Things to read in a DRHP

 DRHP can be a long and boring document to go through if you want to analyse an upcoming company’s IPOs. A DHRP can be as long as 400 pages long with tonnes of not useful and irrelevant information. Now what to read or things to go through if one wants to read a DHRP. Below are the things to go through that can make reading a DHRP a little less hectic and a lot more interesting. 

• Company and business overview: A company overview tells investors about the company’s business model and revenue model, industry analysis, competitive advantage, future plans, areas of growth, and profitability. A business overview gives you in-depth information about what the industry is going through, and how the industry has performed, it is important to understand various macro and micro factors that affect the business and industry as a whole if you are thinking about investing in an IPO.
  
  
• Risk factors: The risk sections outline what kinds of macro-level and micro-level risks the company faces, and what might impact the company’s ability to run operations and remain profitable (if they are). It gives you a picture of pending litigations, market risks, legal risks, taxation risks, or any other kind of risk that the company is going through. 
  
  
• The objective of issue: This tells you why the company is coming up with its issue and where they’re planning on using the funds raised. 
  
  
• Financial statement: This includes income statement, balance sheet and cash flow statements. A deep dive into the financials is a must as this will tell give you a brief picture about whether the company is performing its operations. 
  
  
• Peer comparison: Peer comparison is a section wherein a company gives its peers’ names and what valuation that they are trading at along with their financials. This helps in understanding how the company has done against its peers and what the valuation is, the company is seeking against what its peers are trading at.
  
  
• Management: Management’s role is very important when it comes to the skillful execution of plans and their decisions directly impact the company’s ability to generate profits and cashflows. It is important to know the background of the management, for how long they have been serving this business, how their compensation has increased over time, and whether the compensation is in line with the company results

Conclusion: We all find it very hard to go through long and boring documents and going through a DHRP can be one such thing. But it’s of utmost importance to go through the DHRP and gain all sorts of information possible about  the company before investing. It’s better to spare some hours reading the DHRP rather than losing your hard-earned money.