The primary market is buzzing. In 2026, so far, 68 mainboard IPOs have raised about ₹90,000 crore or about $9.5 billion. This even as some of the large, most anticipated IPOs of Jio Platforms and NSE are in the pipeline. While Jio Platforms is expected to raise about ₹38,000 crore and become India’s largest IPO ever, NSE’s offer for sale is estimated at ₹30,000 crore.

For serious investors keen to participate in the primary market, poring over the red herring prospectus (RHP or simply, prospectus) is important. Yet, the task can be daunting as the prospectus itself runs into hundreds of pages and even into thousands, at times.

SEBI, the regulator, on its part has brought the ‘abridged RHP’ which is a concise summary of the original prospectus. It is short yet effective in helping an investor get started with the analysis in about 10-15 pages. Investors can get a good idea of what the company is and how it is doing in about an hour, going through the abridged RHP. However, should you skip the main prospectus if you are done with the abridged RHP? What does the abridged version miss? How should you go about the main RHP? Here is a lowdown.

Where can I download the RHP?

https://www.sebi.gov.in/ > Filings > Public Issues > Red Herring Documents filed with ROC > Look for the company’s name

Abridged prospectus

The abridged prospectus effectively condenses the longer RHP in about 10-15 pages. Typically, it contains a summary of the company’s business, the industry it operates in, summary financials, KPIs (key performance indicators) and a table showing the pre-IPO stake held by promoters and top 10 public shareholders. Within business, the document contains details of the products/ services offered, breakup of revenue by geography and operating segments, concentration of revenue with top 5 customers, key manufacturing facilities and the company’s strengths and strategies.

Besides, the abridged RHP contains short descriptions of the objects of the offer, background of the promoters, top 10 internal risk factors, board composition, outstanding litigations and auditor qualifications, if any.

Investors who have been analysing RHPs for a long time might be aware that the abridged RHP is not something new. Earlier, it was part of the main RHP under a section called ‘summary of the issue document’. However, delivering the same as a separate ‘abridged RHP’ should evoke investor interest for its condensed, succinct form.

Here’s our take on the abridged RHP. The abridged prospectus does a great job introducing the company to the investor but leaves serious investors wanting for more. For instance, the summary financials only contain a few line items such as revenue, PAT, EPS and net worth from the full financial statements. Financial statements must be read with accompanying notes which are absent in the abridged prospectus. The all important ‘management’s discussion and analysis’ section is available only in the main RHP and so are the granular details pertaining to how the company intends to deploy the fresh issue proceeds.

Yet, we recommend investors start with the abridged RHP and set a context about the company, before moving on to the main RHP. A full reading of the abridged RHP is advised.

Abridged RHP checklist

·     Know if there is a fresh issue component

·     If so, find out the objects behind the fund raise

·     Check if pre-IPO promoters’ controlling stake is maintained after the IPO

·     Understand business, revenue model and market share

·     Internalise the company’s scale, profitability and indebtedness

Round off a thorough reading of the abridged RHP with the outstanding litigations, audit qualifications and risk factors. Most companies may not have material litigations and audit observations. Focus more on the litigations ‘against’ the company and its subsidiaries and measure the amount involved in litigations against its net worth. Reading the top 10 risk factors should suffice in most cases as the other risk factors in the main RHP may largely have to do with general regulatory disclosures.

Sanity checks

It’s time to download the main prospectus now. While still on the topic of litigations and audit observations, your first step in reviewing the main RHP should be to conduct a few basic sanity checks. These help rule out the likelihood of investing in a company engaged in questionable practices.

Due diligence checklist

·     Go to summary of related party transactions (RPTs)

·     Check if management remuneration is disproportionate to revenue. If it is over 5 per cent of revenue, see if it is justified. If closer to 10 per cent, it is definitely excessive and could be a red flag.

·     Check if there are material unsecured loans (as a % of assets) given to promoter-linked entities

·     Check whether sales to and purchases from related entities form a significant portion of revenue or purchases, to confirm that the company is not involved in round tripping

·     Look up contingent liabilities for lawsuits and corporate guarantees

·     As a rule of thumb, contingent liabilities below 10 per cent of net worth should be tolerable. Else, factor it in valuation.

