New Delhi, Aug. 30 -- Initial public offering (IPO) activity in Indian markets is heating up, with companies raising about Rs.22,400 crore this month through 26 August. More IPOs are expected before 30 September, when the one-year validity of approvals from the Securities and Exchange Board of India (Sebi) for several companies is due to lapse.

For investors, that raises a more important question: how do you tell a promising IPO from one best avoided?

Unlike established listed companies, IPO-bound businesses have no track record of exchange disclosures or trading history. Investors instead have to rely on what the companies disclose before listing, chiefly through the red herring prospectus (RHP)-a lengthy, technical document that can r...