What Is a DRHP/RHP (Draft Red Herring Prospectus / Red Herring Prospectus)?

A DRHP (Draft Red Herring Prospectus) — later finalized as an RHP (Red Herring Prospectus) — is a document a company files when it wants to raise capital through an IPO (Initial Public Offering). In short, it’s the primary source of detailed information about a company that’s about to go public.

Why Is It Filed?

To raise an IPO, a company must first submit its DRHP to the regulator of the capital market in its jurisdiction (for example, SEBI in India or the SEC in the U.S.).

→ Related: What Is the Share Market?(#2)

What Does It Contain?

A DRHP/RHP is a detailed report — its length varies significantly depending on the size and complexity of the company, but it typically runs to several hundred pages. It covers:

• The specifics of the upcoming share issue
• The company’s past financial performance
• Its future plans, including how the capital being raised will be used
• Background on the company’s leadership, including their professional and educational credentials

What Does the Regulator Do With It?

The regulator reviews the DRHP in detail, cross-checking the disclosed information before deciding whether to approve the company’s listing. Its core mandate is investor protection — keeping a close watch on every business seeking public capital in order to prevent fraud and financial misconduct, and to maintain trust in the market for everyone buying and selling securities.

Should You Read One Before Investing?

If you’re deciding whether to invest in a company’s IPO, the DRHP is the most reliable primary source available — far more so than secondhand opinions or hype. Reading the full document isn’t always practical, though, so it’s worth focusing on the sections most relevant to your decision: financial statements, use-of-funds, risk factors, and management background in particular.

→ Related: Who Decides the Price/Value of Shares in the Share Market?(#4) — a useful follow-up once you understand what goes into an IPO filing.

What kind of company do you think is worth investing in? And is there another topic you’d like covered next — let us know.