A DRHP (Draft Red Herring Prospectus) is a preliminary legal document that a company files with SEBI (Securities and Exchange Board of India) before launching an IPO.
WHY IS IT CALLED “RED HERRING”?
The term “Red Herring” comes from an old English expression and has both historical and practical reasons behind it.
The prospectus has red-colored legal warnings on its cover. It is a draft document, not the final IPO offer. Key details like price and issue size are not final.
“Red herring” means incomplete or preliminary information. Hence, it is called a Red Herring Prospectus.
WHY IS DRHP IMPORTANT?
The DRHP helps investors understand:
- What the company does (type of business)
- How strong or risky the business is
- Purpose of company to raise money
- Financial performance
- Promoters’ background
WHAT INFORMATION DOES A DRHP CONTAIN?
1. COMPANY OVERVIEW
- Business model
- Products/services
- Industry overview
- Competitive strengths
2. OBJECTS OF THE ISSUE
- Expansion
- Debt repayment
- Working capital
- General corporate purposes
3. RISK FACTORS
- Business risks
- Financial risks
- Legal risks
- Industry-related risks
4. FINANCIAL STATEMENTS
- Last 3 years’: Revenue Profit/Loss Assets & liabilities
- Cash flow statements
5. PROMOTERS & MANAGEMENT
- Promoters’ background
- Shareholding pattern
- Past experience
- Any legal cases
6. ISSUE DETAILS
- Fresh issue / Offer for Sale (OFS)
- Number of shares offered
- Face value
- Price band (may not be final in DRHP)
7. LEGAL & REGULATORY DISCLOSURES
- Ongoing litigation
- Regulatory approvals
- Compliance status
What is UDRHP (Updated Draft Red Herring Prospectus)?
UDRHP is an updated draft document filed by a company after SEBI reviews its DRHP. It reflects SEBI’s comments and includes the latest financials, risk factors, and business updates. It helps investors access more accurate and current information before the final IPO documents are issued.
- UDRHP stands for Updated Draft Red Herring Prospectus.
- It is a revised version of the DRHP.
- Filed after receiving SEBI observations.
- Contains updated financial data and disclosures.
- Final IPO price and size are still not included.
WHAT IS THE DIFFERENCE BETWEEN DRHP & RHP
| DRHP | RHP |
| Filed before SEBI approval | Filed after SEBI approval |
| Price band may be missing | Price band included |
| Draft version | Final version before IPO |
| Used for analysis | Used for actual IPO application |
