DRHP Preparation — Draft Red Herring Prospectus | Nainit Savla & Associates

DRHP Preparation

The Draft Red Herring Prospectus (DRHP) is the foundational regulatory document of any IPO — the comprehensive disclosure document submitted to SEBI for mainboard IPOs (or the stock exchange for SME IPOs) for review before the public issue opens. The DRHP must contain complete, accurate, and balanced disclosures about the company's business, financial condition, management, risk factors, industry, use of proceeds, and all material information that an investor would require to make an informed investment decision. Preparing a DRHP that satisfies SEBI's rigorous ICDR Regulation requirements while minimising query letters requires deep expertise in securities law, financial reporting, and industry-specific disclosure practice.

Business Description

Comprehensive narration of the company's business — products, services, competitive strengths, growth strategies, industry context, and customer relationships — presenting the investment thesis compellingly and accurately for retail and institutional investors.

Risk Factors

Drafting a balanced, complete, and specific risk factors section — covering business risks, financial risks, regulatory risks, and market risks — in the format and specificity required by SEBI's ICDR Regulations, without generic boilerplate.

Restated Financial Information

Coordination of 3-year restated financial statements, the Reporting Accountants' Report, and all required financial disclosures — EPS, NAV, P/E ratio, pre-issue and post-issue shareholding, and capitalisation statement.

Objects of the Issue

Drafting the Objects of the Issue — detailing each proposed use of IPO proceeds with a clear rationale, cost estimates, and deployment timeline — a section subject to intense SEBI scrutiny and post-listing monitoring.

Industry & Market Analysis

Preparation of the industry analysis section — market size, growth drivers, competitive landscape, and regulatory environment — supported by third-party research reports commissioned or cited for DRHP credibility.

Legal & Regulatory Disclosures

Complete disclosure of outstanding litigation, regulatory proceedings, intellectual property, government approvals, material contracts, and all other legal disclosures required under Schedule VIII of the SEBI ICDR Regulations.

Key Requirements

Cover page — issuer details, issue structure, risk warning, and SEBI observation status
Summary of the Business — 2 to 3 page executive summary of the investment
Risk Factors — complete, specific, quantified risk disclosures
Introduction — summary financial information and capital structure
Objects of the Issue — use of IPO proceeds with cost estimates and timelines
Basis for Issue Price — EV/EBITDA, P/E, and other valuation benchmarks
Management Discussion and Analysis (MD&A) — 5-year financial analysis
Audited restated financial statements for 3 years with Reporting Accountants Report

Frequently Asked Questions

How many pages is a typical mainboard DRHP?

A mainboard DRHP for a reasonably complex company typically runs 400 to 700 pages — covering all the sections required by Schedule VIII of the SEBI ICDR Regulations. The length is driven primarily by the complexity of the business, the number of subsidiaries and group companies, the extent of outstanding litigation, and the detail required in the restated financial statements. SEBI expects DRHP disclosures to be complete, specific, and material — and penalises both omission of material disclosures and inclusion of excessive boilerplate that obscures key information.

What is the SEBI ICDR Regulations, 2018?

The SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 is the primary regulatory framework governing public issues (IPOs, FPOs, rights issues) and private placements of listed company securities in India. It prescribes the eligibility criteria for issuers, the content and format of the DRHP and prospectus, the allocation ratios between QIBs, NIIs, and retail investors, the basis of allotment, the pricing methodology, the lock-in requirements for promoters, and the post-issue obligations of issuers. SEBI regularly amends the ICDR Regulations — recent significant amendments have covered SME listing norms, promoter lock-in relaxation, and IPO proceeds utilisation monitoring.

What are risk factors and how specific must they be?

Risk factors are the disclosures in the DRHP that alert investors to the material risks that could affect the company's business, financial condition, and the value of their investment. SEBI requires risk factors to be specific to the company and its business — not generic industry boilerplate. Each risk factor must describe: the nature of the risk, why it is material to the company specifically, and the potential impact on the company's business if it materialises. SEBI frequently issues query letters on risk factors that are vague, generic, or insufficiently quantified — requiring the company to revise the risk factors with greater specificity.

What is the 'Objects of the Issue' section and why is it so important?

The Objects of the Issue section details exactly how the company plans to deploy each rupee raised in the IPO — across capital expenditure, working capital, debt repayment, acquisitions, and general corporate purposes (GCP, capped at 25% of the net fresh issue proceeds). This section is one of the most scrutinised by SEBI — as it defines the company's commitment to investors on how their capital will be used. Post-listing, the company must report quarterly on actual utilisation against the stated Objects. Any deviation from the stated Objects requires shareholder approval by special resolution. Objects must be supported by independent valuations, quotations, and management estimates — not just high-level statements.

Can the DRHP be amended after SEBI filing?

Yes — and it almost always is. The DRHP filing triggers a SEBI review process, and SEBI typically issues one or more rounds of query letters — an Initial Review Letter (IRL) followed by one or more Additional Information Letters (AILs) — requesting clarifications, additional disclosures, and revisions to specific sections. The company must respond to each query within the prescribed timeline (typically 30 to 45 days per round). Updated DRHPs incorporating SEBI's observations are refiled with SEBI. Once SEBI issues its final observations letter, the company makes additional updates (pricing, market data updates) and files the Red Herring Prospectus (RHP) — the finalised version used for the IPO subscription.

DRHP That Gets Through SEBI With Fewer Queries

Expert DRHP preparation for mainboard and SME IPOs — business description, risk factors, restated financials, Objects of Issue, and complete ICDR-compliant disclosures.

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