What is a draft red herring prospectus, and why does it matter? It’s the first full offer document a company files with SEBI before an IPO, and it lays out the business, the numbers and the risks months before anyone can bid. It’s often called the “birth certificate” of an IPO.
Where the Name Comes From
The odd name has a practical origin, and it explains what’s missing from the document.
- “Red herring” refers to a disclaimer historically printed in red on the cover, warning that the document is incomplete and subject to change
- The two missing items are the final price and the number of securities on offer
- Those two variables move from unknown to fixed as the draft becomes the red herring prospectus, and then the final prospectus
- DRHP stands for Draft Red Herring Prospectus, and it’s filed with SEBI and the stock exchanges through the merchant banker
What It Contains
A DRHP is long, but its content falls into a few predictable blocks.
- The business: what the company does, its products, customers and competitive position
- Risk factors: the issuer’s own list of what could go wrong
- Financial information, presented as restated financial statements for the past few years
- Objects of the issue: where the new money will go
- Promoters and management: who they are and how much they hold
- Related-party transactions and litigation: deals with insiders and pending legal matters
- Capital structure and the offer details, such as the split between fresh issue and offer for sale
What It Leaves Out
The absence of pricing is the point of the draft stage, though a few guides disagree about it.
- Most sources say a DRHP doesn’t include the price band, final price or exact issue size
- A couple of guides say it can include a tentative price band or IPO price band details, which conflicts with the majority view
- The safer reading is that price and quantity are settled later, in the RHP and then the final prospectus
- You can’t apply for shares from a DRHP. One guide says investors can apply only once the final prospectus is available, but in practice bidding opens after the RHP is filed with the price band, and the final prospectus follows once the issue closes
DRHP, RHP and Final Prospectus
Three documents track the same offer as the unknowns get filled in.
- DRHP: filed with SEBI for review, with no price band and no final issue size
- RHP: filed with the Registrar of Companies before the issue opens, with the price band and issue mechanics, and updated financials
- Final prospectus: filed after bidding, with the final price and number of shares
- Between DRHP and RHP, the company incorporates SEBI’s observations, so the RHP is a better document than the draft
Why It Matters to Investors
The DRHP matters because it’s an early, detailed look at a business before the marketing begins.
- It gives you the company’s own disclosures, not a broker’s summary
- Risk factors can reveal weaknesses that headlines skip
- Restated financials show whether growth was steady or lumpy
- Objects of the issue show whether your money is meant for growth or for early investors’ exits
- Spotting a problem early gives you time to ask questions, not just react on the last day of bidding
Why It Matters to the Market
The DRHP also does work for people who never buy the shares.
- SEBI uses it to check disclosure quality before the issue opens
- The public comment period lets outsiders flag omissions
- Analysts and journalists track DRHP filings to see which companies are lining up
- A DRHP filing is not a launch date, though. One IPO tracker lists Zepto and Hero FinCorp as “timing overdue” after targeted dates of July and August 2026. Once SEBI issues its observations, the company has 12 months to open the issue, so many drafts sit for a long time
Where to Find One
DRHPs are public, and you don’t need a subscription to read them.
- SEBI’s website carries draft offer documents for public issues
- The stock exchanges, BSE and NSE, publish them
- The lead manager’s website hosts a copy
- The company’s own website often links to it too
How to Read One Without Reading 400 Pages
You don’t need every page, and a targeted read beats a skim.
- Start with the summary of the offer document and the risk factors
- Check the objects of the issue and the fresh issue versus offer for sale split
- Look at three years of restated financials, including debt and cash flow
- Read the related-party and litigation sections last, since that’s where unpleasant facts tend to sit
- Remember that the financials may be months old by the time of the IPO, so check the RHP for updates
FAQs
Q1. What does DRHP stand for?
Draft Red Herring Prospectus. It’s the preliminary offer document a company files with SEBI before an IPO, without the final price or share quantity.
Q2. Why is it called a red herring?
Because the cover historically carried a red disclaimer saying the document is incomplete and subject to change, mainly missing the final price and number of shares.
Q3. Can I apply for an IPO using a DRHP?
No. The DRHP is a draft for review. You bid only after the RHP is filed with the price band and the issue opens.
Q4. Where can I read a company’s DRHP?
On SEBI’s website, the BSE and NSE sites and the lead manager’s site. Companies often link to it from their own site too.
