Draft red herring prospectus

The offer document an Indian company files before a public issue, describing the business, the financials, the risks and what the money will be used for. The version filed with the regulator for comments is the draft. The red herring, filed with the Registrar of Companies once SEBI's observations are dealt with, is complete except for the price, and the price band is announced separately by public advertisement at least two working days before the issue opens.

It's the single richest document about a private company that will ever be public, and if you're new to analysis it's better teaching material than most annual reports, because it explains a business from scratch to a reader assumed to know nothing.

Four sections carry most of the value. First come the risk factors. Lawyers draft them, and they are unusually candid. Then the restated financial statements, which run for several years on a consistent basis. Then the objects of the issue, and finally the basis for the issue price, which sets out the peer comparison the company itself chose.

Industry chapters cite paid research and should be read as sponsored. Liability attaches to the financials and risks.

Restated financial statements deserve particular attention because they are unusual. Indian rules require the accounts to be restated onto a single consistent basis across the periods shown, correcting for accounting policy changes and for the effects of restructuring that happened during the period. That produces a comparable multi-year series for a company that has never had one, and it's often the only place such a series exists. Building the revenue, margin and return-on-capital history from that table takes twenty minutes, and it's worth more than every other section combined.

Read the risk factors and the restated financials first. Leave the objects and the basis for the price until after that.