Reviewed on 24 Oct 2026 · Source: IPO Bulletin explainer; checked against SEBI ICDR Regulations 2018 (as amended) and offer-document practice
The Draft Red Herring Prospectus, or DRHP, is the first detailed offer document that a company files with SEBI when it plans to go public. It is prepared by the lead managers and describes the business, the industry, the management and promoters, the financial statements for several years, the risk factors, the legal proceedings, and the proposed objects of the issue. It does not contain the final price, the size of the issue at that price or the dates. SEBI examines the draft and may ask for changes or clarifications, and it also publishes the DRHP on its website and the lead managers’ sites for public comments, usually for 21 days. Once SEBI issues its observation letter, the company can proceed to file the Red Herring Prospectus within a set validity period, normally twelve months. Reading the DRHP early can reveal how the business makes money, who the major shareholders are and what risks the company itself highlights. A DRHP being filed does not guarantee an IPO will happen; many are delayed or withdrawn. IPO Bulletin lists the pipeline of DRHP filings for readers who want to track them.
Example: A company files its DRHP with SEBI in March. SEBI gives its observations in June, and the company then has up to a year to launch the IPO, filing the RHP with the final price band shortly before the issue opens.
A prospectus is the legal document in which a company invites the public to subscribe to its shares or debentures and discloses the information investors need to decide. In India the Companies Act 2013 and SEBI regulations require it to contain complete and accurate details about the business, promoters, directors, financial statements, risks, legal cases, capital structure and the purpose for which funds are being raised. There are stages in the document trail of an IPO: the Draft Red Herring Prospectus filed with SEBI, the Red Herring Prospectus filed before the issue opens, and the final Prospectus filed with the Registrar of Companies after the price and size have been fixed. The final prospectus is the binding document that records the issue price, the amount raised and the allotment details. Because investors rely on it, the company, its directors and the lead managers carry legal liability for any misstatement, and investors can seek remedies for material misrepresentation. For ordinary investors a long prospectus can be daunting, so start with the summary of the issue, the risk factors, the objects of the issue and the financial tables, and then read the rest as needed.
A price band is the range, with a lower limit (floor) and an upper limit (cap), within which investors may bid for shares in a book-built IPO. The company and its lead managers announce the band in the price band advertisement, usually a few working days before the issue opens, and the Red Herring Prospectus carries the same range. The final issue price is discovered through bidding and is fixed inside this range, so it can never be higher than the cap or lower than the floor. Under SEBI rules the cap should not exceed 120 percent of the floor price, which keeps the range reasonably tight. Retail investors normally bid at the cap or at the cut-off price so that their bid stays valid whatever the final price turns out to be. The band matters because it sets the maximum money you must keep blocked in your bank account: lot size multiplied by the cap price. Companies can revise the band during the issue, but that requires public notice and an extension of the bidding period by at least three working days. Fixed-price issues do not have a band; they have a single price.
Worked example
A company files its DRHP with SEBI in March. SEBI gives its observations in June, and the company then has up to a year to launch the IPO, filing the RHP with the final price band shortly before the issue opens.
