How to analyse an IPO before you apply: a 12-point checklist

Most investors decide on an IPO in the time it takes to read a GMP quote. A better decision takes about an hour with the Red Herring Prospectus open, and less with the right checklist. These are the twelve questions a diligence team asks first, with the RHP section where each answer lives.

Part 1: the deal itself

1. Who gets the money? Split the issue into fresh issue and offer for sale. A fresh issue funds the company; an offer for sale pays existing shareholders. (Section: The Offer.) See OFS vs fresh issue.
2. What will the fresh money be used for? Specific, costed projects are better than large “general corporate purposes” or repaying loans taken shortly before the IPO. (Section: Objects of the Offer.)
3. Is the price fair? Compare the P/E at the upper band with listed peers, and compare the IPO price with the weighted average cost at which promoters and investors bought shares in the last 18 months. (Section: Basis for Offer Price.)
4. Who is selling, and how much of their stake? A private equity fund exiting fully is normal. A promoter selling a large slice is worth a question. (Section: The Offer and Capital Structure.)

Part 2: the people

5. Are promoter shares pledged? Any pledge on promoter shares is a red flag worth reading closely. (Section: Capital Structure.)
6. How much related-party business is there? Large purchases from, sales to, or loans with promoter group entities deserve scrutiny. (Section: Financial Information, related party note.)
7. What litigation is outstanding? Look at the amounts, not just the count, and especially at tax and regulatory matters involving promoters and directors. (Section: Outstanding Litigation.)

Part 3: the numbers

8. Is profit turning into cash? Compare operating cash flow with net profit over three years. Profits that never reach the bank are the most common quiet warning in Indian IPOs. (Section: Restated Financial Statements.)
9. Are receivables and inventory growing faster than revenue? That pattern usually means the company is funding its customers or stocking unsold goods.
10. How concentrated is revenue? Top-customer and top-supplier concentration is disclosed in Risk Factors and the Business section.
11. Did the auditor qualify anything? Read the auditor’s report and any CARO remarks. Qualifications, emphasis of matter and auditor changes all matter.

Part 4: after listing

12. When do lock-ins expire? Anchor lock-ins end after 30 and 90 days; promoter and pre-IPO lock-ins follow. Large unlocks can add selling pressure. See how anchor lock-ins work.

How to do this in ten minutes instead of an hour

Upload the DRHP or RHP to DRHP Lens. It checks these signals, scores the document, writes a one-page IPO summary and cites every finding to a page, so you can verify each point yourself.

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.