DRHP vs RHP

A Draft Red Herring Prospectus (DRHP) comes earlier in an IPO, while a Red Herring Prospectus (RHP) comes later with updated offer information before the IPO opens.

• DRHP comes before the RHP stage.
• SEBI reviews the DRHP and gives observations.
• RHP comes before IPO bidding starts.
• RHP contains updated IPO-related company details.
• Final issue price comes after bidding.
• Both documents help investors check risks.

Before putting your money into an IPO, you may want to know whether the company looks financially strong, why it needs money, and what risks you could face.

This is where the DRHP and RHP help.

The Draft Red Herring Prospectus (DRHP) comes earlier. The Red Herring Prospectus (RHP) comes later and contains updated information before the IPO opens.

If you want to study an IPO seriously, both documents can give you useful information.

Because your money is at risk when you apply for an IPO.

Advertisements and social media posts may tell you that an IPO is popular. But the DRHP and RHP show important information directly from the company.

You can check:

• What business the company runs
• How the company earns money
• Whether the company makes profits
• What risks the company faces
• Why the company needs IPO money
• Who controls and manages the company
• How IPO proceeds will be used

This does not tell you whether the share price will rise. It helps you understand what you are investing in.

A Draft Red Herring Prospectus (DRHP) is an early IPO document.

The company files it as part of the IPO regulatory process. The Securities and Exchange Board of India (SEBI) reviews the document and can ask for clarification or changes.

A DRHP can contain details about:

• Company business
• Financial statements
• Promoters
• Management
• Risk factors
• Shareholding structure
• IPO objectives
• Proposed use of funds

The DRHP does not contain the final IPO issue price.

No. SEBI reviews the DRHP and gives observations.

This difference matters.

SEBI reviewing an IPO document does not mean SEBI is saying that the company is a good investment or that you will make money.

You still need to study the company and decide for yourself.

Yes. Under the standard IPO filing route, the draft offer document is made available for public comments.

The standard public-comment period is at least 21 days under the applicable SEBI framework.

This gives investors a chance to study the company before the IPO reaches the later stages.

SEBI also provides a separate pre-filing route under which a draft document can initially remain confidential.

A Red Herring Prospectus (RHP) is the updated offer document available before an IPO opens.

Think of it this way:

DRHP = earlier draft

RHP = updated IPO document

The RHP can contain:

• IPO opening date
• IPO closing date
• Company details
• Financial information
• Risk factors
• Promoter information
• Capital structure
• Offer structure
• Investor allocation details

You can use these details to understand the IPO before you bid.

No.

This is an important point because the two terms are often confused.

The RHP comes before the final prospectus. Some details, including the final issue price in a book-built IPO, are determined later.

Under Section 32 of the Companies Act, 2013, the company files further prospectus information after the offer closes.

Not necessarily.

In a book-built IPO, investors bid within the stated price band. The final issue price is determined through the book-building process after bidding.

So, do not assume that the RHP always contains the final price.

The RHP cannot remove investment risk.

But it can help you avoid investing without understanding the company.

Suppose Ravi is a 32-year-old earning ₹35,000 per month. He has saved some money and wants to apply for an IPO because his friends say the company will perform well.

Instead of investing only because others are talking about the IPO, Ravi checks the RHP.

He looks at:

• Company profits and losses
• Debt
• Business risks
• Promoters
• Use of IPO money

He can then decide whether the IPO fits his own risk level.

Under Section 32 of the Companies Act, 2013, the RHP must be filed with the Registrar of Companies at least 3 days before the subscription list and offer open.

A simple example:

Latest filing point = IPO opening date − 3 days

If an IPO opens on 20 October, the RHP needs to be filed at least 3 days earlier, subject to the applicable legal requirements.

The actual dates differ for every IPO.

You do not need to read every page first.

Start with the sections that can directly affect your investment decision.

Check the business

Understand what the company sells and how it earns money.

Check profits and losses

Look at the company's financial statements over the disclosed periods.

Check the risks

The risk-factor section can tell you about problems that may affect the business.

Check why the company needs money

See how the company plans to use money raised through the IPO.

Check the promoters

Understand who owns and controls the company.

Check fresh issue versus offer for sale

A fresh issue brings new money into the company.

An offer for sale allows existing shareholders to sell their shares. That money goes to the selling shareholders rather than the company.

Read both if you are seriously studying an IPO.

The DRHP gives you an earlier picture of the company and proposed IPO. The RHP gives you updated information closer to the IPO opening.

If you have limited time, the RHP is especially useful before applying because it contains more up-to-date offer information.

However, neither document guarantees that you will earn money.

The IPO opens for bidding after the required offer documents and other formalities are completed.

In a book-built IPO, investors place bids within the available price band.

After bidding ends, the final issue price is determined through the book-building process.

The company then completes the remaining IPO steps according to applicable rules.

Before investing in an IPO, understand what you are putting your money into. The DRHP gives you the company’s early IPO details, while the RHP provides updated information before bidding starts. Reading both can help you check the company’s business, risks, financials, promoters, and use of funds. You can also learn how to check your IPO allotment status and understand the difference between an NFO and an IPO.