How to read an IPO red herring prospectus (RHP)

Updated 19 October 2026

The Red Herring Prospectus is the company's official offer document. It is long, but a handful of sections tell you most of what you need. Every IPO page on IPOScanner links to the RHP when NSE publishes it.

1. Objects of the issue

This says what the money raised will be used for — expansion, paying off debt, working capital, or none of these. If most of the issue is an offer for sale (OFS), the money goes to selling shareholders, not the company.

2. Risk factors

Near the front of the document. Skip the generic ones and look for risks specific to this company: dependence on a few customers, pending litigation, regulatory approvals, losses, or related-party dealings.

3. Financial information

Revenue and profit over the last three years — is growth steady or a sudden jump just before the IPO?
Debt and cash flow from operations — profits without cash flow deserve a closer look.
Return on equity and margins compared with listed peers.

4. Basis for issue price

This section compares the company's valuation (price-to-earnings and other ratios) with listed peers chosen by the company. It shows how richly the IPO is priced — but remember the peer list is chosen by the issuer.

5. Promoters and shareholding

Check how much the promoters own before and after the IPO, whether they are selling in the OFS, and any pledged shares.

6. Outstanding litigation

Lists legal cases involving the company, promoters and directors, with amounts involved. Large or numerous cases are worth noting.

Reading the RHP helps you understand the business. It does not tell you whether the shares will rise, and this guide is not a recommendation.