![]() For instance, if you find that the company has a number of pending legal cases, it may be a good idea to avoid the IPO. While many are routinely listed risks, some risks need to be scrutinized. You can gauge the safety and profitability of your future investment based on the financial statement.Īlso read: What can you learn by analysing a company’s debt profile Risk Factors:Ĭompanies lists out the potential risks that could impact their business and operations under a section titled ‘Risk Factors’. As an investor, the financial statement will help you get an idea of future dividends based on the profits disclosed. This is one of the most important segments and contains the company’s audit reports and financial statements. As a prospective shareholder, you should pay attention to this part as your investment will be utilised by the company in its core business and you will be entitled to hold ownership of this very part should you choose to become a shareholder.Īlso read: Why understanding valuation is key to IPO investing Financial information: This segment talks about a company’s core operations and how it conducts business. It also elaborates on how the company intends to use the money that will be raised, the possible risks for investors.Īs an investor, here are a few things to look at in a draft red herring prospectus: Business Description: The document is very useful to investors because it provides detailed information about the company’s business operations, financials, promoters and the company’s objective for raising funds by filing an IPOs. Reading the company’s Draft Red Herring Prospectus (DRHP) is a great way to identify whether it has good potential or not.Īlso read: What is IPO and advantages of IPO? What Is A Draft Red Rerring Prospectus?Ī Red Herring Prospectus, or offer document, is filed by a company to SEBI (Securities and Exchange Board of India) when it intends to raise money from the public by selling shares of the company to investors. But when so many companies announce IPOs regularly, it can be tough to identify the right company to invest. The recent IPO for Indian Railways Catering and Tourism Corporation (IRCTC) is a prime example. Initial Public Offerings (IPOs) always tend to create a big buzz among investors.
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