{"id":49,"date":"2026-11-02T21:42:30","date_gmt":"2026-11-02T16:12:30","guid":{"rendered":"https:\/\/prefyle.com\/blog\/?p=49"},"modified":"2026-11-04T11:29:25","modified_gmt":"2026-11-04T05:59:25","slug":"ai-drhp-drafting","status":"publish","type":"post","link":"https:\/\/prefyle.com\/blog\/ai-drhp-drafting\/","title":{"rendered":"AI in DRHP drafting: what can be automated and what stays with the banker"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">In June 2025, BSE started letting merchant bankers run SME draft offer documents through a generative AI pre-check before filing. The tool points out sections that may need correcting, and BSE still reviews the whole document once it is formally filed. SEBI has been using AI as well: in February 2024, whole-time member Ananth Narayan said the regulator had started using it for the first level of scrutiny of DRHPs.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Both are fairly clear about where the AI&#8217;s job ends, and I think that is a useful place to start when thinking about AI DRHP drafting on the banker&#8217;s side. My view, generally speaking, is that AI can often take on the first pass of the work (pulling facts out of documents, a first draft of a section, a summary of a long report, etc.). The banker&#8217;s team still prepares the document and signs the due diligence certificate, and the judgement calls in between stay with them. Below is how I would split the work, with two recent SEBI orders that show where the split tends to matter.<\/p>\n\n\n\n<div class=\"wp-block-rank-math-toc-block\" id=\"rank-math-toc\"><h2>In this guide<\/h2><nav><ul><li class=\"\"><a href=\"#how-the-regulator-and-exchange-use-ai-on-offer-documents\">How the regulator and exchange use AI on offer documents<\/a><\/li><li class=\"\"><a href=\"#what-the-banker-signs-and-cant-hand-off\">What the banker signs and can&#8217;t hand off<\/a><\/li><li class=\"\"><a href=\"#ai-for-merchant-bankers-where-ai-helps-and-where-the-banker-decides\">AI for merchant bankers: where AI helps and where the banker decides<\/a><\/li><li class=\"\"><a href=\"#questions-to-ask-before-you-use-an-ai-tool-for-drhp-preparation\">Questions to ask before you use an AI tool for DRHP preparation<\/a><\/li><li class=\"\"><a href=\"#where-prefyle-fits\">Where Prefyle fits<\/a><\/li><li class=\"\"><a href=\"#faq\">Common questions<\/a><ul><li class=\"\"><a href=\"#faq-question-1793635729815\">Can AI draft a DRHP?<\/a><\/li><li class=\"\"><a href=\"#faq-question-1793635741525\">Does SEBI allow merchant bankers to use AI?<\/a><\/li><li class=\"\"><a href=\"#faq-question-1793635756296\">What is DRHP preparation?<\/a><\/li><li class=\"\"><a href=\"#faq-question-1793635772263\">Does an exchange AI pre-check count as due diligence?<\/a><\/li><\/ul><\/li><li class=\"\"><a href=\"#try-it-on-a-live-mandate\">Try it on a live mandate<\/a><\/li><\/ul><\/nav><\/div>\n\n\n\n<h2 id=\"how-the-regulator-and-exchange-use-ai-on-offer-documents\" class=\"wp-block-heading\">How the regulator and exchange use AI on offer documents<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">BSE&#8217;s pre-check for SME issues runs through a secure SFTP folder. The merchant banker uploads the draft offer document, and the AI reads it and highlights the parts that may need work before filing. One advisory firm noted at launch that validating a draft had usually taken about a week before this. The pre-check is advisory, though. Once the document is formally filed, BSE still reviews it in full before giving in-principle approval (<a target=\"_blank\" rel=\"noopener\" href=\"https:\/\/caalley.com\/news-updates\/indian-news\/bse-introduces-ai-tool-to-speed-up-sme-ipo-document-checks\">caalley<\/a>, <a target=\"_blank\" rel=\"noopener\" href=\"https:\/\/mmjc.in\/when-machines-read-the-fine-print-how-ai-is-transforming-the-drhp-review-process-in-india\/\">MMJC<\/a>).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">SEBI&#8217;s use follows a similar pattern. At an event on 16 February 2024, Ananth Narayan (a whole-time member at the time) said SEBI had started using AI for the first level of scrutiny of DRHPs, and that it was useful for vetting documents that are publicly available (<a target=\"_blank\" rel=\"noopener\" href=\"https:\/\/inc42.com\/buzz\/sebi-leveraging-ai-for-initial-scrutiny-of-ipo-papers-ananth-narayan\">Inc42<\/a>). The deeper review still sits with SEBI&#8217;s officers.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In both cases, the AI does a first read and points at things, and a person who answers for the outcome does the review. I think the same split works for drafting, because the person who signs needs to have checked every line against its source, and AI can usually speed up finding and arranging that source material without taking away the check.