How to Evaluate Upcoming IPOs Using SEBI Filings and DRHP Data

You just saw an IPO ad on TV, a WhatsApp tip from a cousin, and a flashy GMP screenshot on social media. Your finger is already on the apply button. Stop. If you want to know how to apply for IPO in India with actual judgement, you need to evaluate the company first using SEBI filings and DRHP data, not hype. Here is the exact checklist seasoned investors use.

1. Find the DRHP on SEBI and the exchanges

The Draft Red Herring Prospectus (DRHP) is the single most important document an IPO candidate files. It lists the business, risks, finances, and how the company plans to use your money.

You can download it free from:

• The SEBI public issues page on sebi.gov.in.
• The BSE and NSE IPO sections.
• The book-running lead manager's website.

Once SEBI gives observations, the final Red Herring Prospectus (RHP) is filed with the price band. That is the version you should actually evaluate before applying.

2. Read the Risk Factors section first

Most retail investors skip straight to the numbers. Seasoned investors do the opposite. They read Risk Factors first, because that section lists every litigation, regulatory issue, revenue/revenue-quality-checklist-signs-sustainable">customer concentration, and debt covenant the company must disclose.

Watch for these red flags:

• Pending tax disputes or GST notices in large amounts.
• Founder pledged shares or pending SEBI cases against promoters.
• Top five customers contributing over 50 percent of revenue.
• Group companies with unresolved losses or related-party debt.

If the Risk Factors section runs past 50 pages with heavy legal language, slow down. Companies do not write risk sections for fun. They write them because regulators force them to.

3. Decode the Objects of the Issue

The Objects of the Issue tells you exactly where your money will go. This is the difference between a fresh issue and an offer for sale.

• Fresh issue: New shares are created and money flows to the company for expansion, debt-free-complete-guide-indians">debt repayment, or working capital.
• Offer for Sale (OFS): Existing equity-as-asset-class">shareholders sell their stake. Money flows to them, not the company.

A heavy OFS component is not automatically bad. But if 90 percent of the issue is OFS and promoters are exiting in size, ask yourself why they are selling to retail at this price, at this moment.

4. Study the Financials and Basis of Issue Price

Skip to the restated eps-compare-companies-sector">Financial Statements and the Basis for Issue Price sections. These are the numbers that actually matter.

Check:

• Three to five years of revenue growth. Is it steady or spiky?
• Operating margin trend. Is it expanding or shrinking?
• investing/signs-stock-strong-quality-factor">Return on equity and return on capital employed.
• emi-payments-cash-flow">Cash flow from operations. Profitable on paper does not mean cash-generating.
• dividend-research">Debt to equity ratio and interest coverage.

The Basis for Issue Price section compares the IPO price with peers on P/E, EV/EBITDA, and market cap. Compare the same multiples with listed peers yourself using screening tools. If the IPO asks for a premium over the sector leader, you need a very good reason to pay it.

5. Read MD&A and Related Party Transactions

Management Discussion and Analysis (MD&A) explains in plain English what happened in each financial year. Management tells you which segment grew, which shrank, and why.

Right after it, the Related Party Transactions note lists every rupee that moved between the company and its promoters, directors, or group entities. Look for:

• Loans to promoter entities at zero interest.
• Lease rents paid to founder trust-generational-wealth-india">family trusts.
• Inter-company sales at non-etfs-and-index-funds/etf-nav-vs-market-price">market prices.

A clean RPT section is a sign of esg-and-sustainable-investing/best-esg-scores-indian-companies">governance discipline. A messy one is a yellow flag, even if current numbers look fine.

6. Check the Anchor Investor List

A day before the IPO opens, anchor investors commit at a fixed price. These are usually large options">mutual funds, sovereign funds, and long-only foreign institutions. Their names and allocations get published on the exchanges.

A list full of respected domestic mutual funds is a positive signal. A list dominated by smaller, unknown entities or single-investor concentration is worth more caution. Anchor investors are locked in for 30 to 90 days, so their skin in the game matters.

Example: If you see top-10 domestic mutual funds taking 60 percent of the anchor book, long-term institutional belief is strong. If anchors are 80 percent HNI family offices with a track record of selling on listing day, expect more volatility after listing.

7. Ignore the GMP and do your own valuation

Grey Market Premium (GMP) is an unofficial price quoted in informal markets before the IPO opens. It is not regulated, not auditable, and not a reliable fcf-yield-vs-pe-ratio-myth">valuation signal. GMP can swing by 50 percent in two days based on rumours alone.

Instead, build your own quick valuation.

1. Take the post-IPO share count from the RHP.
2. Multiply by the issue price to get post-issue market cap.
3. Divide by last full-year earnings to get P/E.
4. Compare with listed peers in the same industry.
5. Decide what premium, if any, you are willing to pay.

If the math stretches beyond your comfort, skip the IPO. Missing one overpriced listing will not ruin your portfolio. Overpaying on ten of them will.

Apply through ASBA and stay calm

Once you have done the homework, apply through your bank's ASBA (Application Supported by Blocked Amount) or through UPI. The money stays blocked in your account until allotment. If you do not get allotment, the block is released automatically.

One last tip. Never apply in bulk across family accounts just to "improve chances" if you are not convinced about the company. Real money flows best into businesses you would be happy to hold for five years, even if the listing gain is modest.