No single disclosure decides an IPO. But some disclosures reliably separate a document that can be read quickly from one that needs a full diligence pass. These are the signals we check on every document, grouped by how seriously to take them.
High: read before you subscribe
| Signal | Where to look | Why it matters |
|---|---|---|
| Audit qualification or adverse opinion | Restated Financial Information, auditor's examination report and annexures | The auditor could not agree with, or could not verify, part of the accounts. |
| Emphasis of matter on going concern | Auditor's report; notes to accounts | The auditor is drawing attention to doubt about the company continuing in business. |
| Wilful defaulter or fraudulent borrower tag | Other Regulatory and Statutory Disclosures; Risk Factors | ICDR bars an issuer whose promoters or directors are wilful defaulters or fraudulent borrowers; any related mention needs careful reading. |
| Defaults, delays or restructuring with lenders | Financial Indebtedness; Risk Factors | Past stress on repayments often recurs if the cause has not been fixed. |
| Criminal proceedings against promoters or directors | Outstanding Litigation and Material Developments | Goes to governance and to management's ability to run the company. |
Medium: ask management
| Signal | Where to look | Why it matters |
|---|---|---|
| Promoter shares pledged or encumbered | Capital Structure; Our Promoters | Pledged shares can be sold by the lender if the promoter defaults. See promoter pledge in an IPO. |
| Issue mostly offer for sale | Objects of the Offer; The Offer | Proceeds go to sellers, not the business. See OFS vs fresh issue. |
| Large "general corporate purposes" or unidentified acquisitions | Objects of the Offer | Less visibility on how money will be used. ICDR caps these amounts. |
| Customer or supplier concentration | Our Business; Risk Factors | Loss of one account can move revenue materially. |
| Show-cause notices and regulatory orders | Outstanding Litigation; Government and Other Approvals | May lead to penalties, licence issues or restrictions. |
| Resignation of auditor, CFO or other KMP | Our Management; General Information | Recent changes near an IPO deserve an explanation. |
| Negative operating cash flow | Restated Financial Information; MD&A | Profits that do not turn into cash point to working-capital pressure. |
| Recent pre-IPO allotments at much lower prices | Capital Structure; Basis for Offer Price | Shows what insiders and pre-IPO investors paid relative to you. |
| Expired or pending material licences | Government and Other Approvals | Operations may depend on approvals not yet in hand. |
Low: note for the file
| Signal | Where to look | Why it matters |
|---|---|---|
| Related party transactions | Related Party Transactions; restated financials | Normal in Indian groups; material only when large or off-market. |
| Contingent liabilities | Notes to restated financials | Compare against net worth; tax demands are the usual driver. |
| Group companies in a similar business | Group Companies; Our Promoters | Possible conflict of interest. |
| Commissioned industry report | Industry Overview | Useful context, not independent research. |
How to use the checklist
Count the high signals first. One high signal is a reason to read the relevant section in full; two or more that point the same way, such as a lender default plus a going-concern emphasis, is a reason to slow down. Medium signals become questions for the company or the lead manager. Low signals go into your notes.
DRHP Lens runs these checks on a PDF in your browser, scores the result from 0 to 100, and links each finding to the page so you can read the original wording. The score tells you where to look, not whether to invest.
Run the red-flag scan
Upload a DRHP, RHP, NCD prospectus, AIF PPM or annual report. The scan runs in your browser, nothing is uploaded, and every finding is cited to a page.
Analyse a documentFrequently asked questions
What are red flags in a DRHP?
Red flags are disclosures that suggest elevated risk and deserve a closer look, such as auditor qualifications, going-concern doubts, defaults to lenders, large promoter pledges, an issue dominated by offer for sale, heavy customer concentration, regulatory orders, and large related-party transactions.
Does a red flag mean I should not invest?
No. A red flag tells you where to look harder and what to ask. Many good companies carry one or two. What matters is the size of the issue, how it is explained, and whether several flags point the same way.
Where is litigation disclosed in a DRHP?
In the section titled Outstanding Litigation and Material Developments, which covers proceedings involving the company, its promoters, directors, key managerial personnel and group companies.
This guide is general education about how Indian offer documents are structured. It is not investment advice or a recommendation to subscribe to any issue. Regulations change; always read the current offer document and the SEBI regulations it refers to, and consult a SEBI-registered investment adviser before you invest.