Foundational Concept
A Draft Red Herring Prospectus (DRHP) is a preliminary offer document prepared before an IPO. In the SME IPO framework, the draft offer document is filed and reviewed in accordance with the applicable SEBI ICDR Regulations and the requirements of the relevant SME stock exchange, such as NSE Emerge or BSE SME.
The DRHP contains almost everything the public (including investors, analysts, and regulators) needs to understand about the company, such as its business model, financial history, promoter background, risk factors, industry positioning, litigation record, and the specific purposes for which the IPO proceeds will be used.
Regulatory Framework Governing DRHP
The draft offer document is prepared by the issuer in consultation with the Lead Manager (Merchant Banker), legal advisors, auditors and other intermediaries, as applicable. Its disclosures must comply with the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended from time to time, along with the applicable requirements of the relevant SME stock exchange.
DRHP filings stand at the intersection of three interconnected legal frameworks:
- SEBI (ICDR) Regulations, 2018 —The primary framework governing pre-listing disclosures, eligibility norms, pricing mechanisms and allotment procedures. SME-specific provisions sit in Chapter IX (Regulations 228 onwards).
- SEBI (LODR) Regulations, 2015 — Govern continuous, post-listing disclosure obligations, including quarterly reporting on utilisation of IPO proceeds under Regulation 32.
- Companies Act, 2013 — Governs prospectus filing with the Registrar of Companies (RoC), board composition requirements under Section 149 and statutory audit obligations.