IPO DRHP vs RHP: Key Differences Investors Should Know

Before a company launches an Initial Public Offering (IPO), investors may come across two important documents: the Draft Red Herring Prospectus (DRHP) and the Red Herring Prospectus (RHP). Both documents contain detailed information about the company, its business, financial performance, risks, promoters, management and the proposed public issue.

Although DRHP and RHP look similar, they serve different purposes and appear at different stages of the IPO process. Understanding the difference can help investors follow an IPO from its early preparation stage to the actual public issue.

For investors researching an upcoming IPO, the DRHP is useful for early analysis, while the RHP is generally more closely connected to the final public issue and contains updated information relevant to the offering.

What Is a DRHP?

DRHP stands for Draft Red Herring Prospectus.

It is a detailed draft document prepared by a company when it proposes to raise money from the public through an IPO. The document contains information about the company’s business, financials, risks, management, promoters, use of funds and other important matters.

The DRHP is submitted as part of the regulatory review process. It allows regulators and other relevant parties to examine the proposed disclosures before the IPO moves to the next stages.

The DRHP can therefore be considered an early-stage IPO document.

Investors can use it to start researching a company well before the IPO opens.

What Is an RHP?

RHP stands for Red Herring Prospectus.

It is a later-stage IPO document issued closer to the public offering. Under the applicable framework, an RHP does not contain the final particulars of the issue price in the same way as the final prospectus. For a book-built issue, the price band and other final issue details are communicated as part of the IPO process.

The RHP contains detailed information about the company and the issue and reflects developments and updates made after the earlier draft stage.

It is therefore particularly important for investors who are considering applying for the IPO.

DRHP vs RHP: Quick Comparison

Feature	DRHP	RHP
Full form	Draft Red Herring Prospectus	Red Herring Prospectus
Stage	Earlier stage of IPO process	Later stage, closer to IPO
Purpose	Regulatory review and disclosure	Provides updated information for the public issue
Information	Detailed but subject to changes	More updated issue-related information
IPO price	Final price is not available	Final issue price is not necessarily stated yet
Issue size	May change	Generally reflects later-stage issue details
Investor use	Early research	Detailed review before applying
Risk factors	Included	Updated where required
Financial information	Included	Updated information may be included
Final document	Not the final prospectus	May form the basis for the final prospectus after pricing and required filing

Key Difference Between DRHP and RHP

The simplest way to understand the difference is:

DRHP = early draft of the IPO disclosure document

RHP = later-stage document issued closer to the IPO

The company may update information between these two stages.

Changes can relate to:

• Financial results
• Business developments
• Litigation
• Risk factors
• Shareholding
• Promoter information
• Issue structure
• Fresh issue
• Offer for Sale
• Objects of the issue
• Capital structure
• Material contracts
• Management information

Therefore, investors should not assume that the DRHP and RHP are identical.

Why Does a Company File a DRHP?

The DRHP provides extensive information about the proposed IPO.

It allows the relevant regulatory and market-review process to examine the company’s disclosures before the public issue proceeds.

A typical DRHP can contain information about:

• Company history
• Business operations
• Products and services
• Industry overview
• Competitive strengths
• Business strategies
• Financial statements
• Revenue and profit
• Assets and liabilities
• Borrowings
• Promoters
• Directors
• Key management personnel
• Risk factors
• Legal proceedings
• Related-party transactions
• Shareholding
• IPO structure
• Objects of the issue

For an investor, the DRHP can provide an early opportunity to understand the company.

Why Is the RHP Important?

The RHP is important because it comes closer to the actual IPO.

By this stage, investors can review a more updated version of the company’s disclosures and issue-related information.

The RHP can help investors understand:

• The final-stage issue structure
• Price band, where applicable
• Number of shares offered
• Fresh issue component
• Offer for Sale component
• Reservation categories
• Minimum bid lot
• Use of IPO proceeds
• Updated financial information
• Updated risk factors
• Promoter and shareholder information
• Details about the company’s operations

This makes the RHP particularly useful when making a detailed pre-IPO assessment.

Does the DRHP Contain the IPO Price?

Generally, the DRHP does not provide the final IPO issue price because pricing is determined later in the IPO process.

