Red Herring Prospectus vs DRHP: What Changes Between the Two

The next major IPO you follow will generate at least three separate public filings before a single share is allotted. The first document, the one that starts appearing in financial news coverage and prompts articles about which investors are expected to participate, is the Draft Red Herring Prospectus.

The second, which arrives several weeks later and marks the point at which an IPO becomes genuinely imminent, is the Red Herring Prospectus. The third, filed after the issue closes, is the final prospectus that locks in the issue price and allotment details.

Most retail investors encounter these documents only as names in headlines and treat them interchangeably, which is understandable given how similar they sound. But the differences between the DRHP and the RHP are not cosmetic. They represent different stages in a regulatory process with different levels of investor protection attached to each, and the specific items that change between the two documents are often the most practically important ones for an investor evaluating whether to apply.

Indian securities law and SEBI's ICDR Regulations require companies going public to move through a specific sequence of filings, each of which adds more certainty and more binding commitment than the one before it. Understanding the sequence makes each document's specific limitations clear.

Document	Filed With	Key Characteristic
Draft Red Herring Prospectus, DRHP	SEBI for regulatory review	A preliminary disclosure document; price, lot size, and dates are absent or indicative only; not yet approved for public subscription
SEBI Observation Letter	Not a public document; issued by SEBI to the company	SEBI's comments and required clarifications that the company must address before the issue opens
Red Herring Prospectus, RHP	Filed with SEBI, ROC, and stock exchanges	The final disclosure document used during the subscription period; contains the confirmed price band, lot size, and issue dates
Final Prospectus	Filed with SEBI and ROC after issue closes	Contains the final issue price determined from the book building process and the actual allotment structure

The DRHP is a preliminary version of the full prospectus submitted to SEBI to initiate the regulatory review process. It contains the company's entire business description, audited financial statements, risk factors, details of the promoters and key management, objects of the issue explaining what the money raised will be used for, and the offer structure in broad terms. This disclosure is thorough and is publicly available on SEBI's website, the lead managers' websites, and the exchange platforms from the date of filing.

What the DRHP does not contain is the single most important piece of commercial information for an investor evaluating an IPO: the price. The price band, the lot size that determines the minimum investment amount, and the specific opening and closing dates of the subscription window are all marked as indicative or to be announced in the DRHP.

The document is, in legal terms, a draft pending SEBI's review and is explicitly not an offer to subscribe for securities. An investor cannot apply to an IPO on the basis of the DRHP alone.

Reading a DRHP gives you almost everything you need to understand the business, the risk factors, and the offer structure. It gives you nothing to apply to. The price, the lot size, and the dates only appear in the RHP, and the RHP is only filed after SEBI has finished its review.

Once the DRHP is filed, SEBI's review process typically runs for 30 to 75 days, though for larger or more complex issues it can run longer. During this period, SEBI examines the disclosures, assesses whether the risk factors adequately describe the material risks a subscriber might face, reviews the basis of allotment structure, checks the credentials of the lead managers, and may seek additional information or clarifications from the company and its advisers.

SEBI issues its observations in a letter addressed to the company, which is also available on SEBI's website. The observation letter is not an approval in the sense of SEBI endorsing the company or its valuation. It is a confirmation that the disclosures meet the regulatory requirements and that the issue may proceed, and it sets out any conditions or required amendments the company must incorporate before the RHP is filed.

The changes between the DRHP and the RHP fall into two categories: the commercial details that were always going to be added at this stage, and the substantive disclosure changes that arise from SEBI's review and from events that occurred during the gap between filing.

What Changes	What Is Added in the RHP	Why It Matters
Price band	The confirmed floor and cap price for the book building process	The single most important number for a retail investor evaluating whether to apply
Lot size	The minimum number of shares per application and the resulting minimum investment amount	Determines whether the IPO is accessible given an investor's available capital
Issue timeline	Confirmed opening date, closing date, and listing date	Defines when investors can apply and when they can expect their shares or refund
Offer size adjustments	Sometimes the total issue size, fresh issue component, or offer for sale component changes from what was in the DRHP	A reduction or increase in the total raise can affect the company's balance sheet and dilution
Updated financials	If significant time has passed, the RHP may include updated audited or limited review financial statements	More recent data on the company's performance is available for evaluation
Responses to SEBI observations	Risk factors, disclosures, or offer structure elements that SEBI required to be amended or expanded	Substantive changes to how the offer is described, which can include new risk disclosures or corrections
Anchor investor details	Not in the RHP itself but announced alongside it, the anchor allotment precedes the public open	The RHP's filing marks the point after which anchor allocation and public subscription are imminent

Between the DRHP and the RHP, months can pass and things change. The financials get updated. SEBI may have required new risk disclosures. The offer size may have been revised. Reading only the DRHP and then applying directly to the open issue means missing all of that.

SEBI's observations frequently result in changes to the risk factors section of the prospectus, which is one of the more important but frequently skipped sections for retail investors. SEBI may require a company to add a new risk factor that was inadequately described in the DRHP, expand an existing one to be more specific about the magnitude or likelihood of the risk, or move a risk from the general risks section to the company specific risks section where it receives more prominence.

Changes to the objects of the issue, the section explaining what the money raised will be used for, are another area where SEBI observations sometimes produce substantive amendments. If SEBI is not satisfied with the specificity or credibility of how the company plans to deploy its fundraising proceeds, it may require the company to provide more detailed breakdowns, revised cost estimates, or explanations of alternatives considered.

An investor comparing the DRHP objects section against the RHP objects section will sometimes find material differences in how the deployment plan is described.

The financial statements included in the RHP are particularly worth checking if there has been a gap of six months or more between the DRHP filing and the RHP.

During that period, the company will have reported results for additional quarters, and those results, whether better or worse than the period disclosed in the DRHP, are incorporated into the RHP and change the financial picture an investor is evaluating.

The final prospectus is filed after the subscription window closes and the issue price has been determined through the book building process. It converts the price band into the single confirmed issue price, includes the actual number of shares allotted across each investor category, and documents the basis of allotment methodology that was used.

For a retail investor who has already applied and received or not received an allotment, the final prospectus is primarily a record document rather than a decision document. The basis of allotment circular, which is the specific document most relevant to understanding why allotment came out the way it did, is a separate filing made around the same time.

The RHP is the correct document to read before applying to an IPO. It is the only version that contains the confirmed price and structure on which an investment decision can actually be based. The DRHP is useful for extended research during the weeks between the company filing and the issue opening, when the price is not yet known, but it should be treated as preliminary and subject to amendment rather than as the definitive disclosure.

• The DRHP is available on SEBI's website under the IPO section, on the lead manager's website, and on the exchange platforms from the date of filing. Searching for the company name alongside DRHP will typically surface the document within seconds.

• The SEBI observation letter, which is publicly available, can be found on SEBI's website under the same filing for the company, and is worth reading specifically to understand what SEBI required the company to address before the RHP was approved.

• The RHP is filed with the exchanges and is available on NSE and BSE's IPO information sections as well as the lead manager and registrar websites. It typically becomes available two to three working days before the issue opens to the public.

• The minimum useful reading in the RHP before applying: the price band section, the objects of the issue, the risk factors section noting any that are new relative to the DRHP, and the basis of allotment section explaining how shares will be divided across investor categories.

Disclaimer: This article is for educational purposes only and does not constitute investment advice. The description of the DRHP, RHP, and SEBI observation process reflects SEBI's ICDR Regulations and standard market practice as understood in June 2026 and is subject to amendment. Readers should rely only on the official RHP filed with SEBI and the exchanges as the basis for any IPO application and should consult a qualified financial adviser before making investment decisions.