IPOs are booming, but 37% fell below issue price: 6 red flags to check hiding in the RHP
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- Indian IPO activity has gathered pace, with companies raising approximately ₹22,400 crore through 26 August 2026, and additional issues expected before Sebi's one-year approval window expires on 30 September.
- 37% of IPOs in 2026 closed below their issue price on listing day as of 26 August, up from 33% in 2025, with nearly two-fifths of all companies listed since 2022 still trading below their IPO prices as of the same date.
- RHP financial statements warrant scrutiny when companies report accounting profits alongside persistent negative cash flow, a pattern experts flag as a sign reported earnings aren't translating into actual cash generation.
- The "objects of the issue" section should reveal whether IPO proceeds fund productive uses like expansion, debt reduction or working capital — or primarily enable existing shareholders to exit, limiting fresh capital reaching the business.
- Pre-IPO share transactions are a key warning area: if shares changed hands at half the public issue price just six months earlier, investors are urged to question whether fundamentals have genuinely doubled.
- Promoter compensation, contingent liabilities and working-capital stress are additional RHP red flags — including guarantees, disputed tax demands and discounted bills that may not appear as conventional debt on the balance sheet.
Why it matters: With Sebi approvals expiring 30 September and 37% of 2026 IPOs already listing below issue price — the worst year since at least 2025 — retail subscribers face heightened downside risk. The article hands investors six concrete RHP checks (cash-flow gaps, use-of-proceeds, pre-IPO share markups, promoter pay, contingent liabilities, dilution patterns) that surface risks invisible in headline revenue and profit numbers.
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