For a book-built IPO, investors may subsequently receive the price band and other pricing-related information closer to the opening of the issue.

Therefore, investors should not calculate the expected IPO valuation only from the DRHP.

The RHP and later issue announcements provide more relevant information as the IPO approaches.

Does the RHP Contain the Final IPO Price?

Not necessarily.

An RHP for a book-built issue can be filed before the final issue price is determined. The final issue price is determined through the applicable pricing and book-building process.

This is why investors may see a price band rather than one final issue price before bidding.

After the issue closes and pricing is finalized, the final prospectus contains the applicable final issue information.

DRHP vs RHP: Difference in Issue Size

The proposed issue size can change between the DRHP and RHP.

For example, suppose a company initially proposes:

Fresh Issue: ₹1,000 crore
Offer for Sale: ₹500 crore

Later, the company may modify the structure because of regulatory observations, market conditions, business developments or decisions by the company and selling shareholders.

Therefore, investors should always check the latest document instead of relying entirely on the original DRHP.

DRHP vs RHP: Difference in Financial Information

Financial information is one of the most important sections to compare.

The DRHP may contain financial information based on the latest reporting period available when it was prepared.

By the time the RHP is issued, a newer financial period may be available.

This means the RHP may provide investors with more recent information about:

• Revenue
• Profit
• EBITDA
• Earnings per share
• Assets
• Debt
• Cash flows
• Working capital
• Margins

Investors should compare the financial tables rather than assuming that the company’s financial position has remained unchanged.

DRHP vs RHP: Risk Factors

Risk factors are another important area where updates may occur.

A company may face new developments between the DRHP and RHP stages.

For example, there could be:

• New litigation
• Regulatory developments
• Changes in major customers
• New borrowings
• Supply-chain problems
• Industry changes
• Changes in business conditions

The RHP may therefore contain updated or additional disclosures.

Investors should read the risk section carefully instead of focusing only on the company’s growth story.

DRHP vs RHP: Fresh Issue and Offer for Sale

An IPO can contain a Fresh Issue, an Offer for Sale (OFS), or both.

A fresh issue means the company issues new shares and receives the proceeds, subject to the terms of the issue.

In an OFS, existing shareholders sell their shares through the IPO.

The composition of the issue should be checked in the latest available IPO document because the proposed structure can change during the IPO process.

Which Document Should Investors Read?

Ideally, investors should understand both.

DRHP Is Useful For:

• Early research
• Understanding the business
• Studying historical financials
• Identifying risks
• Understanding promoters
• Reviewing the company’s strategy
• Tracking the proposed IPO structure

RHP Is Useful For:

• Updating the earlier analysis
• Reviewing recent financial information
• Checking the latest risk disclosures
• Understanding the issue structure closer to IPO opening
• Reviewing the price band and bidding-related information
• Checking the latest information before applying

For an investor who is deciding whether to participate in an IPO, the latest available documents are particularly important.

How Investors Can Compare DRHP and RHP

Instead of reading both documents from beginning to end without a plan, investors can compare important sections.

1. Compare the Business

Check whether the company’s description of its business has changed.

Look for changes in:

• Revenue sources
• Products
• Geographic markets
• Customers
• Business segments
• Expansion plans

2. Compare Financial Performance

Check the latest:

• Revenue
• Profit
• EBITDA
• Margins
• Debt
• Cash flow
• Working capital

Do not look at profit alone. Cash flow and debt can provide important additional information.

3. Compare the IPO Structure

Check:

• Fresh issue size
• OFS size
• Total issue size
• Number of shares
• Reservation categories
• Minimum bid lot

4. Compare Risk Factors

Look for newly added or modified risks.

This section can sometimes reveal important information that is less visible in promotional material.

5. Check Promoter and Shareholding Changes

Compare promoter holdings and other major shareholder information.

Also check whether existing shareholders are selling shares through the OFS.

6. Review Use of IPO Funds

For a fresh issue, check why the company wants to raise money.

Common purposes may include:

• Debt repayment
• Capital expenditure
• Expansion
• Working capital
• General corporate purposes
• Acquisitions

Investors should consider whether the stated use of funds relates to the company’s long-term business plans.

