Direct-to-consumer (D2C) audio products and wearables brand Boat<\/a> has closed a $60-million, or about Rs 500-crore, financing through convertible preferred stocks notes from existing investor Warburg Pincus<\/a> and new investor Malabar Investments<\/a>, and has formally withdrawn its listing plans.

Boat has put a minimum valuation cap of around $1.2 billion as part of this funding, people aware of the terms of the deal told ET. This means whenever Boat closes its next round of funding or goes for an initial public offering (IPO), Warburg and Malabar – an India-focused investment fund – will get these preffered stocks converted into equity at a business valuation of $1.2 billion even if other investors come at a higher price.

Boat declined to comment on details of the financing.

“The convertible preffered stocks will be priced to either the IPO or the next funding round though chances of the former is higher,” one the people cited above said. “Existing investors and incoming investors are signing up now as they will get a discount on pricing now.”

With this fundraise, the Delhi-based company’s draft red-herring prospectus (DRHP) filed with stock markets regulator Securities and Exchange Board of India (Sebi) for a planned IPO stands withdrawn, a senior executive at the firm said.

ET had reported in May that Boat was among new-age companies that are likely to postpone IPO plans<\/a> even after securing Sebi’s clearance due to choppy market conditions.

“The market condition still remains very choppy but the intent is quite clear – to access the markets in the near future when the conditions are conducive,” company CEO Vivek Gambhir<\/a> told ET. “While there is no set timeline, I think it would be sometime in the near future.”

In January this year, Imagine Marketing – parent of Boat – had filed the DRHP with Sebi to raise Rs 2,000 crore through an IPO<\/a> with a fresh issue of shares worth up to Rs 900 crore and an offer for sale of shares worth up to Rs 1,100 crore.

Gambhir said the objective of the fundraise is to expand the brand’s presence in the smartwatches category with investments in branding, design and R&D, and make-in-India capabilities, besides paring debt.

“We intend to use a part of this money for debt repayments,” he said. “Current net debt levels are around Rs 750 crore. We intend to bring this down to Rs 300-400 crore over the next couple of months.”

ET reported on October 12 that convertible notes are increasingly being used by late-stage startups to raise capital<\/a> without compromising on their valuation amid a funding drought in big-ticket deals. Udaan, Byju’s, and PharmEasy are among startups that have opted for funding through convertible notes.