First, the business you are buying into
Start with the industry, not the company. Every sector runs on its own economics — a cement maker lives on regional demand, pricing power and who has capacity nearby, and none of that transfers to a software firm. Until you understand the ecosystem, the company's numbers have no context to sit in.
Then ask what could make that industry stop working. Electric vehicles rewrote the ground under engine makers; e-commerce did it to offline retail. A company with a real barrier — a network, a licence, a switching cost — survives that. One without simply gets overtaken while its prospectus is still being printed.
A new company has no long record to check. That is the whole reason this document exists.
Then the numbers, and what the money is for
Read three years of results and the last six quarters, and look for consistency rather than a spike. One excellent year before an issue is the easiest thing in finance to arrange. Compare the valuation against listed peers; where a company is loss-making, judge it on revenue, order book or operating profit instead of earnings.
Check what the share count does. A large issue spreads profits over more shares, so earnings per share falls even when the business is unchanged — the dilution you met in 01.02.01, with a number attached. Then check debt: a company already carrying a lot of it is fragile, and one spending your money to service it is not investing anything.
Finally, Objects of the Issue — what the fresh money will actually be spent on, item by item. Expansion, plant, or paying down debt can build something. "General corporate purposes" for a large share of the raise means nobody has committed to anything you can hold them to later.
Where the signal actually is
Ordered by how often a section changes a decision, not by how many pages it runs to.
Skip any risk factor that would be true of any company in the country. Read every one with a name, a number or a date in it.
Last, who is handling it and what is off the books
Look at who is running the issue. Lead managers and investment bankers carry a record, and it is public — a house that has repeatedly brought overpriced issues is telling you something about this one. Look too at how much the promoters keep after listing, and whether early investors are heading for the exit in the same breath as the company asks you to come in.
Then find contingent liabilities. These are obligations that have not become debts yet — a pending tax demand, a guarantee given for a subsidiary, a case that could go either way. They sit in the notes rather than on the balance sheet, and a company can look sound until one of them lands.
An issue can be well-run, fully disclosed, correctly priced by its bankers and still a poor thing to own. The prospectus is a disclosure document, not an assessment. Nothing in it says whether to apply.
A prospectus states that most of the fresh issue will go to "general corporate purposes". What have you learnt?
You now know what a share is, what it is worth, where it comes from and where it trades. What you do not yet know is who is on the other side of your order.