India IPO Boom Brings Warning Signs for Investors

Many companies in India are selling shares to the public through IPOs.

These IPOs are raising a lot of money, but some shares fall below their starting price after listing.

A document called the red herring prospectus, or RHP, gives investors important information about the company.

Investors should check whether the company is growing and making real cash, not just reporting accounting profits.

They should also see how the IPO money will be used.

If most money goes to existing shareholders instead of the business, they should investigate further.

Recent share prices before the IPO can show whether the new valuation has risen sharply.

Investors should also examine management pay, possible future bills, legal cases, tax disputes and other risks.