Due Diligence

Due Diligence means carefully examining all available information about a company before making an investment decision. In the context of an IPO, both investors and merchant bankers carry out due diligence.

Key points:

Merchant bankers verify company disclosures before filing the DRHP with SEBI

Investors can perform their own due diligence by reading the RHP, financial statements, and risk factors

Covers areas like business model, management background, financial health, and legal issues

Example:

Before applying for an IPO, an investor might read the RHP, check the company's revenue growth, debt levels, and pending litigations as part of their due diligence.