Management discussion & analysis

Once making sure that you are studying a rather clean company, head over to ‘management discussion & analysis’ (MDA). It is probably the only part of the prospectus that blends qualitative aspects of the business, like revenue model, quantitative (non-GAAP measures or KPIs) and financial data in one place. Hence, MDA makes it convenient for an investor to conduct fundamental analysis. MDA typically tops at 30-40 pages, and a thorough study of MDA should make it easy for you in the subsequent stages of the analysis.

Here’s a step-by-step approach.

1.   Most RHPs begin MDA with a brief description of the business and revenue model. If absent, your reading of the abridged RHP should suffice for now.

2.   Use the ‘principal factors affecting results of operations’ part to understand the drivers responsible for the company’s growth. These include internal drivers and industry tailwinds. For instance, growth in AUM, folios were mentioned as an internal driver of growth for SBI Funds Management. Stringent emission norms in the future were mentioned as an industry tailwind for Tenneco Clean Air.

3.   Use the table on KPIs or non-GAAP measures to see if the drivers of revenue growth are on an uptrend. These include GMV for an e-commerce company, number of keys for a hospitality company, loan growth for an NBFC, area of leasable properties for a real estate player, so on and so forth.

4.   Make use of the common size P&L statement (all items given as a percentage of revenue) to infer how revenue flows through costs down to the bottom line. Check if revenue, operating profit (EBITDA) and net profit are growing and calculate CAGRs for comparison with peers later.

5.   Go through management’s explanation of the year-on-year rise or decline in each of the items of P&L as it will give good clarity.

6.   Analyse the nature of cost items (variable/ fixed) to see if the company can benefit from operating leverage. This is more relevant for platform businesses such as Turtlemint Fintech Solutions, listed in 2026. At the time of its IPO, the company’s adjusted EBITDA loss narrowed to ₹108 crore in 9M FY26 from ₹143 crore in 9M FY25, driven by flat fixed costs and an 82 per cent year-on-year expansion in service margin (akin to contribution margin).

7.   Always have notes to accounts (part of restated financial information) by your side when you analyse financial statements to infer what goes into each line item of P&L and balance sheet.

Once done, move on to ratio analysis. While there are many ratios to consider, here are ones you should not miss.

Ratio analysis

1.   Cash flow from operations (before tax) to EBITDA - suggests the extent of operating profit converted to cash. There is no clear benchmark but as a rule of thumb, a ratio above 75 per cent is considered fine. It is very important to check whether earnings are concurrent with increase in cash flows. If not, the company’s working capital could be dragging cash flows down. Look if it is temporary or can be justified, given the nature of the industry.

2.   Net debt-to-equity ratio - measures a company’s leverage.

Net debt = Borrowings (non-current and current) – cash and bank balances – liquid investments (like short-term mutual funds).

Lower the ratio, the better it is and the benchmark depends on the capital intensity of the industry (infer from ratios of peers). In general, a ratio below 1x is desirable.

3.   Current ratio – measured by dividing current assets by current liabilities, gives you an idea whether the company is solvent in the short-term. This must be 1x at the least. However, some businesses such as retail, which collect cash from customers immediately on sale and pay vendors later, may have negative working capital or current ratio below 1x.

4.   Fixed assets turnover ratio – measured by dividing revenue by fixed assets, suggests how often the company can turn the investment in fixed assets into revenue. Higher ratio, the better it is.

Calculating this ratio is essential especially when a company is raising capital for capex. Read along with the schedule of utilisation of issue proceeds given under ‘objects of the offer’ (relates to in which year the capex will be incurred), it should come handy in modelling future revenue.

Other ratios such as working capital days, RoE/ RoCE can be analysed along with those of peer companies, using the ‘basis for offer price’ segment.

Business and industry

Once done with the above, the rest of the prospectus should be a breeze. ‘Industry overview’ and ‘our business’ are two large segments that an investor must go through, though the rigour maintained so far may not be required.

Checklist for industry analysis

·     Understand that the prospectus is ultimately the company’s sales pitch. Treat projected industry figures with a pinch of salt.

