DRHP
The Draft Red Herring Prospectus (DRHP) is the preliminary IPO registration document filed with SEBI by a company seeking to go public, containing detailed disclosures about the business, financials, risk factors, and intended use of proceeds, but without the final price or issue size.
The DRHP was the foundational disclosure document of the Indian IPO process, representing the first public window into a company's operations, financials, and future plans for investors who had previously had no visibility. Filed with SEBI by the company and its lead managers (investment banks), the DRHP triggered a mandatory 30-day public comment period during which SEBI reviewed the document and issued observations, and members of the public, competing companies, or other stakeholders could raise objections.
The content requirements for a DRHP were extensive and governed by SEBI's ICDR Regulations. The document had to include three years of audited financial statements, a management discussion and analysis (MD&A) section, details of the promoter group and related-party transactions, litigation history, risk factors (typically spanning several dozen pages), business description, competitive positioning, details of the IPO objects (use of Fresh Issue proceeds), a summary of outstanding litigations against the company and its promoters, and details of all pre-IPO placements and anchor investor rounds.
The risk factors section was arguably the most important part of the DRHP for retail investors, yet the most commonly skimmed. Companies were required to disclose all material risks — market risks, regulatory risks, concentration risks, litigation risks, and key-man dependencies — in plain language. Ignoring this section meant investors allocated capital without understanding the downside scenarios the company itself acknowledged as plausible. In several high-profile Indian IPOs, risks that were disclosed in the DRHP and subsequently materialised had been visible to diligent readers prior to the listing.
After SEBI's observations were incorporated (a process that typically took 30–75 days after filing), the document was updated to become the Red Herring Prospectus (RHP). The RHP was a near-final version containing all disclosures except the issue price and final lot size, which were added only in the Final Prospectus after the price band and book-building process concluded. DRHPs were publicly available on SEBI's website (sebi.gov.in) and on the websites of the lead managers and the company itself.
A key analytical use of the DRHP was tracking the company's financial trajectory over the three years of disclosed financials. Revenue growth trends, operating margin evolution, working capital intensity, debt levels, and free cash flow generation could all be assessed from the audited financials in the DRHP long before the IPO subscription window opened, allowing investors to form an independent view of business quality rather than relying solely on investment bank pitch materials.