Due diligence refers to the comprehensive, systematic, and thorough investigation or review conducted before entering into a business transaction or partnership. This process aims to assess and verify all relevant aspects of the transaction to ensure that all legal, financial, and operational risks are identified and evaluated.

Due diligence typically encompasses several areas, including legal due diligence, where the legal standing and compliance of the target entity with Indian laws and regulations are scrutinised; financial due diligence, which involves a detailed examination of the financial statements, assets, liabilities, and overall financial health; tax due diligence, focusing on the tax obligations and compliance status; and commercial due diligence, assessing the market position, competitive landscape, and commercial viability.

This process is essential for informed decision-making and risk mitigation, ensuring that investors or acquirers have a clear understanding of the potential benefits and liabilities associated with the transaction. It also involves verifying the accuracy of the information provided by the target entity and assessing any potential legal, financial, or operational issues that could impact the success of the deal.