How to read an IPO RHP: a section-by-section guide

Updated 26 October 2026 · 5 min read

The red herring prospectus (RHP) is the official document a company publishes before its IPO opens. It is often 300 to 500 pages long, and most investors never open it. You do not need to read all of it: about eight sections tell you what the company does, how it makes money, what it will do with your money, who is selling, how richly it is priced, and what could go wrong.

This guide explains the difference between the DRHP, RHP and final prospectus, where to find them, and then walks through the sections that matter in the order most experienced readers use, with the red flags to look for in each. Plan for an hour the first time; it gets much quicker with practice.

DRHP vs RHP vs prospectus

The word "red herring" comes from the fact that the document does not yet contain the final price. For deciding whether to apply, the RHP is the one to read, because it has the latest figures. Comparing it with the DRHP can also be useful: if the size of the issue, the OFS portion or the use of funds changed a lot, ask why.

How to find the RHP

• SEBI's website lists offer documents for mainboard issues under its filings section.
• NSE and BSE publish the RHP on their IPO pages once the issue is announced; SME documents are on NSE Emerge and BSE SME.
• The lead managers and the registrar usually host a copy on their websites.
• Each IPO page on IPOScanner links to the RHP when the exchange publishes it.

Start with the offer document summary

Near the front there is a short summary of the business, the issue, the objects, shareholding, key financials, litigation and related-party transactions. Read this first. It gives you the map, and tells you which later sections need a closer look.

Risk factors

Risk factors are listed early, often 30 to 50 of them. Many are generic (the economy, regulation, pandemics). Skip those and look for risks that are specific to this company, which are usually the ones with numbers attached.

• Red flag: a large share of revenue from one customer, product, supplier or region.
• Red flag: losses or negative operating cash flow in recent years.
• Red flag: key licences or approvals still pending, or past regulatory penalties.
• Red flag: large contingent liabilities or guarantees given for group companies.

Capital structure and promoter holding

This section shows who owns the company before and after the issue, the price at which promoters and pre-IPO investors bought their shares, and how much promoters will hold afterwards. A big gap between recent acquisition prices and the IPO price, promoters selling a large part of their stake, or pledged promoter shares are worth noting. It also explains lock-in periods for promoter and pre-IPO shares.

Objects of the issue

Here the company explains what the fresh-issue money will be used for. Remember that money from an offer for sale (OFS) goes to the selling shareholders, not the company, so check the split first. Specific uses with cost estimates are easier to follow than vague ones.

• Red flag: most of the issue is OFS, so little money reaches the business.
• Red flag: a large share for "general corporate purposes" with no detail.
• Red flag: proceeds used mainly to repay loans taken shortly before the IPO, without a clear reason.

Business and industry overview

"Our Business" explains products, customers, plants, order book and strategy. The industry overview is usually based on a report commissioned and paid for by the company, so read growth forecasts there with some caution. Try to answer in one sentence how the company makes money and why customers choose it.

Financial information and MD&A

The restated financial statements cover the last three financial years and often a recent part-year. Management's Discussion and Analysis (MD&A) explains the numbers. Look at revenue and profit trends, margins, cash flow from operations, debt, and trade receivables.

A small worked example: say profit grew from ₹20 crore to ₹45 crore in two years, but cash flow from operations stayed near zero and receivables doubled. The profit is real on paper, but customers are paying slowly. That is a question to keep in mind, not a verdict.

Basis for issue price

This section gives earnings per share (EPS), return on net worth (RoNW), net asset value and the price-to-earnings (P/E) ratio at both ends of the price band, compared with listed peers chosen by the company. It shows how the IPO is priced relative to others. Since the company picks the peer list, check whether those peers are truly comparable in size and business. It also lists key performance indicators the company itself considers important.

Litigation, management and the rest

"Outstanding Litigation and Material Developments" lists cases involving the company, promoters, directors and group companies, with amounts. A few cases are normal; large tax or criminal matters are not. "Our Management" covers the board and key managers. "Government and Other Approvals" lists licences, and the section with price information of past issues shows how the lead managers' earlier IPOs traded after listing.

A 30-minute reading order

1. Offer document summary.
2. The Offer: fresh issue vs OFS split.
3. Objects of the issue.
4. Company-specific risk factors.
5. Restated financials: revenue, profit, cash flow, debt.
6. Basis for issue price and peer comparison.
7. Capital structure and promoter holding.
8. Outstanding litigation.