Draft Red Herring Prospectus (DRHP)

DRHP stands for Draft Red Herring Prospectus. It’s a document companies file with SEBI before an IPO, giving details about the business, but it's not final and can be updated later.
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Draft Red Herring Prospectus (DRHP)
OPEN ACCOUNT
3 mins read
26-July-2025

A Draft Red Herring Prospectus (DRHP) is a preliminary document issued by a company intending to launch an Initial Public Offering (IPO). It gives potential investors an overview of the company’s business operations, objectives, financial performance, and the reasons for raising capital. Though incomplete, it forms a crucial part of the IPO process.

While the DRHP doesn’t include final details such as the IPO price or issue size, it offers key insights that help investors evaluate the company’s potential. This document is filed with SEBI for review and may be revised before the final version is issued. Understanding it is vital for informed investment decisions.

What is DRHP

DRHP stands for Draft Red Herring Prospectus. It is a draft document filed with SEBI by companies planning to go public through an IPO. The DRHP contains early disclosures about the company’s financial health, business model, and proposed usage of funds. Though not final, it helps investors gain a basic understanding before subscribing to shares. The document may be updated based on feedback from SEBI and market conditions before the IPO launch. It serves as a vital tool for early investor analysis.

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Components of a Draft Red Herring Prospectus

Here are the components of a Draft Red Herring Prospectus (DRHP) and the information you will get about the company:

  • Object for raising funds
    The DRHP will contain the reason for which the company is planning an IPO and trying to raise funds from the public. The company may raise funds for business expansion, debt repayment, working capital requirements, launching a new product, or buying new assets.
  • Business description
    This section provides information about the nature of the business operations and how the company conducts its business. You can understand the industry in which the business operates and the target customers
  • Financial details
    The financial details section is one of the most important sections as it details the company's financial health. The section includes all the company's financial reports, which you can analyse to understand the company’s historical performance, profitability, and future growth potential.
  • Management
    The company management is critical in running the business and ensuring its profitability in the future. The promoters, directors, and executives are the main decision-makers for the company, making it important to know the details about these individuals. This section also provides information about any legal cases pending against the company’s directors, promotors, or executives.
  • Industry overview
    While analysing a company and its IPO issue, it is important to understand the industry it operates in and how it is currently performing. This section provides information about the industry's performance, allowing you to decide whether investing in a company operating in this industry is justified.
  • Risk factors
    Operating a business always comes with risks, which the company knows extensively. This section provides information about all the risk factors faced by the company because of external factors such as demand and supply or from competitors. Investors can assess the factors and decide whether they wish to subscribe to the IPO.

Why should a company file a DRHP?

SEBI mandates the filing of DRHP if a company wants to launch an IPO to raise funds from the general public by listing the shares on the stock exchanges. Hence, companies must file a DRHP with SEBI. Once the company files the DRHP, SEBI reviews the document and makes necessary suggestions until it is approved. Once approved by SEBI and the Registrar of Company (ROC), the stock exchanges convert the DRHP to the final RHP.

Where can you find the DRHP of a company?

Now that you know what is DRHP, the next step is to know where you can find and read it. The best way to find a company's DRHP is by visiting SEBI's website. Every DRHP is listed on SEBI's website for public viewing. Furthermore, you can find a company’s DRHP on the merchant banker’s website or the stock exchanges' websites, such as NSE and BSE.

Why is a Draft Red Herring Prospectus important to investors?

The Draft Red Herring Prospectus is important for investors if they want to analyse a company to decide whether investing in its IPO would be profitable. The DRHP provides information about the company, its operations, industry, risk factors, and management to allow investors to research every aspect of the company. Afterwards, investors can make informed decisions about subscribing to the company’s IPO.

Difference Between RHP & DRHP

Aspects

Red Herring Prospectus (RHP)

Draft Red Herring Prospectus (DRHP)

Definition

A regulatory document containing all IPO details except the price and number of shares.

A preliminary version of the RHP filed before IPO launch.

Timing

Released after receiving regulatory approval.

Submitted for SEBI’s review and approval before launching the IPO.

Content

Includes company’s operations, financials, promoters, and IPO objectives.

Similar to RHP but excludes final pricing and issue size.

Pricing and Issue Size

Includes IPO price and number of shares.

Does not contain the final IPO price; this is determined later.

Public Offering Size

States total size based on finalised price and shares.

States an approximate offering size.

Regulatory Approval & Filing

Filed after receiving final SEBI approval.

Filed initially for SEBI comments; changes incorporated in the RHP later.

 

Final words

The DRHP is a detailed document that averages 300-500 words and aims to provide every possible information about the company to the investors. However, as it is almost impossible for the average investor to go through every section of the DRHP, you can simply go through the main components mentioned above and decide whether or not to apply to a company’s IPO.

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Frequently asked questions

What is Red Herring Prospectus with example?

The Red Herring Prospectus is a detailed document that provides investors with information about a company when it wants to launch an IPO. For example, if a company wants to launch an IPO, it will first file a DRHP with SEBI, which will be converted to an RHP after SEBI approval.

How do I check my Red Herring Prospectus?
While checking a Red Herring Prospectus, look for sections such as the object of raising funds, business description, financial details, management, industry overview, and risk factors.
What does DRHP mean in finance?

In finance, DRHP or Draft Red Herring Prospectus is a document submitted by a company planning an IPO. It offers preliminary insights into the company’s financials, business strategy, and fund usage plans, helping regulators and investors assess its credibility before the final public issue.

What happens after DRHP is filed?

Once the DRHP is filed, SEBI reviews it for compliance and may provide observations or ask for clarifications. The company must address these points before filing the final Red Herring Prospectus (RHP). Post-approval, the company proceeds with roadshows, pricing, and eventually the IPO launch.

What is a DRHP for an IPO?

For an IPO, a DRHP is a preliminary document that shares vital details about the company with regulators and potential investors. It outlines the firm’s business model, risks, financials, and intended use of funds, offering a first look before the final IPO terms are decided.

How long is DRHP valid for?

A DRHP remains valid for 12 months from the date of SEBI’s final observations. The company must launch its IPO within this period; otherwise, it will need to refile or update the document and seek regulatory clearance again to proceed with the public issue.

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