engagement take?

Indicative timelines: a focused, single-workstream review runs 3–4 weeks; a full multi-workstream engagement across several locations runs 6–8 weeks or more, depending on document readiness.

Q7: What matters most in PE or VC due diligence?

The cap table, founder and promoter background, and whether growth projections match the company’s real unit economics rather than market averages.

Q8: What documents are required before a due diligence engagement starts?

Audited financials, MCA/ROC filings, material contracts, tax records, and board minutes for every entity and location involved. Having these ready in advance is one of the most important factors affecting turnaround time.

Q9: How much does due diligence cost in India?

Fees are generally scope-based rather than fixed, driven mainly by the number of entities and locations, which disciplines are in scope, and document volume — an actual quote needs the scope discussed directly.

Q10: Is this worth it for a smaller, single-state deal?

Yes, though the scope is usually lighter — financial records, legal standing, basic compliance — without the full multi-location depth.

Before You Start

If a deal, fundraise, or lending decision touching more than one state is coming up, don’t start with a full engagement. Start with a scoping call: share the entities, locations, and transaction scope, and work out which disciplines actually apply before agreeing on cost or timeline. That one conversation usually decides whether a review finishes on schedule.

Write to valuation@sapientservices.com or call +91 9540162888.