What is DRHP, the Draft Red Herring Prospectus (DRHP)

Before investing in an IPO, understanding the Draft Red Herring Prospectus (DRHP) helps investors review important information disclosed before an IPO. The DRHP is the company’s preliminary disclosure filed with SEBI that outlines the business, financials, risks, promoters, and intended use of proceeds. This guide explains what a DRHP is and how it differs from the RHP, the sections worth reading, how to access the document, and the limits of relying on it alone. By understanding the DRHP, investors can review the company's disclosures before the IPO subscription opens.

A DRHP is the company’s preliminary disclosure filed with SEBI before a public issue, giving prospective investors an early, detailed look at the business and its risks. For those searching what is DRHP IPO, it is the first formal offer document submitted for regulatory review before an IPO can proceed further.

What it typically covers

• Business overview, long-term plans, industry and competition

• Historical financial statements and important ratios

• Risk factors and material dependencies

• Promoters, management, and shareholding pattern

• Use of proceeds (objects of the issue)

• Legal, regulatory, and outstanding proceedings
   

Importance of the DRHP

• The DRHP is a publicly available disclosure that provides standardised information about the company before the IPO subscription opens.

• Improves transparency and market confidence through full disclosures

• Invites public comments that can lead to clarifications or updates
   

How it differs from the final RHP

• No price band or final issue price in the DRHP; these appear in the RHP

• Final share quantity and offer details are confirmed in the RHP

• DRHP is reviewed by SEBI; the RHP is filed with the Registrar of Companies

Understanding the contents of a DRHP helps readers understand the sections of a company going public. Here are the sections typically included:

Business Overview

This section outlines the company’s vision, mission, history, and core activities. It often includes information about its industry sector, competitive landscape, and long-term strategy.

Financial Statements

This part provides audited financial information for the periods required under the applicable SEBI regulations:

• Balance sheet summaries

• Income statements

• Cash flow statements

• Financial ratios such as Return on Net Worth (RoNW) and Earnings Per Share (EPS)
   

Risk Factors

This section highlights various internal and external risks that could affect the company’s performance. These could include:

• Regulatory changes

• Market competition

• Dependency on specific personnel

• Supply chain risks
   

Use of Proceeds

The company explains how it plans to utilise the capital raised from the IPO. Typical purposes include:

• Repayment of borrowings

• Funding capital expenditure

• Business expansion

• General corporate purposes
   

Promoters and Management

Details about the individuals or entities promoting the company, along with profiles of the board of directors and managerial personnel, are shared here. Their experience, background, and roles are required disclosures under SEBI regulations.
 

Legal Proceedings

Any outstanding litigations, criminal proceedings, tax disputes or penalties involving the company, its subsidiaries, promoters or directors are detailed in this section.

A DRHP is organised into multiple sections, each covering a different aspect of the company and the proposed public issue.

A typical reading sequence begins with the summary section, followed by the risk factors chapter, business overview, financial statements, use of proceeds, promoters and management details, and legal proceedings.

The exact page numbers vary from one DRHP to another. However:

• Risk factors are generally presented near the beginning of the document.

• Business information appears in the company overview and industry sections.

• Financial information is contained in the financial statements chapter.

• Use of proceeds is presented under the objects of the issue section.

• Promoter and management information appears in the shareholding and corporate structure disclosures.

• Litigation and regulatory matters are usually included in the legal proceedings section.
   

The structure is designed to provide standardised disclosures in a consistent format across IPO filings.

A DRHP is a mandatory regulatory filing that provides standardised disclosure about a company seeking to raise funds through a public issue.

• Early visibility of business model, strategy, industry context, and competition

• Transparent financial history with important ratios that help explain earnings and cash flows

• Clear articulation of risk factors, dependencies, and contingencies

• Promoter, management, and shareholding details to understand the company's governance structure and shareholding

• Specific use of proceeds to understand the intended use of the proceeds

• Legal and regulatory proceedings that may affect future performance

The DRHP contains audited financial statements, stated risk factors, and regulatory disclosures that are accessible to all prospective investors.