<\/p>\n\n\n\n<h2 id=\"what-the-banker-signs-and-cant-hand-off\" class=\"wp-block-heading\">What the banker signs and can&#8217;t hand off<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Under the ICDR Regulations, the lead manager has to carry out due diligence and satisfy itself that the disclosures in the draft offer document are true and adequate. That duty gets put in writing several times over an issue. The banker gives a due diligence certificate when the draft is filed (Form A), a fresh one when the RHP is filed with the Registrar of Companies (Form C), and more around the opening and closing of the issue. Each one is the banker telling SEBI, in its own name, that it has checked.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The AI amendment to the Intermediaries Regulations, in force since 10 February 2025, adds to this. Regulation 16C says a SEBI-regulated entity that uses AI or machine learning tools, whether built in-house or bought from a third party, is solely responsible for the output of those tools, the privacy and security of the data involved, and compliance with the law (<a target=\"_blank\" rel=\"noopener\" href=\"https:\/\/taxmanagementindia.com\/visitor\/Detail_Notification.asp?ID=143194\">SEBI notification via Tax Management India<\/a>, <a target=\"_blank\" rel=\"noopener\" href=\"https:\/\/foxmandal.in\/News\/regulated-entities-responsible-for-output-of-ai-usage-sebi\/\">Fox Mandal<\/a>). So if a bought-in tool drafts a paragraph with a wrong number in it, the regulation treats it as the banker&#8217;s wrong number.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Merchant Bankers Regulations, as amended on 3 December 2025 and in force since 3 January 2026, go a step further. Regulation 9A(1)(i) now says a merchant banker &#8220;shall not outsource its core merchant banking activities&#8221;, and lists due diligence activities and preparation of offer related documents as two of them (<a target=\"_blank\" rel=\"noopener\" href=\"https:\/\/taxguru.in\/sebi\/sebi-tightens-merchant-banker-regulations-net-worth-revenue-rules.html\">gazette text via TaxGuru<\/a>). SEBI&#8217;s January 2026 circular gave existing bankers until 3 April 2026 to close any open outsourcing arrangements (<a target=\"_blank\" rel=\"noopener\" href=\"https:\/\/www.mondaq.com\/india\/securities\/1738952\/sebi-notifies-consequential-requirements-for-amended-merchant-bankers-regulations\">Mondaq<\/a>). Read together with 16C, my reading is that whatever tools your team uses, the preparation and the diligence are expected to stay inside your team. It is probably worth getting your own legal view on where each tool or service you use sits under this rule.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Timing matters too. In January 2026, SEBI fined Gretex Corporate Services \u20b915 lakh for several lapses found in an inspection. One concerned a DRHP filed in December 2022 that said the issuer had made no previous public issue, when the issuer had tried an IPO on NSE Emerge in 2019 and withdrawn it after poor subscription. BSE spotted this during its review after filing, and the RHP was corrected. SEBI still held that the withdrawn IPO was a material fact that belonged in the DRHP, and that correcting it later doesn&#8217;t cure a lapse in due diligence at the draft stage (<a target=\"_blank\" rel=\"noopener\" href=\"https:\/\/moneylife.in\/article\/gretex-corporate-services-slapped-with-15-lakh-penalty-for-failures-in-due-diligence-and-disclosures\/79371.html\">Moneylife<\/a>). In practice, an exchange or a pre-check catching something for you is unlikely to count as a defence, so the draft is expected to be right on the day you file it.<\/p>\n\n\n\n<h2 id=\"ai-for-merchant-bankers-where-ai-helps-and-where-the-banker-decides\" class=\"wp-block-heading\">AI for merchant bankers: where AI helps and where the banker decides<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">I find it helps to picture AI as a junior analyst who reads very quickly but has never met the promoters and doesn&#8217;t know what investors will look for. You would give that analyst a lot of the first pass, and you would check everything they hand back.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Where AI can usually help<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>First drafts of sections built from the source documents, which your team then checks line by line.<\/li>\n\n\n\n<li>Extracting facts from diligence documents, e.g. incorporation dates, share capital history, director details from board resolutions, charges from loan agreements, etc., with a pointer to the page each fact came from.<\/li>\n\n\n\n<li>Summarising financial reports so the team finds what it needs faster. A summary helps you read the report; it doesn&#8217;t reconcile the figures.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>What stays with the banker<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Materiality calls, i.e. what goes in, what is left out and how much space it gets.<\/li>\n\n\n\n<li>Reconciling and restating financials, and checking that numbers match wherever they appear in the document.<\/li>\n\n\n\n<li>KPI selection and peer comparisons, and keeping them consistent from the DRHP to the RHP. (The January 2026 order also found KPI peer comparisons dropped after the DRHP, once they showed the issuer unfavourably.)