Read it backwards
A prospectus opens with the company's best case and buries the awkward parts in the middle. Reading it in order means absorbing a hundred pages of positioning before reaching anything that might change your mind. Read it in this order instead.
1. Risk Factors
Legally required to be comprehensive, so this is where the genuine surprises live. Skip the boilerplate about monsoons and macroeconomics; look for litigation, customer concentration, regulatory proceedings against promoters, and anything quantified in rupees. A risk factor with a number attached was written by a lawyer who could not avoid it.
2. Objects of the Issue
Where the fresh money goes. Debt repayment leaves the business no larger than it was. Capacity, technology and working capital buy future revenue. "General corporate purposes" is capped at 25% of the raise for a reason. An unidentified-acquisitions line means you are funding a decision that has not been made.
3. Basis for Issue Price
The company stating, in its own words, why it is worth this much. It carries the EPS, RoNW and net asset value it wants you to use, the formula for each, and the peer group it chose. The peer group is especially revealing — who a company compares itself to is an argument, not a fact.
4. Restated Financial Information
The audited numbers. Look for the gap between profit and operating cash flow, for related-party transactions, and for anything described as "exceptional" more than once. A business that is profitable but does not generate cash is telling you where the profit is coming from.
5. Capital Structure
Who owns what, what they paid, and when. The "average cost of acquisition" for selling shareholders is disclosed, and seeing an early investor exit at forty times their entry price is context worth having.
6. Our Business
Read last, once you already know what the risks and the numbers say. By then you can tell which of its claims are load-bearing.
Things worth noticing
- A peer group of companies much larger or in adjacent businesses — the comparison is doing work the fundamentals cannot.
- Revenue growth concentrated in the year immediately before filing.
- Promoter holding falling to a low figure post-issue, with no lock-in beyond the statutory minimum.
- Related-party revenue that is material to the top line.
- Auditor qualifications, emphases of matter, or a change of auditor during the reported period.
- Contingent liabilities large relative to net worth.
None of these is disqualifying on its own. All of them are questions you want answered before the price band stops being negotiable.
Going deeper
Want the whole picture, not just IPOs
These guides cover the primary market. If you want structured courses on reading financial statements, valuation and the secondary market, Upstox UpLearn runs paid ones taught by practitioners.
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IPOVista publishes research and data compiled from public filings and exchange disclosures. Nothing here is investment advice, a recommendation, or an offer to buy or sell any security. Figures can contain errors and sources can be stale — verify against the prospectus before you act, and speak to a SEBI-registered adviser. Investing in securities carries risk, including loss of capital.