Investor Guides

DRHP Explained

What is a Draft Red Herring Prospectus and why should investors read it before applying for an IPO?

By OpenIPO Research DeskReviewed by OpenIPO Editorial Team1 min read
Editorial note: This article is for IPO education only. Always verify issue details with the RHP, registrar, exchange notices and your financial advisor before investing.

The DRHP is one of the most important IPO documents. It is long, but it contains the facts investors need: business model, financial statements, promoters, related party transactions, legal matters, risk factors and why money is being raised.

Why DRHP matters

IPO marketing material highlights strengths. The DRHP also shows weaknesses. It can reveal customer concentration, pending litigation, high working capital needs, related party dependence, debt, promoter pledges or past losses.

Sections retail investors should read first

  1. Risk factors: Start here because companies must disclose material risks.
  2. Objects of the issue: See whether money is used for growth, debt repayment or offer for sale.
  3. Financial information: Review revenue, profit, margins, cash flow and debt.
  4. Management and promoters: Check experience and any legal or governance concerns.
  5. Peer comparison: Compare valuation with listed companies in the same sector.

DRHP vs RHP

The DRHP is the draft version. The RHP is closer to the final offer and normally includes more updated issue details. Before applying, use the latest available document, not an old draft.

Frequently Asked Questions

What is DRHP?

DRHP stands for Draft Red Herring Prospectus. It is a draft offer document filed before an IPO with details about the company, issue and risks.

Is DRHP the final IPO document?

No. The final document is usually the RHP or prospectus after updates such as price band and issue dates.

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