# Drhp Ipo Analysis > Read an Indian DRHP or RHP and decide whether an IPO is worth applying to — fresh issue versus offer for sale, use of proceeds, restated financials, risk factors, anchor book, promoter and PE selling, valuation against listed peers, and the SME versus mainboard distinction. Use when given a DRHP, RHP or IPO prospectus for an Indian issuer, or when the user asks whether to apply to an IPO, what an IPO's grey market premium means, or how to evaluate a new listing. - Skill: `sharma23yash-oss/drhp-ipo-analysis` (Agent Skill) - Install (CLI): `npx skillmds@latest add sharma23yash-oss/drhp-ipo-analysis` - Raw SKILL.md: https://api.skillmd.com/api/skills/sharma23yash-oss/drhp-ipo-analysis/raw - Safety review: pending - Works with: Claude Code, Claude.ai, OpenAI Codex - Category: Coding & Dev Tools - License: MIT - Author: sharma23yash-oss (https://skillmd.com/u/sharma23yash-oss) - Updated: 2026-09-17 - Page: https://skillmd.com/skills/sharma23yash-oss/drhp-ipo-analysis --- # DRHP / IPO Analysis (India) A DRHP is written by bankers to sell shares. It is also, by SEBI mandate, the most complete disclosure document any Indian company ever produces. Read it as a hostile witness under oath: everything in it is true, and the arrangement is designed to lead you. ## Document sequence - **DRHP** (Draft Red Herring Prospectus) — filed with SEBI, public, no price band - **SEBI observations** — issued after review; the issuer must incorporate them - **RHP** (Red Herring Prospectus) — filed with RoC, carries the price band and the anchor allocation - **Prospectus** — final, post-issue, carries the discovered price Read the **RHP** for a decision. Read the **DRHP** for what changed between the two. ## The read order Do not start at page 1. Start here: 1. **Objects of the Issue** 2. **Capital Structure** — including the average cost of acquisition per share for promoters and selling shareholders 3. **Restated Financial Information** — the summary statements and the auditor's examination report 4. **Risk Factors** — the first ten, in full 5. **Basis for Issue Price** 6. **Related Party Transactions** 7. **Outstanding Litigation and Material Developments** 8. **Our Business** and **Industry Overview** — last, and sceptically ## Step 1 — Fresh issue vs offer for sale This is the first question and it decides most of the analysis. ``` Total issue size = Fresh issue + Offer for Sale (OFS) ``` - **Fresh issue** proceeds go to the company. Growth capital, debt repayment, working capital. - **OFS** proceeds go to the selling shareholders. **The company receives nothing.** Dilution without capital. A 100% OFS is an exit, not a fundraise. That is not disqualifying — private equity funds have to exit somewhere — but it changes what you are buying and it removes the "use of proceeds" argument entirely. Check **who** is selling and how much of their holding: - Promoter selling a large share of their stake at IPO - PE/VC investor exiting fully vs partially (a full exit at IPO from a fund with remaining life is a signal) - Average cost of acquisition per share, disclosed in the Capital Structure section, next to the issue price. **A pre-IPO placement at ₹80 six months before an IPO priced at ₹450 is disclosed, and it is the most informative single line in the document.** ## Step 2 — Objects of the issue For the fresh-issue portion, the DRHP must state the use of proceeds with amounts and deployment schedule. Score it: | Object | Read | |---|---| | Capacity expansion with named projects and timelines | Best — testable later | | Debt repayment | Neutral to good; check the resulting interest saving and whether leverage was the constraint | | Working capital | Common; ask why the business consumes so much | | Acquisitions, unidentified | Weak — a blank cheque | | **"General corporate purposes"** | Capped by SEBI at a share of the issue size; if it is at the cap, treat the object statement as thin | | Investment in subsidiaries | Trace where the money actually lands | Later, **monitor deployment**: SEBI requires a monitoring agency for issues above a threshold, and quarterly deviation statements are filed with the exchanges under LODR. Comparing promised versus actual deployment 12 months post-listing is one of the cleanest management-quality tests available. ## Step 3 — Restated financials DRHP financials are **restated** under Ind AS for the last three financial years plus any stub period. Restated statements often differ from what the company previously filed with MCA. Look for: - **Revenue growth that accelerates sharply in the two years before filing.** Almost universal, and the single most common form of IPO window-dressing. Check whether the acceleration is volume, price, acquisition, or accounting. - **Margin expansion into the IPO year**, then examine what happens to it in the first two post-listing quarters. - **Related party revenue** — revenue from promoter-group entities that may not recur. - **Cash conversion** — CFO versus PAT over the three years. Companies frequently list with strong PAT and negative CFO. - **Restatement adjustments** — the reconciliation note shows what the auditor changed and why. - **Stub period annualisation.