Things worth checking in an IPO

How to use this list

Each point below is a question, with the RHP section that answers it. A point that applies is something to understand, not a reason on its own to stay away. Good companies have weaknesses too, and the RHP must disclose them.

The list works for mainboard and SME issues alike, and for an IPO of any size. Most points take a few minutes each once you know which section to open. Read the strengths at the same time. On every IPO24by7 page, our read before you apply panel shows strengths and things worth checking side by side, with the source of each.

The 12 points

Points 1 and 2: who sells and where the money goes

A fresh issue brings new money to the company. An offer for sale pays existing shareholders, not the company. A large offer for sale is common and not wrong in itself, but it is worth knowing who is selling and how much of their stake. Read fresh issue vs offer for sale.

For the fresh money, check the split between named purposes, such as repaying loans or building a plant, and general corporate purposes, which can be used more freely.

Points 3 and 4: cash and debt

Profit is an accounting figure. Cash from operations shows whether the business actually brings in cash. A company whose profit grows every year while operating cash flow stays negative needs a closer look, often at inventory or money owed by customers.

For debt, look at total borrowings against equity, and how much of the IPO money goes to repay it. Also check the interest cost against profit. A company that spends a large part of its operating profit on interest has less room if business slows, and repaying loans with IPO money can improve that.

Points 5 to 7: concentration and related parties

A large share of revenue from one customer, or of supplies from one supplier, is a risk if that relationship ends. The RHP usually gives the top customer or top 10 customers as a percentage of revenue.

Related party transactions are dealings with companies linked to the promoters. Large or growing ones are worth understanding, since they may not be at arm’s length.

Points 8 and 9: what others paid, and the price

The RHP shows the average cost at which promoters and selling shareholders acquired their shares, and the prices of share issues in the recent past. A price band far above shares issued a few months earlier is worth understanding.

Then compare the P/E at the cap with the peers the company chose. Read how to read the P/E ratio of an IPO.

Points 10 to 12: court cases, auditors and the lead manager

Outstanding litigation lists cases against the company, its promoters and directors. Look at the amounts and the kind of case, such as tax demands or regulatory action.

In the financial statements, search for qualification or emphasis of matter, which mark points the auditor has flagged.

Finally, the RHP lists the price performance of past issues handled by the same lead manager, at 30, 90 and 180 days after listing. A record of many issues trading below their issue price is worth noting. It describes the lead manager’s past deals, not this company, so treat it as background.

A worked example

Here is how the list applies to Bombay Coated and Special Steels, from its RHP dated 21 October 2026.

Strengths sit alongside these: revenue grew about 29.5% a year from FY24 to FY26, the company was profitable in each year, and debt to equity fell from 4.31 times. That is the balanced view our IPO page shows.

Strengths to look for, too

A fair reading weighs both sides. The same sections of the RHP also show strengths, such as:

• Steady growth in revenue and profit over three years, not just one.
• Cash from operations that tracks profit.
• Low or falling debt, or IPO money that reduces it.
• A wide spread of customers, with no single one dominant.
• Return on net worth that is high and stable.
• Promoters keeping most of their shares after the IPO.

None of these makes an IPO a good investment by itself either. The point is to see the whole picture, and to judge the price against both sides.

How to check an IPO in an hour

1. Ten minutes on the summary. It gives the business, the objects, the shareholding, key financials and litigation in a few pages.
2. Twenty minutes on risk factors. Read the first fifteen in full.
3. Ten minutes on objects and capital structure. Who gets the money, and what promoters paid.
4. Twenty minutes on the financials. Profit, cash from operations, borrowings, related party dealings and any auditor remarks.

Then compare the P/E at the cap with the peers, and you have covered all twelve points.

Extra points for SME IPOs

SME companies are smaller and followed by fewer analysts, so some points carry more weight:

• A sudden jump in profit in the year or two before the IPO.
• Shares issued shortly before the IPO at a much lower price.
• The market maker, since trading after listing depends on it.
• The lead manager’s SME record on past issues.

Read SME IPO vs mainboard IPO for the other differences.

Common mistakes to avoid

• Treating one point as a verdict. Weigh it against the strengths and the price.
• Reading only the strengths in the company’s own summary. Risk factors come first for a reason.
• Skipping the objects section. It shows whether the company or the sellers get the money.
• Ignoring what promoters paid. It puts the price band in context.
• Relying on social media summaries. Go to the RHP, which is the primary source.
• Checking once and stopping. Subscription, price band revisions and anchor names can add context during bidding.

What to do next

Read how to read an RHP for the ten sections that matter most. Then see the strengths and things worth checking for any open IPO, each with its RHP source.

Sources: SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, Schedule VI: disclosures in an offer document; Bombay Coated and Special Steels RHP dated 21 Oct 2026, for the worked example (risk factors 1, 4, 5 and 8; Objects of the Issue; restated financial information).

Frequently asked questions