How to Analyse an IPO

1. Read the business model, not just the sector

Understand how the company actually makes money, who its customers are, and what could disrupt that model. Two companies in the same sector can have very different quality of earnings.

2. Check the financial trend, not a single year

Look at revenue, margins and debt over 3 years, not just the latest one. Consistent growth with stable or improving margins is a healthier sign than one strong year.

3. Compare valuation with listed peers

Check the P/E and P/B the IPO is being priced at against similar already-listed companies. A premium valuation needs a clear reason — faster growth, better margins, or a stronger moat.

4. Understand where the money is going

Fresh issue proceeds used for growth (capacity, debt reduction) are generally viewed more favourably than an issue that is entirely an offer for sale by existing investors.

5. Read the risk factors section

It's the least exciting part of the prospectus, and usually the most honest. Litigation, customer concentration and regulatory risk are commonly disclosed here.

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