Why Investors Should Not Rely Only on the DRHP

The DRHP is valuable for research, but it is an earlier document.

Important information may change before the IPO opens.

For example:

DRHP: Earlier financial information

RHP: Updated financial information

Similarly:

DRHP: Proposed issue structure

RHP: Later-stage issue structure

Therefore, an investor who studied the DRHP should revisit the latest disclosures before making an IPO application.

Is the RHP the Same as the Final Prospectus?

No.

The RHP is a red herring prospectus and is associated with the IPO process before the final pricing information is incorporated into the prospectus.

After the pricing process and required filings, the relevant final prospectus contains the applicable final issue information.

This distinction is important because investors should not assume that every detail in the RHP represents the final post-pricing terms.

Simple Example

Suppose ABC Ltd. plans an IPO.

DRHP Stage

The company proposes:

• Fresh Issue: ₹800 crore
• OFS: ₹400 crore
• Proposed use of funds: Expansion and debt repayment

At this stage, an investor studies the company’s business, financial statements and risks.

RHP Stage

Later, the company releases its RHP.

The latest information may show:

• Updated financial results
• Revised issue structure
• Updated risk factors
• Price band
• Updated shareholding
• Updated use of funds

The investor should now revisit the earlier analysis.

This demonstrates why the RHP should not simply be treated as a copy of the DRHP.

Common Mistakes Investors Make

Mistake 1: Reading Only the DRHP

The DRHP may be several months old by the time the IPO opens.

Mistake 2: Ignoring Updated Financial Results

A company’s financial performance can change significantly between reporting periods.

Mistake 3: Focusing Only on Revenue Growth

Revenue growth does not automatically mean strong profitability or cash generation.

Mistake 4: Ignoring Risk Factors

Risk factors can contain information about regulatory, business, financial and legal risks.

Mistake 5: Assuming Issue Size Cannot Change

The IPO structure can change before the final issue.

Mistake 6: Confusing Price Band With Final Issue Price

For a book-built IPO, the price band provides the bidding range. The final issue price is determined later through the applicable process.

DRHP vs RHP: Investor Checklist

Before applying for an IPO, investors can use this checklist:

• Read the latest RHP
• Compare it with the DRHP
• Check recent financial results
• Review revenue and profit trends
• Examine cash flow
• Check debt levels
• Read all major risk factors
• Understand fresh issue and OFS
• Check the use of IPO proceeds
• Study promoter shareholding
• Check related-party transactions
• Review outstanding litigation
• Understand the price band
• Calculate relevant valuation measures
• Compare the company with its industry peers
• Avoid relying only on IPO marketing material

Frequently Asked Questions

What is the main difference between DRHP and RHP?

The DRHP is an earlier draft disclosure document submitted during the IPO preparation and review process. The RHP is a later-stage document issued closer to the public offering and contains updated information.

Which is more useful for an IPO investor?

Both are useful for different purposes. The DRHP is valuable for early research, while the RHP is particularly important closer to the IPO because it reflects later-stage information.

Does DRHP contain the IPO price?

The final IPO price is generally not available in the DRHP.

Does RHP contain the final IPO price?

For a book-built issue, the RHP may contain the price band rather than the final issue price. The final price is determined through the applicable pricing process.

Can information change between DRHP and RHP?

Yes. Financial information, risk disclosures, issue structure, shareholding and other details may be updated.

Should investors read the DRHP after reading the RHP?

The RHP should generally be the primary document for reviewing the IPO close to the issue. However, comparing the DRHP and RHP can help investors identify important changes.

Is the DRHP a final IPO document?

No. It is a draft document and is subject to the applicable review and update process.

Final Takeaway

The DRHP and RHP are two important stages of IPO disclosure. The DRHP helps investors understand a company’s proposed public issue at an earlier stage, while the RHP provides updated information closer to the actual IPO.

Investors should pay particular attention to changes in financial performance, issue size, fresh issue and OFS components, risk factors, promoter holdings, use of funds and valuation-related information.

The most important lesson is simple: do not make an IPO decision based only on an old DRHP. Review the latest RHP and compare important changes before applying.