<\/li>\n\n\n\n<li>Choosing, ordering and wording risk factors.<\/li>\n\n\n\n<li>Carrying SEBI&#8217;s observations into the RHP.<\/li>\n\n\n\n<li>The due diligence certificate.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">A second order shows why the materiality line matters. On 27 October 2026, SEBI fined Taurian MPS, two of its directors and its merchant banker \u20b918 lakh in total over the offer document for its SME IPO, with \u20b98 lakh of that on the banker. The document didn&#8217;t show Taurian Engineering Pvt Ltd as part of the promoter group, and didn&#8217;t mention that it was under liquidation. One promoter had raised her stake in it from 19% to 80% between 2012 and 2023, which took it past the promoter group threshold. The parties argued, among other things, that the investment had been written off and that NSE had scrutinised the documents. SEBI didn&#8217;t accept that this excused the omission (<a target=\"_blank\" rel=\"noopener\" href=\"https:\/\/www.oquilia.com\/news\/sebi-fines-taurian-mps-gretex-ipo-disclosure-lapses\">Oquilia, summarising the order<\/a>, <a target=\"_blank\" rel=\"noopener\" href=\"https:\/\/www.whalesbook.com\/news\/English\/sebiexchange\/SEBI-Fines-Taurian-MPS-Gretex-indian-rupee18-Lakh-Over-IPO-Disclosure-Lapses\/6ae0e8234fc30694db4f147e\">Whalesbook<\/a>).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">I doubt an AI summary of the data room would have helped much here. The stake grew slowly over eleven years, and if the company&#8217;s own papers didn&#8217;t mention the entity, a summary of those papers wouldn&#8217;t either. Finding it usually means asking the promoters about all their holdings and checking the answers against MCA records. After that, someone has to decide that a liquidation inside the promoter group is something investors should hear about, even with the investment written off. A tool can help once you know where to look (pulling a shareholding history from filings, say), so I would treat promoter group mapping as work your team owns, with AI used for the lookups inside it.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><th>Task<\/th><th>AI extracts, drafts or summarises<\/th><th>Banker verifies, decides or signs<\/th><\/tr><tr><td>Company history<\/td><td>Pulls dates, name changes and office changes from incorporation records and filings<\/td><td>Checks against originals; decides what is material<\/td><\/tr><tr><td>Capital structure<\/td><td>Extracts share capital history from allotment records<\/td><td>Reconciles with registers and filings; confirms promoter contribution and lock-in<\/td><\/tr><tr><td>Promoter group and group companies<\/td><td>Pulls shareholding data from filings it is given<\/td><td>Finds every entity (including by asking promoters), applies thresholds, decides on disclosure<\/td><\/tr><tr><td>Financial information<\/td><td>Summarises audited reports<\/td><td>Reconciles, restates and checks figures across chapters<\/td><\/tr><tr><td>KPIs and peers<\/td><td>Extracts KPI figures from source documents<\/td><td>Picks KPIs and peers; keeps the comparison consistent to the RHP<\/td><\/tr><tr><td>Risk factors<\/td><td>Lists issues found in the diligence documents<\/td><td>Selects, orders and words them<\/td><\/tr><tr><td>Chapter drafts<\/td><td>First draft from source documents, with references<\/td><td>Checks every line against its source and adopts it<\/td><\/tr><tr><td>SEBI observations<\/td><td>Lists each observation and the chapters it touches<\/td><td>Makes each change and confirms it is in the RHP<\/td><\/tr><tr><td>Due diligence certificate<\/td><td>No role<\/td><td>Signs<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 id=\"questions-to-ask-before-you-use-an-ai-tool-for-drhp-preparation\" class=\"wp-block-heading\">Questions to ask before you use an AI tool for DRHP preparation<\/h2>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Can every drafted line be traced to a source document?<\/strong> Ideally the tool shows the page or clause beside each line, so your reviewer can check it in one step. Where it has no source for something, it should say so instead of filling the gap.<\/li>\n\n\n\n<li><strong>Does the vendor claim to reconcile financials?<\/strong> If it does, ask how that is checked and what the tool does when figures don&#8217;t tie. Summarising a report and reconciling it are different jobs, and under Regulation 16C the output is yours either way.<\/li>\n\n\n\n<li><strong>Where is client data stored and processed?<\/strong> Diligence files carry a fair amount of personal data (director KYC, employee details, etc.). The DPDP Rules were notified on 13 November 2025, and the main obligations on data fiduciaries apply from 13 May 2027 (<a href=\"https:\/\/www.khaitanco.com\/sites\/default\/files\/2025-11\/ERGO%20-%20Digital%20Personal%20%20Data%20Protection%20Rules%20-%2015%20November%202025.pdf\" target=\"_blank\" rel=\"noopener\">Khaitan &amp; Co<\/a>). Ask how the vendor is preparing for its obligations under the Act and Rules. The amended Merchant Bankers Regulations also expect your own data to be kept within India, so it is worth asking where the vendor&#8217;s servers are.