Supports Market Confidence

Standardised, public disclosures mean all investors have access to the same information before the IPO subscription opens.

Public Comment Process

Because a DRHP is open for review, market participants can submit observations that may lead to clarifications, revisions, or SEBI-requested updates to the disclosure document.

Investors can access a company’s Draft Red Herring Prospectus to review important information before subscribing to an IPO. For readers searching what is DRHP in stock market, these documents are publicly available through official regulatory and exchange platforms. Here are the main official routes.

SEBI Website

• Visit the SEBI website.

• Navigate to Filings or Offer Documents → Public Issues → Draft Offer Documents.

• Search by company name and open the latest PDF.

• Check the filing date and any addenda or clarifications.
   

Stock Exchanges

• Go to the NSE or BSE website.

• Navigate to Markets/Products → IPO/Primary Market → Offer Documents or Draft Offer Documents.

• Select the company to view the DRHP and related updates.
   

Company Websites

• Open the company’s Investor Relations section.

• Look for IPO/Offer Documents or Downloads.

• Download the DRHP along with any corrigenda, addenda, and presentations

 

The preparation and submission of a Draft Red Herring Prospectus are guided by strict regulatory frameworks to ensure transparency, fairness, and investor protection.

SEBI (ICDR) Regulations, 2018

• Define eligibility for public issues and prescribe mandatory disclosures, including business details, risk factors, financial information, promoters, and use of proceeds.

• Lay down the filing process with SEBI, timelines for public comments, issuance of observations, and requirements for updates or corrigenda.

• Specify norms for book building, price band disclosures, underwriting, and allotment methodology.

• Set due-diligence responsibilities for lead managers, registrars, and other intermediaries, including certifications and compliance checks.

• Govern pre-issue communications and advertising to prevent misleading claims and ensure balanced disclosures.
   

Companies Act, 2013

• Provides the legal framework for prospectus requirements and liabilities for misstatements or omissions.

• Mandates necessary corporate approvals and board resolutions related to capital raising.

• Covers filing, record-keeping, and reporting standards that underpin accuracy of financial statements and governance disclosures.

• Prescribes penalties and enforcement mechanisms for non-compliance, reinforcing accountability across the IPO process.
  Together, these frameworks work in tandem to standardise disclosures, protect investors, and maintain market integrity from draft filing through to listing

The IPO process typically begins when a company files its Draft Red Herring Prospectus with SEBI and the stock exchanges.

1. DRHP Filing: The company files the DRHP containing business, financial, risk, and issue-related disclosures.

2. Public Availability: The DRHP is made available on SEBI, NSE, and BSE platforms for public review.

3. Public Comments and Observations: Stakeholders may submit comments or observations regarding disclosures.

4. SEBI Review: SEBI examines the filing for regulatory compliance and disclosure completeness.

5. SEBI Observations Issued: SEBI may seek clarifications, modifications, or additional disclosures.

6. Document Updates: The company updates the DRHP, wherever required, based on SEBI's observations.

7. RHP Filing: After addressing observations, the company files the Red Herring Prospectus (RHP).

8. IPO Opens: The public issue opens for subscription based on the disclosures contained in the final offer document.

Although a Draft Red Herring Prospectus offers valuable insights, it comes with limitations investors should recognise before drawing conclusions.

• Preliminary and subject to change: SEBI observations and company updates can alter sections between the DRHP and the final RHP.

• No final price band or issue size: the final valuation and dilution cannot be fully assessed from the DRHP alone.

• Data cut-off and lag: financials and risk disclosures are based on periods already past.

• Management-prepared narrative: the document reflects the issuer’s perspective within regulatory bounds.

• Limited forward-looking specificity: guidance is cautious and non-committal.

• Density and legalese: length and complexity can obscure material points.

• Not an investment offer: the DRHP cannot be used to apply.

The Draft Red Herring Prospectus is a preliminary disclosure document filed with SEBI as part of the IPO process. It sets out information about the company, its financials, risk factors, and the intended use of funds raised from the public issue.