By ipomarket.in Editorial Team · Last reviewed: 2026-10-16
Disclaimer: This article is for informational purposes only and does not constitute investment advice. IPO investments are subject to market risks. Please read the offer document carefully and consult a SEBI-registered investment advisor before investing.
Before any company lists its shares on the stock exchange, it has to tell the market who it is, how it earns money, and what could go wrong. That disclosure lives in a document called the DRHP. For retail investors, learning to read even a few sections of it is one of the most practical research habits you can build, because it replaces hype and grey-market chatter with the company's own audited numbers.
This guide walks through what a DRHP is, which parts deserve your time, and how to find the genuine copy.
What is a DRHP?
DRHP stands for Draft Red Herring Prospectus. It is the preliminary IPO document filed with SEBI that discloses a company's business, finances, risks, and the purpose for raising capital. Think of it as the company introducing itself to the public and the regulator at the same time.
Two things are deliberately not final in a DRHP. It does not contain detailed information about the issue size, the price, or the exact number of shares offered. Those get locked in later. What the DRHP does carry is company overview, IPO structure, management and shareholder details, risk factors, use of proceeds, and financial statements.
The DRHP is also a living document. It gets updated through "Errata" and "Addenda" until the final Prospectus is filed with the Registrar of Companies. The Red Herring Prospectus (RHP), which is the near-final version with the price band, can only be filed after SEBI has reviewed and approved the DRHP. Reportedly, in India SEBI's review of a DRHP usually takes two to four months before the company can officially ask the public for investments, according to industry commentary.
If you want the foundational explainer first, see our detailed note on what a DRHP is and how to read it.
The 7 sections that matter most
A full DRHP runs into hundreds of pages. You do not need to read all of it. The seven sections below are the ones most relevant to a retail investor:
- Risk Factors
- Financial Statements (three-year P&L, balance sheet, cash flow)
- Use of Proceeds
- Industry Overview
- Business Overview
- Promoter Holding and Lock-in
- Related Party Transactions
Let us take the important ones in turn.
Risk Factors
This is a regulator-mandated list of everything that could go wrong. Companies are legally required to disclose every material risk, including pending litigation, regulatory uncertainty, customer concentration, and related-party dealings. The section typically spans 30 to 50 pages. It reads like a list of worst cases because that is exactly its job. Rather than skipping it, look for risks that are specific to this company (a single client making up most revenue, for example) versus generic boilerplate that applies to any business.
Financial Statements
A DRHP requires three years of restated audited financials. Here you examine revenue, profitability, debt, and cash flows across those years. The Revenue Growth view usually measures the average annual growth rate (CAGR) over multiple years, and steady, consistent growth is generally more reassuring than a single spike. Our walkthrough on how to analyse IPO financials in the RHP breaks down what to look for line by line.
Use of Proceeds (Objects of the Issue)
This section answers a simple but crucial question: if you invest your money, what exactly will the company do with it? The Objects of the Issue may involve a Fresh Issue, an Offer for Sale (OFS), or a combination of both.
- In a Fresh Issue, new shares are created and sold. The money raised flows directly into the company and can fund expansion, debt repayment, working capital, or technology investment.
- In an Offer for Sale (OFS), existing shareholders sell part of their stake to the public. That money goes entirely to the sellers, not the company.
This distinction tells you whether the IPO is primarily about funding growth or about giving early investors and promoters an exit. Common uses of fresh-issue funds include debt repayment, capital expenditure, working capital, and general corporate purposes.
Business and Industry Overview
The Business Overview explains what the company does, its products or services, its customers, and how it makes money. Reading it alongside the Industry Overview helps you judge whether the company operates in a growing market and how it stacks up against competitors.
Promoter Holding and Related Party Transactions
The Promoter Background and Shareholding Pattern section tells you who controls the company and is responsible for running it, whether that is founders, families, or other entities. Related Party Transactions deserve a careful look because you want to confirm that dealings between the company and its promoters or group entities happen on arm's-length terms, not on terms that quietly benefit insiders.
A quick map of the document's layout
The first part of a DRHP usually contains a "Summary of the Offer Document", often the first 10 pages, covering the issue structure, total size, the fresh issue versus OFS split, selling shareholders, and the use of proceeds. This summary is a good starting point before you dive into the detailed sections.
Where to find the authentic DRHP
Always read the genuine document, not a summary posted on social media. You can find authentic DRHPs at:
- SEBI (sebi.gov.in) under the "Public Issues" section
- BSE (bseindia.com) and NSE (nseindia.com) under corporate filings. On NSE, use the "Market Data" tab, select "IPO," and open the "Documents" link for the latest version with all recent addenda.
- The lead manager's website
- The company's investor-relations page
Because the DRHP keeps getting updated, make sure you are reading the most recent version with its errata and addenda attached.
Putting it together
Reading a DRHP is not about becoming an analyst overnight. It is about answering a few honest questions: What does this company do? Is it growing? Where is my money going? Who runs it, and what could go wrong? The risk factors, financials, and use of proceeds carry most of those answers. Pair this habit with our broader checklist on how to analyse an upcoming IPO, and you will be far ahead of anyone relying on grey-market noise.
FAQ
What is a DRHP and how is it different from an RHP?
A DRHP is the preliminary IPO document filed with SEBI disclosing the company's business, finances, risks, and purpose for raising capital. It does not carry the final price or exact number of shares. The Red Herring Prospectus (RHP), which includes the price band, can only be filed after SEBI reviews and approves the DRHP.
How long does SEBI take to review a DRHP?
Reportedly, SEBI's review usually takes two to four months before the company can officially ask the public to invest, according to industry commentary. This figure is not an official SEBI timeline and can vary case to case.
Which sections of the DRHP should a retail investor read first?
The seven most useful sections are Risk Factors, Financial Statements (three-year P&L, balance sheet, cash flow), Use of Proceeds, Industry Overview, Business Overview, Promoter Holding and Lock-in, and Related Party Transactions.
Does a DRHP tell me the IPO price?
No. The DRHP leaves out detailed information on the issue size, price, and exact number of shares. Those are finalised later in the RHP and the final Prospectus.
Where can I download an authentic DRHP?
You can access it on the SEBI website under "Public Issues," on BSE and NSE under corporate filings, on the lead manager's website, or on the company's investor-relations page. Remember the document is updated through errata and addenda, so always use the latest version.
Last reviewed: 2026-10-16 by the ipomarket.in Editorial Team.