DRHP, RHP and Prospectus — Which Document Says What

An IPO generates a sequence of offer documents, each a version of the same thing at a different stage of completeness. Knowing which is which saves a lot of confusion.

The DRHP — the draft

The draft red herring prospectus is filed with SEBI and the exchanges when the company first proposes to go public. It is the longest document in the sequence and it contains almost everything:

• The business, its history, its operations and its industry
• Restated financial statements for the last three years
• Risk factors, ordered by materiality
• Promoter and promoter group details, and their shareholding
• Outstanding litigation against the company, promoters and directors
• Related-party transactions
• The intended use of proceeds
• Capital structure before and after the issue

What it does not contain is the price band, the issue size in shares, and the dates. Those depend on market conditions that will not be known for months.

SEBI publishes the DRHP for public comment. This is the earliest point at which anyone outside the company can form a view on the issue, and it is often six to twelve months before the IPO actually opens.

The RHP — the binding document

The red herring prospectus is filed with the Registrar of Companies at least three days before the issue opens. It is the DRHP updated for everything that has changed since, plus:

• The price band
• The bid opening and closing dates
• The lot size and bid details
• Updated financials, if a new period has closed
• The final structure of fresh issue and offer for sale

This is the document that governs your application. If you read only one thing before applying, read this.

It is still called a red herring because one gap remains: the exact issue price and the final number of shares are absent until book building closes.

The final prospectus

Filed after pricing and allotment, the prospectus is the RHP with the last blanks filled in — the actual issue price, the exact issue size and the final category-wise allocation.

Nobody reads it before applying, because it does not exist yet. It matters afterwards, as the definitive record of what was sold and on what terms.

The abridged prospectus

The abridged prospectus is a short-form summary that SEBI requires to accompany every application form, accessible via a QR code printed on the form.

It condenses the business, financials, objects of the issue, top risk factors and basis for issue price into a handful of pages. For most retail investors it is the highest-value document per minute spent — a genuine summary rather than a marketing sheet, because its contents are prescribed.

What changes between the DRHP and the RHP

Comparing the two is an underused piece of research. Things that commonly change:

• Fresh issue size shrinks because the company completed a pre-IPO placement. The price paid in that placement is disclosed and makes a useful reference against the band.
• New risk factors appear in response to SEBI’s observations or to events during the review period.
• Financials are updated for a further quarter or half-year, sometimes revealing a slowdown that the DRHP’s cut-off concealed.
• Litigation moves — cases resolved, new cases filed.
• The OFS composition changes as selling shareholders adjust how much they intend to sell.

Where a company has been on the shelf for many months, the delta between the two documents is often the most informative thing available.

Reading order, if you are short of time

1. Abridged prospectus — the whole issue in a few pages
2. Risk factors in the RHP — the first ten are the ones that matter
3. Objects of the issue — where your money actually goes
4. Basis for issue price — the company’s own valuation argument, plus the peer table
5. Related-party transactions and promoter litigation — the sections most likely to change your mind

That sequence takes an hour or two and covers most of what you would want to know before committing money.