·     Exercise caution when assuming the total addressable market (TAM) of the company. It must be commensurate with the company’s products and capabilities. Readers can recall from our analysis of SpaceX’s IPO as to how the company had suggested an absurd figure of about $28.5 trillion as its TAM, which is almost of 90 per cent of US’ GDP.

·     Find out the relevant industry’s projected growth rate. It is better to have a growth rate that exceeds that of nominal GDP.

·     In fast growing or underpenetrated markets like financial services, the profit pool expands year after year and so, competition perhaps is less of a concern. On the contrary, the company’s market share and moats do matter if the underlying market is mature.

·     Round off industry analysis with competition. You must have a good idea of how crowded the market is, who the leaders are and what their moats are in relation the company going public.

Head to ‘our business’ section next. Focus more on understanding what contributes to revenue (share of key product lines and their margin profile, geography/ customers contribution to revenue) with the help of quantitative data presented. Hunt for factors that give a competitive advantage to the company. They could be IP rights, distribution network or the company’s entrenched position in a capital-intensive market. Further, use the ‘strategies’ section to understand how the company intends to pursue growth (organic/ inorganic). Also, do not miss the data on capacity utilisation of manufacturing units. If they are close to being fully utilised, it can give you useful perspective when modelling free cash flows, as there could be capex requirements in the near term.

Valuation

With valuation being the only other major step left in the analysis, the ‘basis for offer price’ segment comes in handy if you belong to the school of relative valuation. The segment contains a detailed table comparing the KPIs of the company like RoCE, working capital days, margins and growth rates with those of its listed peers. Once you triangulate the closest peer and its valuation multiple (P/E or P/B or EV/revenue), you can then add a valuation premium/ discount depending on the company’s growth prospects and competitive advantages relative to the closest peer. This can help you judge whether the company’s offer price makes it undervalued or overvalued, relative to its peers.

For example, readers can recall our ‘avoid’ call on HDB Financial Services’ IPO at 3.4x book value. We had based our call on two factors. One, although the risk profile of HDB’s loan book is lower than that of Bajaj Finance’s (P/B of 6x then), its credit cost was similar to Bajaj’s. Ideally, HDB’s credit cost should’ve been lower. Two, its parent HDFC Bank which had an RoA similar to HDB and a credit cost much lower than HDB was trading at a lower valuation. In our view, from a long-term perspective, there was no attractive case to be made for subscribing to its IPO, given other listed options at that time. HDB trades below its IPO price today.

Investors must also remember that in some cases, relying on relative valuation comes with the risk of comparison with overvalued peers. Readers can recall our ‘avoid’ call on Hexaware Technologies’ IPO in February 2025, although its IPO valuation was cheaper than listed peers. In this case, we had pointed out that in the face of uncertainty caused by AI, mid-cap IT services stocks were being mispriced and Hexaware was expensive on an absolute basis as well. Today, multiples of Hexaware’s peers (Persistent, Coforge) have been substantially derated from over 70x then to about 45x now. Our ‘avoid’ call on Hexaware, based on its then-absolute P/E of 41x, relative to growth prospects has been validated. The stock now trades 25 per cent below its issue price.

Finally, to round off the analysis, head to the ‘capital structure’ segment. Find out if there are instances of primary issues of capital within a range of 2 years preceding the IPO, at prices that look significantly at a discount, relative to the issue price of the IPO. This analysis is even more relevant for IPOs with only the OFS component. This is to see if recent investors are looking to exit with quick, big gains. Assess if the premium valuation is justified by comparing the returns delivered by listed peers over the same period. In the recent case of Dhoot Transmission, the issue price of ₹871 was higher than Bain Capital’s cost of shares acquired since April 2025 at ₹480 (an 81-per cent premium). However, given stocks of some peers had gained up to 76 per cent in the same period made the issue price appear justified.

There’s always a second chance

We would also like to remind our readers of our earlier Big Story (edition dated December 14, 2025) that carried an in-depth analysis of IPOs during 2021-25. We had highlighted how 65 to 75 per cent of IPOs tend to fall 20-50 per cent from their issue prices to their all-time lows within two years of listing. If your analysis suggests that valuations do not add up given the underlying fundamentals, wait for your second chance. On the other hand, once subscribed for the long-term, remain unfazed by interim stock volatility, provided the thesis remains intact.

Published on September 5, 2026