Draft Red Herring Prospectus (DRHP) : Components, Importance and More
Written by Subhasish Mandal
Published on July 31, 2025 | 3 min read
Summary
When a company plans to launch an IPO to get listed on the stock exchange, they file a Draft Red Herring Prospectus (DRHP) with the market regulator; in India, it's SEBI.
DRHP is an official document that highlights all the details regarding the IPO issue size, components, financials, business model, plans, and more.
Key Takeaways
- DRHP is the first document filed by the company with the market regulator (SEBI) for launching an IPO.
- It contains all the necessary information related to IPO issue size, business model, products, financials, management team, and more.
- DRHP does not disclose the final price band of the IPO.
- DRHP and RHP are not the same. RHPs are the rectified version of DRRP, in which rectifications are made as suggested by SEBI.
What is a Draft Red Herring Prospectus (DRHP)?
A DRHP is an IPO document prepared by merchant bankers as a preliminary registration document for companies seeking to launch an IPO. It contains information about the IPO issue size, the company’s financial details, and other necessary information.
The details are verified by the regulator, and if any points need to be amended, the DRHP is put on hold for IPO approval until the changes are made.
The DRHP plays a crucial role in the IPO process by ensuring transparency, regulatory compliance, and informed decision-making. It allows regulators, investors, and market participants to review company details before the IPO goes live.
Components of DRHP
A DRHP contains the following information, which can be of great value to an investor:
Objective of Raising Capital
This section of the DRHP discusses the objective of the IPO and the utilisation of the funds. It may include paying off debts, meeting working capital requirements, acquiring assets, or other business purposes.
Business Operations
This section provides information about the nature of the business, its products, and services.
Industry Overview
This section of the prospectus contains data about performance trends of the industry. It includes details on the supply and demand of the overall sector, various economic variables, etc.
Financial Details
This section of the DRHP provides information about the financial health of the business. It includes profit and loss statement, balance sheet, cash flow statement, and ratios.
Management Details
Here, you will find details about the company’s promoters, directors, and executives involved in key decision-making.
Risk Factors
Every business faces certain challenges and risks. To maintain transparency, these risks are disclosed
Benefits of DRHP for Investors
DRHP details allow investors to thoroughly evaluate the company’s financial health, business model, management team, risk, and more. Here are the key benefits:
Authentic Information about the Company
SEBI reviews the document for regulatory compliance, disclosures, and investors' safety. This information is considered reliable when analysing an IPO.
Transparency on Risk
The DRHP requires companies to disclose internal and external risks, including legal issues. It informs investors beforehand about the risks faced by the company.
Comparing Financials with Peers
The DRHP provides the latest financial information about the business. This helps investors compare the company’s financials with those of competitors and assess whether the IPO is worthwhile.
Difference Between DRHP and RHP
Here is the main difference between the Draft Red Herring Prospectus (DRHP) and the Red Herring Prospectus (RHP):
| Aspects | DRHP | RHP |
|---|---|---|
| Definition | A preliminary document filed with the market regulator, when planning for an IPO. | It is the updated and approved version of the DRHP after regulators' review. |
| Timing | Filed first with SEBI | Filed after DRHP approval but before the IPO opens. |
| Pricing | It doesn't include information about the price. | Includes information about the issue price. |
| Regulatory Approval | The DRHP is filed for regulatory review and comments, and accordingly, changes are made in the RHP. | RHP is released after receiving the final approval from regulators. |
Where Can Investors Find the DRHP of a Company?
Investors can find the DRHP of a company by visiting the SEBI website. Every DRHP is disclosed on SEBI's website for public viewing.
Other than this, you can also find the DRHP on the merchant banker's website or the stock exchange's official website.
A DRHP is a detailed document, typically around 300 to 500 pages long, that helps investors to understand a company’s business operations, financials, future outlook, and many other things.
Reviewing the DRHP before applying to an IPO can help you to make more informed and confident investment decisions.
About Author
Subhasish Mandal
Sub-Editor
Finance professional with strong expertise in stock market and personal finance writing, he excels at breaking down complex financial concepts into simple, actionable insights. Holding a Master’s degree in Commerce, he combines academic depth with practical knowledge of technical analysis and derivatives.
Read more from Subhasish
Upstox is a leading Indian financial services company that offers online trading and investment services in stocks, commodities, currencies, mutual funds, and more. Founded in 2009 and headquartered in Mumbai, Upstox is backed by prominent investors including Ratan Tata, Tiger Global, and Kalaari Capital. It operates under RKSV Securities and is registered with SEBI, NSE, BSE, and other regulatory bodies, ensuring secure and compliant trading experiences.
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