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How to Get DRHP Ready – Complete Step-by-Step Guide for SMEs Planning an IPO

Preparing for an IPO is a major milestone for any SME. Whether you are listing on the Main Board, BSE SME, or NSE Emerge, the first and most critical step is preparing the Draft Red Herring Prospectus (DRHP).

Understanding How to Get DRHP Ready is important because the DRHP is the foundation of your IPO — a document that showcases your company’s financial strength, business model, governance, risks, and growth potential.

This comprehensive blog gives you a complete roadmap on How to Get DRHP Ready, what documents you need, which compliances matter, and how consultants help companies prepare for a successful IPO journey.

What Is DRHP and Why Is It Important(How to Get DRHP Ready Explained)

The Draft Red Herring Prospectus (DRHP) is the preliminary document filed with SEBI before an IPO. It contains detailed disclosures about:

  • Business operations

  • Promoter background

  • Financial performance

  • Risk factors

  • Corporate governance

  • Use of IPO proceeds

  • Legal compliance

Learning How to Get DRHP Ready ensures that your disclosures are accurate and compliant.
If your DRHP is incomplete or incorrect, SEBI will delay approval and ask for multiple clarifications.

How to Get DRHP Ready – Step-by-Step Process for Companies

Becoming DRHP-ready involves financial cleanup, legal due diligence, operational preparation, governance alignment, and strong documentation.
Below is the complete professional process.

Pre-IPO Feasibility: The First Step in How to Get DRHP Ready

Before starting the DRHP process, advisors conduct an IPO feasibility study. This includes evaluating:

  • Your financial health

  • Profitability trends

  • Market scalability

  • Eligibility criteria

  • Compliance score

  • Shareholding structure

  • Governance framework

This determines whether the company is fit for IPO and what needs fixing before drafting the DRHP.

Shareholding Cleanup for DRHP Readiness

To get DRHP-ready, your shareholding structure must be clean and compliant.
This includes:

  • Correcting old entries

  • Ensuring proper board approvals

  • Fixing mismatched transactions

  • Cleaning cap table errors

  • Updating beneficial ownership

A clean shareholding pattern builds investor trust and ensures SEBI compliance.

Preparing Financial Statements for DRHP Readiness

SEBI requires:

  • Minimum 3 years audited financials

  • CARO-compliant reports

  • GST/TDS/ROC data matching financials

  • Transparent revenue recognition

During How to Get DRHP Ready, merchant bankers review:

  • Accounting policies

  • Profit margins

  • Related party transactions

  • Inventory valuation

  • Cash flow accuracy

If discrepancies are found, reaudits may be required.

Legal Documentation Required to Get DRHP Ready

Legal Due Diligence (LDD) is one of the biggest parts of DRHP preparation.

You must ensure:

  • Updated ROC filings

  • Property ownership clarity

  • Valid lease agreements

  • No undisclosed litigation

  • Director KYC completed

  • Proper board resolutions

  • Vendor & customer contracts in place

Legal gaps can delay or block the IPO.

Business Data Compilation for How to Get DRHP Ready

A major part of DRHP is detailed business information, including:

  • Company history

  • Business model

  • Production facilities

  • Supplier and customer relationships

  • Marketing strategy

  • SWOT analysis

  • Industry overview

This section must be written clearly and professionally as it directly influences investor perception.

Governance Requirements for DRHP Readiness

Good governance is a major requirement for IPO approval.

You must have:

  • Proper board structure

  • Independent directors

  • Audit & CSR committees

  • Updated policies (risk, whistleblower, etc.)

  • Internal control systems

Weak governance can lead to SEBI objections.

Risk Factors and Mitigation for DRHP

SEBI requires a detailed risk disclosure section covering:

  • Industry risks

  • Market risks

  • Financial risks

  • Operational risks

  • Legal risks

  • Competition risks

In How to Get DRHP Ready, presenting realistic risks (without exaggeration or underplaying) builds investor confidence.

Use of IPO Proceeds Section for DRHP

Investors want clarity on how funds will be used.
This section must clearly explain:

  • Working capital requirements

  • Expansion plans

  • Debt repayment

  • CapEx needs

  • General corporate purpose

This must match your CMA report and financial projections.

Management Discussion & Analysis (MD&A) for DRHP

MD&A is one of the most important sections. It includes:

  • Revenue trends

  • Profitability analysis

  • Cost structure

  • Liquidity position

  • Industry growth

  • Future strategy

Good MD&A helps investors understand your business’s strength.

Documentation Checklist for DRHP Filing

A company must prepare several documents to become DRHP-ready:

  • 3-year audited financials

  • CA certificates

  • CS compliance certifications

  • Property documents

  • Loan agreements

  • Vendor contracts

  • GST, TDS & ROC records

  • Promoter declarations

  • Net worth certificates

Missing documentation can delay filing.

Common Challenges in Getting DRHP Ready

Many companies face challenges like:

  • Outdated financials

  • ROC non-compliance

  • Shareholding discrepancies

  • Missing contracts

  • Pending litigations

  • Governance gaps

Fixing these issues early makes the DRHP drafting process smoother.

Compliance Gaps That Impact DRHP Readiness

Common compliance issues include:

  • Unreported related party transactions

  • Unreconciled GST or TDS

  • Director KYC mismatches

  • Improper board resolutions

  • Unrecorded loans

  • Misaligned capital structure

These must be resolved before DRHP submission.

Why SMEs Must Understand How to Get DRHP Ready

For SMEs, DRHP readiness brings many advantages:

  • Faster SEBI approval

  • Better credibility

  • Stronger investor attraction

  • Higher valuation

  • Clean governance

  • Smooth IPO execution

Companies that are DRHP-ready are 70% IPO-ready.

Expert Advisory Support for DRHP Readiness

Consultants like Pioneer help companies with:

  • Full due diligence

  • Financial cleanup

  • Legal compliance

  • Documentation preparation

  • Governance structuring

  • DRHP chapter writing

  • Coordination with merchant bankers

Professional guidance ensures your DRHP is accurate, complete, and SEBI-ready.

Steps to Get DRHP Ready Quickly

  • Finish pending audits

  • Fix shareholding mismatches

  • Update ROC filings

  • Strengthen governance

  • Clean financial records

  • Prepare business write-ups

  • Draft risk factors

  • Finalize use of proceeds

DRHP Readiness Checklist

  • Financial statements ✔

  • Legal documents ✔

  • Contracts & agreements ✔

  • Corporate governance ✔

  • Industry analysis ✔

  • Promoter details ✔

  • Litigation records ✔

  • Asset verification ✔

Documents Required to Get DRHP Ready

  • MOA & AOA

  • Board resolutions

  • Lease or property documents

  • Audit reports

  • Bank statements

  • PAN, GST, TDS data

  • Vendor agreements

  • Promoter KYC

  • Net worth certificates

Mistakes to Avoid While Getting DRHP Ready

Avoid:

  • Incomplete disclosures

  • Wrong financial entries

  • Outdated compliance records

  • Missing agreements

  • Poor governance

  • Delayed responses to merchant bankers

⭐ Conclusion: Understanding How to Get DRHP Ready Is the Key to a Successful IPO

Mastering How to Get DRHP Ready ensures your company is:

  • Financially transparent

  • Legally compliant

  • Operationally structured

  • Investor-friendly

A strong DRHP sets the stage for a strong IPO.
For SMEs planning to list, becoming DRHP-ready is the smartest, most essential first step.

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