DRHP, RHP and prospectus: what to read before an IPO
Every IPO comes with an offer document. It is long, but a few sections tell you most of what matters.
The three documents
The DRHP (draft red herring prospectus) is filed with SEBI, and the exchanges for SME IPOs, when a company plans an IPO. It is public, and can change after SEBI's observations.
The RHP (red herring prospectus) is the version filed before the issue opens. It has almost everything except the final price and number of shares; the price band is announced separately. The prospectus, filed after the issue closes, adds the final price.
Where to find them
On the websites of SEBI, BSE and NSE, and usually on the lead managers' and the company's websites. IPO Khata links to the offer document from an IPO's page where the source provides it.
What to read
Objects of the issue: how much is a fresh issue (money for the company) and how much is an offer for sale (existing shareholders selling). A large offer for sale means less money goes into the business.
Risk factors, the restated financial statements, and the basis for the issue price, which compares valuation with listed peers. Pending litigation and related-party transactions are also worth a look.
Related guides
- Anchor investors in an IPO
- SME IPO vs mainboard IPO: what is different
- IPO lot size, price band and cut-off price explained
- How an IPO's price band is decided
More on how ipos work
- IPO categories explained: retail, HNI (NII) and QIB
- The shareholder quota in an IPO
- IPO lock-in periods explained
- The employee quota in an IPO
- What is the HNI category in an IPO?
- What is book building in an IPO?
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Information, not investment advice. GMP is an unofficial grey-market indicator; figures come from public sources (InvestorGain) and may be late or wrong. Not registered with or affiliated to SEBI, the exchanges, the registrars or InvestorGain.