Author: Aditya Pareek | EQMint | EQ Originals
DRHP stands for Draft Red Herring Prospectus. It’s the document a company files with SEBI before its IPO opens. Roughly 400 to 800 pages long, dense with legal language, financial tables and risk disclosures.
It’s also the single most useful document a retail investor will ever read about a company they’re considering investing in.
Most retail applicants never read the DRHP. They read a few news articles, check the GMP, see what their broker is saying and apply. That’s exactly why most retail applicants get IPOs wrong.
Here’s what is DRHP actually, what’s inside it, which sections matter most, which to skip and how to read one in 90 minutes without an MBA.
What is DRHP and why it exists
The DRHP is the offer document. It’s the company’s formal disclosure to the market about what it does, how it makes money, what risks it carries, what the IPO is for and what it’s worth.
The phrase “red herring” comes from the disclaimer printed in red on the cover page. The document is preliminary. Some details (final price band, final issue size, exact dates) are missing because they get fixed closer to the launch date. The “red herring” warning tells readers that this is a preliminary draft. The binding version comes later as the Prospectus.
SEBI mandates the DRHP filing under the ICDR Regulations 2018. The purpose is investor protection. Without standardised disclosures, retail investors would be applying blind. The DRHP forces companies to put every material fact (good and bad) on the public record.
Three documents in the IPO disclosure chain.
DRHP (Draft Red Herring Prospectus). Filed with SEBI for review. Submitted before final pricing.
RHP (Red Herring Prospectus). Filed with the Registrar of Companies just before the IPO opens. Contains the final price band, lot size and dates.
Prospectus. Filed after the IPO closes. Contains the final allotment details and listing information.
The DRHP is what retail investors should focus on. By the time the RHP comes out, the application window is already short.
Confidential DRHP vs public DRHP
A change worth knowing about. Since November 2022, SEBI has allowed companies to file the DRHP through a confidential prefiling route.
In a public DRHP, the document is uploaded to SEBI’s website immediately on filing. Anyone can read it. Competitors, journalists, retail investors, everyone.
In a confidential DRHP, the document is only shared with SEBI and the stock exchanges privately. Public release happens only when the company files the updated DRHP (called UDRHP) after SEBI’s review is complete.
Companies use the confidential route to protect sensitive information during the SEBI review period, which can take 4 to 6 months. Several recent IPOs (Reliance Jio, NSE, Zepto, PhonePe) have used confidential filing.
For retail investors, the practical difference is timing. With confidential filing, the public DRHP only becomes available in the UDRHP form, which is closer to launch. The window to study the document is shorter.
The confidential route also offers issuers an 18 month window from SEBI observations to launch the IPO. The standard route gives only 12 months. SEBI’s April 2026 circular extended observation letters expiring between April and September 2026 by an additional 6 months, after the West Asia geopolitical disruption.
The 10 sections of a DRHP that matter most
A typical DRHP runs 400 to 800 pages. Reading all of it isn’t required. The 10 sections below cover 90% of what a retail investor needs.
Section 1: Cover page and offer details. First 5 pages. Tells you the basic structure of the IPO. Fresh issue vs Offer for Sale, lead managers, the registrar and approximate timeline. Read this first.
Section 2: Risk factors. Usually pages 30 to 100. This is the most important section in the entire document and the one most retail investors skip. SEBI requires companies to disclose every material risk. Regulatory risks, business risks, competitive risks, founder dependence, customer concentration, related party transactions, ongoing litigation. Read every single risk factor. The bad news is here.
Section 3: Industry overview. Usually pages 100 to 200. The company pays a consulting firm (CRISIL, Frost & Sullivan, RedSeer, etc.) to write this. It describes the market the company operates in. Useful for context but treat with care, because the company is paying for the report.
Section 4: Business overview. Usually 50 to 80 pages. This is where the company describes itself in detail. Products, customers, geographies, competitive position, growth strategy, key strengths. Read this in full.
Section 5: Management discussion and analysis (MD&A). Usually 20 to 30 pages. The company’s own narrative explanation of its financial performance. Often the easiest section to read because it’s written in plain English. Compare what management says to what the financial statements actually show.
Section 6: Financial statements. Usually 100 to 200 pages. Three years of audited financials, restated as per SEBI norms. Income statement, balance sheet, cash flow. Skip line by line reading. Focus on a few key metrics (revenue growth, EBITDA margin, debt levels, working capital, cash flow from operations).
Section 7: Objects of the issue. Usually 5 to 15 pages. This explains what the company will do with the IPO money. If it’s a fresh issue, the funds usually go toward debt repayment, expansion, working capital or general corporate purposes. If it’s an OFS, no fresh capital comes to the company. The selling shareholders pocket the money.
Section 8: Capital structure and shareholding. Usually 20 to 30 pages. Who owns the company before the IPO. Promoter holding, institutional investors, ESOPs. This shows you who is selling in the OFS portion and how much.
Section 9: Basis for issue price. Usually 5 to 10 pages. The company’s justification for the price band. Comparable listed company multiples, P/E, EV/EBITDA, EV/Revenue. Compare these claims to actual peer multiples on screener.in or moneycontrol.
