Draft Offer Document
The Draft Red Herring Prospectus (DRHP) is the initial offer document filed with SEBI by the lead merchant banker for a proposed mainboard IPO, initiating a review process in which SEBI issues observations within 30 days of receiving a complete filing, and those observations must be addressed before the final RHP is filed and the issue opens.
The Draft Red Herring Prospectus (DRHP) — also referred to as the Draft Offer Document — is the first comprehensive public disclosure made by a company planning to list on the Indian stock exchanges. It is filed with SEBI by the company's lead book-running manager (the lead merchant banker) and must contain all the information specified in Schedule VI of SEBI's Issue of Capital and Disclosure Requirements (ICDR) Regulations 2018. The DRHP is simultaneously made public on the websites of SEBI, the lead merchant banker, and the relevant stock exchanges, enabling public access and comment.
SEBI's processing timeline is governed by Regulation 26 of the ICDR Regulations. SEBI is required to issue its observations within 30 calendar days of receiving the DRHP, provided the DRHP is complete in all respects. If SEBI finds the filing incomplete or requires additional information, it issues queries, and the clock for the 30-day observation period may restart after the company provides its response. For companies that do not have a three-year track record (such as newly incorporated entities or those with complex histories), SEBI's review timeline may be longer. The 'observation letter' is the document SEBI issues at the conclusion of its review; it does not constitute an approval or certification of the contents of the DRHP, but indicates that SEBI has no further observations at that stage. This is an important legal distinction: SEBI does not 'approve' IPOs; it merely verifies that disclosure norms are met.
The 12-month validity window is a practical constraint. After SEBI issues its observation letter, the company has 12 months to open the IPO. If market conditions are unfavourable and the company delays beyond 12 months, it must refile the DRHP (potentially updated for new financial results) and go through the SEBI review process again. Companies navigating volatile market periods — such as the COVID-19 disruption in 2020 or the market uncertainty in late 2022 — sometimes had to refile DRHPs that had expired.
The information mandated in the DRHP is extensive. Beyond financial statements, it must include: a detailed description of the business and its competitive landscape, identification and analysis of risk factors (often the most critically read section), disclosures on litigation (including all pending cases above a specified threshold), related-party transactions, promoter background and their history with other companies (including any regulatory actions), details of how IPO proceeds will be used, and the basis for issue price. The quality and completeness of the risk factor disclosures in the DRHP were a subject of SEBI's ongoing attention, with SEBI issuing guidance notes and circulars to improve the specificity and accuracy of risk disclosures over the years.