Key Takeaways

The DRHP (Draft Red Herring Prospectus) is the most important document in the IPO process — it is the company's formal pitch to SEBI and investors.
A typical mainboard DRHP runs 400-600 pages and covers everything from business description to restated financials.
SEBI reviews the DRHP and issues observations within 30 days (which may extend to 75 days with queries).
The DRHP is publicly available on the SEBI website, inviting comments from the public for 21 days.
Common SEBI observation areas include related-party disclosures, objects of the issue, risk factors, and financial restatements.

What Is a DRHP?

The Draft Red Herring Prospectus is the preliminary offer document filed by a company with SEBI before launching its IPO. It is called "draft" because the final price and exact number of shares are not yet determined (these are filled in the Red Herring Prospectus after book building).

The term "Red Herring" originates from US securities law — early prospectuses were printed with a red disclaimer on the cover indicating the document was not yet final.

Document Progression:

DRHP — Filed with SEBI for review
RHP (Red Herring Prospectus) — Filed with ROC after SEBI observations are addressed; includes price band
Final Prospectus — Filed after pricing is determined; includes final offer price and allocation details

Key Components of a DRHP

A well-structured DRHP contains the following major sections:

Section I — General Information

Cover page with issue details, BRLMs, registrar
Table of contents, definitions, and abbreviations

Section II — Risk Factors

Internal risks (operational, financial, regulatory)
External risks (industry, economic, geopolitical)
Risks related to the securities being offered

Section III — Introduction

Summary of the issue (fresh issue size, OFS size, objects)
Summary financial information
General information about the company

Section IV — About the Issuer

Industry overview (typically 30-50 pages of CRISIL/Frost & Sullivan research)
Business description (detailed narrative of operations, products, customers)
Regulations and policies applicable to the business
Company history and corporate structure
Key management personnel and promoter details

Section V — Financial Information

Restated financial statements (3-5 years under Ind AS)
Auditor's report on restated financials
Financial ratios and management discussion
Capitalisation statement

Section VI — Legal and Other Information

Outstanding litigation (promoter, company, directors, group companies)
Material developments after last financial statements
Government approvals and licences

Section VII — Other Regulatory Information

Objects of the issue with detailed fund utilisation
Basis for issue price
Tax benefits statement (certified by CAs)

The SEBI Review Process

Once the DRHP is filed, the following sequence unfolds:

| Step | Timeline | Details | |---|---|---| | Filing with SEBI | Day 0 | DRHP filed on SEBI portal; simultaneously hosted on SEBI website | | Public Comments Window | Day 0 to Day 21 | Public and market participants can submit comments to SEBI | | SEBI Internal Review | Day 0 to Day 30 | SEBI's Corporation Finance Department (CFD) reviews the document | | First Observation Letter | Day 30 (typically) | SEBI issues observations or raises queries | | Issuer Response | 15-30 days | Issuer and BRLMs address SEBI observations | | Final Observation Letter | Day 45-75 | SEBI issues final observations; validity 12 months |

For SME IPOs, the stock exchange (BSE or NSE) conducts the review instead of SEBI, typically with a shorter turnaround.

Landmark Reference: LIC IPO DRHP (2022)

The Life Insurance Corporation of India (LIC) DRHP, filed in February 2022, was the most extensive IPO document in Indian history at over 650 pages. The embedded value computation alone required unprecedented actuarial disclosures. The DRHP underwent multiple rounds of SEBI observations, particularly around the embedded value methodology, policyholders' fund disclosures, and the valuation basis. The Rs 21,000+ crore IPO remains a landmark reference for complex public sector IPOs.

Worked Example: DRHP Drafting Timeline

For a mid-sized manufacturing company planning a mainboard IPO:

| Week | Activity | Responsible | |---|---|---| | Week 1-2 | Business description drafting | Company + BRLM | | Week 2-4 | Risk factors identification and drafting | Legal Counsel + BRLM | | Week 3-6 | Restated financial statements finalisation | Qualified CAs / Statutory Auditors | | Week 4-6 | Industry report commissioned | CRISIL / Frost & Sullivan | | Week 5-7 | Litigation summary and legal due diligence report | Legal Counsel | | Week 6-8 | Objects of the issue and fund utilisation drafting | Company + BRLM | | Week 7-9 | Tax benefits statement preparation | CAs | | Week 8-10 | Integration and consistency review | BRLM | | Week 10-11 | Board approval of DRHP | Board of Directors | | Week 12 | Filing with SEBI | BRLM |

Total drafting time: approximately 10-12 weeks (assuming pre-IPO preparation from Chapter 3 is already complete).

Expert Tip: The tax benefits statement in the DRHP must be certified by qualified CAs and is one of the most scrutinised sections by investors. Ensure it covers Income Tax, GST, and Customs benefits accurately — an error here can lead to SEBI queries and investor distrust. Our CAs always cross-verify tax benefit claims against the latest Finance Act provisions.

Common SEBI Observation Areas

Based on publicly available SEBI observation letters, the most frequent areas of scrutiny include:

Objects of the Issue — Insufficient detail on capital expenditure plans; vague "general corporate purposes" allocation
Related-Party Transactions — Inadequate disclosure of transactions with promoter group entities
Risk Factors — Generic risk factors not specific to the company's business
KPI Disclosures — Non-standard financial metrics used without adequate explanation
Litigation Disclosures — Incomplete listing of pending cases involving promoters and group companies
Restated Financials — Adjustments made during restatement not adequately explained

Section Interconnect

Previous: Chapter 4 — SEBI ICDR Regulations
Next: Chapter 6 — IPO Process Timeline
Related: Chapter 3 — Pre-IPO Preparation
Related: Chapter 8 — Post-IPO Obligations

Frequently Asked Questions

Can the public access the DRHP before the IPO opens?

Yes. Once the DRHP is filed with SEBI, it is hosted on the SEBI website (sebi.gov.in) and on the websites of the stock exchanges and the merchant banker. Any member of the public can read the full document and submit comments to SEBI within 21 days of filing.

What is the difference between a DRHP, RHP, and Prospectus?

The DRHP is the initial draft filed with SEBI for review (no price information). The RHP (Red Herring Prospectus) is filed with the Registrar of Companies after SEBI observations are addressed and includes the price band. The Final Prospectus is filed after the issue closes and includes the final issue price and allocation details.

How long is the DRHP valid after SEBI issues its observations?

SEBI's observation letter is valid for 12 months. The company must open its IPO within this period. If the IPO is not launched within 12 months, the company must refile the DRHP with updated financials and seek fresh SEBI observations.

Disclaimer: This article is for educational and informational purposes only. It does not constitute financial, legal, or investment advice. SEBI processes and timelines are subject to change. Always consult qualified professionals for your specific IPO requirements.

Planning to draft your DRHP? Our qualified CAs handle restated financials, tax benefits statements, and financial disclosures for IPO offer documents. WhatsApp us to get started →

DRHP Explained: Components, Drafting & SEBI Review Process