Section 10: Outstanding litigation. Usually 20 to 50 pages. Every material legal case the company is involved in, including criminal, civil, tax and regulatory proceedings. SEBI’s threshold for materiality is strict. Read this. If a company has major pending litigation, the DRHP will say so here.
How to actually read a DRHP in 90 minutes
A focused reading plan that works for most mainboard IPOs.
Minutes 0 to 10. Read the cover page. Note the fresh issue vs OFS split, lead managers, registrar and total issue size.
Minutes 10 to 30. Read the risk factors section in full. Mark the top 5 risks that worry you. These are what you’ll watch in future quarterly results post listing.
Minutes 30 to 50. Read the business overview. Note the company’s main revenue lines, top customers, key geographies and growth strategy.
Minutes 50 to 60. Read management discussion and analysis. Compare what management says to the financial data tables.
Minutes 60 to 75. Scan financial statements. Note revenue and PAT for last 3 years. Calculate growth rates. Note debt to equity ratio. Note cash flow from operations vs net profit (if these are very different, dig deeper).
Minutes 75 to 85. Read objects of the issue and capital structure. Understand exactly where the IPO money is going and who’s selling.
Minutes 85 to 90. Read basis for issue price. Calculate the implied P/E and EV/EBITDA at the proposed price band. Compare to the top 2 to 3 listed peers.
That’s it. 90 minutes for a retail level due diligence read. Adequate for making an apply or skip decision on most IPOs.
Five red flags to watch for in a DRHP
These patterns appear in the DRHPs of IPOs that later underperformed.
Pure OFS with no fresh issue. All the money goes to existing shareholders. The company gets nothing. Often a sign that promoters or early investors want to cash out at a peak.
Heavy promoter pledging or recent share sales. Promoters who recently sold or pledged large stakes are often signalling reduced confidence in the long term story.
Revenue concentration in top 5 customers. If 60% or more of revenue comes from 5 customers, the company is vulnerable to losing any one of them. The DRHP must disclose this.
Related party transactions worth more than 10% of revenue. Means the company is doing significant business with promoter owned entities. Can be a transfer pricing risk. Read the related party section carefully.
Restated financials showing material changes from earlier filings. If the IPO restated numbers are materially different from previously published audited numbers, that’s an accounting concern. SEBI’s restated financials follow strict norms and the discrepancies are usually explained, but watch for the magnitude.
Two green flags worth looking for
The flip side. Patterns that often precede IPOs that performed well post listing.
Fresh issue with clear use of proceeds. The company is raising money to expand, repay debt or fund working capital with specific allocations. Promoters take minimal cash out (or none) in the OFS portion.
Multi year improving margins and cash flow. Revenue growth alone does not matter. EBITDA margin expanding over 3 years, with operating cash flow growing in line with profit, signals a healthier business than one that’s only growing revenue while burning cash.
What a DRHP cannot tell you
A few honest limits to know.
The DRHP does not tell you the final IPO price. That comes in the RHP, usually 2 to 4 weeks after the DRHP is finalised.
The DRHP does not tell you the listing day price. Markets decide that.
The DRHP does not tell you whether you’ll get allotment. That’s determined by the lottery and proportionate allocation methods after the IPO closes.
The DRHP does not project future financials. SEBI rules prohibit forward looking financial projections. Companies can describe strategy and intent, but not predict numbers.
What the DRHP does give you is a complete, audited, regulator scrutinised picture of the company as it stands today. That’s the most reliable disclosure document any retail investor will see. Reading it is the difference between informed application and gambling.
Where to download a DRHP
Three sources, all free.
SEBI’s website. sebi.gov.in has every public DRHP filed since 2010. Go to the Filings section, then Public Issues. Searchable by company name.
BSE and NSE websites. bseindia.com and nseindia.com both list IPO documents under their IPO sections.
The lead manager’s website. Larger lead managers (Kotak, ICICI Securities, Axis Capital, JM Financial, Motilal Oswal) host the DRHP on their IPO landing pages.
For confidential DRHPs, the document only becomes publicly available at the UDRHP stage, after SEBI’s review. Before that, only the company, SEBI and exchanges have access.
FAQ
What is the difference between DRHP and RHP? The DRHP is the draft filed for SEBI review. The RHP is the final version filed with the Registrar of Companies just before the IPO opens, containing the price band and dates.
Is the DRHP a binding document? It’s a draft. The final binding document is the Prospectus, filed after the IPO closes.
How long is a typical DRHP? Between 400 and 800 pages for mainboard IPOs. SME IPOs are usually 200 to 400 pages.
Why does the DRHP include so many risk factors? SEBI mandates disclosure of every material risk. Companies err on the side of including too many risks to avoid future litigation from investors.
Can a DRHP be withdrawn? Yes. Companies regularly withdraw DRHPs due to market conditions, regulatory issues, or strategic changes. SEBI allows withdrawal at any stage before the RHP filing.
What happens after SEBI reviews a DRHP? SEBI issues observations on the DRHP. The company must address these in an updated DRHP (UDRHP) before proceeding. SEBI does not approve or reject IPOs. It only requires complete disclosure.
Can retail investors comment on a DRHP? Yes. SEBI invites public comments on the DRHP for 21 days after public filing. Comments can be submitted directly to SEBI through the website.
EQMint is not a SEBI registered investment adviser. This article is for informational purposes only and is not investment advice.
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