** Bankers annualise a favourable stub period to compute a P/E. Do not accept it; seasonality is usually the reason the stub was chosen. ## Step 4 — Risk factors SEBI requires risk factors in descending order of materiality, with quantification where possible. The first five to ten are the ones the issuer's own lawyers considered most serious. Specifically hunt for: - **Customer concentration** — "our top 5 customers accounted for X% of revenue" - **Supplier or geography concentration** - **Promoter litigation, criminal proceedings, and regulatory actions** — disclosed by name, individually - **Negative cash flows** — SEBI requires an explicit risk factor if the company had negative operating cash flow in any of the last three years. **Search the document for "negative cash flow".** - **Contingent liabilities** as a share of net worth - **Objects of the issue not appraised by any bank or financial institution** — a standard but meaningful disclosure - **Dependence on a group entity for brand, distribution, or premises** - Statutory dues in arrears, and any pending regulatory approval the business needs to operate ## Step 5 — Basis for Issue Price The issuer must justify the price using KPIs and a peer comparison of their own choosing. Two things to do: 1. **Recompute the P/E and P/B on the issue price** using restated FY numbers, not annualised stub numbers. 2. **Rebuild the peer set yourself.** The peers listed in a DRHP are selected to flatter. Run `relative-valuation-india` with your own comp set and compare. Also compute what the promoters and pre-IPO investors paid, versus what you are being asked to pay. Express it as a multiple. ## Step 6 — Anchor book Disclosed in the RHP one day before the issue opens. Read: - **Who** anchored — domestic mutual funds and long-only insurance money is a better signal than a list of unknown alternative funds and family offices - **Concentration** — a handful of anchors taking most of the book means thin genuine demand - **Lock-in** — anchor shares carry a staggered lock-in (a portion released after 30 days, the balance after 90 days). Note both dates; the 90-day expiry is a recurring supply event that is entirely predictable. ## Step 7 — Subscription and listing dynamics - Track QIB / NII / retail subscription separately. **QIB subscription is the informed money**; heavy retail with weak QIB is a warning. - The **NII category** is split between the small (₹2–10 lakh) and large (above ₹10 lakh) bid categories, allotted by lottery and proportion respectively — this drives the leveraged HNI bidding that inflates headline subscription numbers. - **Grey market premium (GMP)** is an unregulated, unofficial, illiquid indication. It is not a valuation, it is not a forecast, and it is frequently manipulated ahead of large issues. Report it only with that caveat, and never as a reason to apply. ## Step 8 — Post-listing supply calendar Write down these dates on the day of listing. They explain most of the first year's price action: | Event | Timing | |---|---| | Anchor lock-in tranche 1 expiry | 30 days from allotment | | Anchor lock-in tranche 2 expiry | 90 days from allotment | | Pre-IPO shareholder lock-in expiry | 6 months from allotment, for non-promoter holders | | Promoter minimum contribution lock-in | Longer, per SEBI ICDR — check the specific dates in the RHP | | First results as a listed company | Within 45 days of the quarter end | ## SME IPOs are a different asset class SME platform issues (NSE Emerge, BSE SME) differ materially from mainboard: minimum application sizes are far larger, lots are indivisible, liquidity post-listing is thin, disclosure and review requirements are lighter, and migration to the mainboard has its own criteria. Retail loss rates in SME IPOs have drawn repeated SEBI attention and enforcement. **Never analyse an SME IPO with mainboard assumptions**, and say so explicitly when the user is looking at one. ## Output format ```markdown # — IPO Analysis **Issue:** ₹X cr | Fresh ₹A cr / OFS ₹B cr | Price band ₹P1–P2 | Mainboard / SME ## Who gets the money - Fresh: ₹A cr → - OFS: ₹B cr → - Selling shareholder average cost: ₹Z vs issue price ₹P (X.X×) ## Financials (restated) | ₹cr | FY-3 | FY-2 | FY-1 | Stub | | Revenue | | | | | | EBITDA / margin | | | | | | PAT | | | | | | CFO | | | | | | Net debt | | | | | | RoCE | | | | | ## Valuation at issue price | | Issue | Peer median | Own comp set | | P/E (FY-1 restated) | | | | | EV/EBITDA | | | | | P/B | | | | ## Top risk factors (issuer's own ordering) 1. ... ## Anchor book ## Verdict ## Post-listing calendar | Date | Event | ``` ## Hard rules - **Cite page numbers** from the RHP for every material claim. - **Never quote a P/E on annualised stub-period earnings** without saying that is what it is. - **Do not use GMP as an input to a recommendation.** Mention it only as unregulated market chatter. - Distinguish clearly between "this is a good business" and "this is a good price". A DRHP is designed to make you conflate them. - IPO applications are investment decisions. State that this is analysis, not advice, and that the user should consult a SEBI-registered investment adviser.