<\/li>\n\n\n\n<li><strong>How does the tool record what was AI-drafted and what a person reviewed?<\/strong> SEBI&#8217;s chairman said in August and again in October 2026 that the regulator&#8217;s upcoming AI guidelines will require human oversight, with regulated entities staying fully responsible for any AI tool they use, built or bought (<a href=\"https:\/\/www.moneylife.in\/article\/ai-in-markets-sebi-to-mandate-human-oversight-kill-switches-and-data-controls-says-pandey\/81406.html\" target=\"_blank\" rel=\"noopener\">Moneylife<\/a>). The guidelines hadn&#8217;t been issued at the time of writing, but a review trail (who checked which section, against what, and when) is probably worth having before they arrive.<\/li>\n\n\n\n<li><strong>What does the vendor hand over?<\/strong> I would look for a draft your team reviews and adopts as its own work, with notes on anything missing. A finished section your team is expected to sign off without reading is probably the wrong shape, given the outsourcing rule and the certificates covered above.<\/li>\n<\/ol>\n\n\n\n<h2 id=\"where-prefyle-fits\" class=\"wp-block-heading\">Where Prefyle fits<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Prefyle is a drafting tool the banker&#8217;s own team uses to prepare the DRHP. Its financial summarisation feature summarises financial reports for your team to read, and leaves reconciling and restating the figures to your team, so the review and the sign-off stay where the regulations expect them.<\/p>\n\n\n\n<h2 id=\"faq\" class=\"wp-block-heading\">Common questions<\/h2>\n\n\n<div id=\"rank-math-faq\" class=\"rank-math-block\">\n<div class=\"rank-math-list \">\n<div id=\"faq-question-1793635729815\" class=\"rank-math-list-item\">\n<h4 class=\"rank-math-question \"><strong>Can AI draft a DRHP?<\/strong><\/h4>\n<div class=\"rank-math-answer \">\n\n<p>AI can often produce first drafts of DRHP sections from source documents and pull facts out of diligence material. The merchant banker still has to prepare the document, check it and sign the due diligence certificates, and since January 2026 the Merchant Bankers Regulations don&#8217;t allow it to outsource preparation of the offer document.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1793635741525\" class=\"rank-math-list-item\">\n<h4 class=\"rank-math-question \"><strong>Does SEBI allow merchant bankers to use AI?<\/strong><\/h4>\n<div class=\"rank-math-answer \">\n\n<p>As far as I know, nothing in SEBI&#8217;s rules stops a banker from using AI. Regulation 16C of the Intermediaries Regulations makes any regulated entity that uses AI solely responsible for its output, its data and legal compliance, and SEBI has said its upcoming AI guidelines will add requirements on human oversight.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1793635756296\" class=\"rank-math-list-item\">\n<h4 class=\"rank-math-question \"><strong>What is DRHP preparation?<\/strong><\/h4>\n<div class=\"rank-math-answer \">\n\n<p>DRHP preparation is the work of putting together the draft red herring prospectus: due diligence on the company, drafting the chapters ICDR requires (business, financials, risk factors, legal and regulatory disclosures, etc.), and filing it with SEBI for a main board issue or with the exchange for an SME issue, along with the lead manager&#8217;s due diligence certificate.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-question-1793635772263\" class=\"rank-math-list-item\">\n<h4 class=\"rank-math-question \"><strong>Does an exchange AI pre-check count as due diligence?<\/strong><\/h4>\n<div class=\"rank-math-answer \">\n\n<p>Probably not. BSE describes its pre-check as a step before filing and still reviews the document in full afterwards, and the January 2026 Gretex order suggests that an exchange catching an error later doesn&#8217;t cure a lapse at the DRHP stage.<\/p>\n\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n\n\n<h2 id=\"try-it-on-a-live-mandate\" class=\"wp-block-heading\">Try it on a live mandate<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">We are opening a small 3-month design partner programme for merchant bankers. Partners run Prefyle on live mandates and cover the compute cost of their usage, and we meet regularly for structured feedback sessions. We publish a case study only if you agree to one. If that sounds useful, <a target=\"_blank\" rel=\"noopener\" href=\"https:\/\/prefyle.com\">get in touch<\/a> and I&#8217;ll walk you through how it would fit your next filing.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In June 2025, BSE started letting merchant bankers run SME draft offer documents through a generative AI pre-check before filing. The tool points out sections&#8230;<\/p>\n","protected":false},"author":1,"featured_media":74,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[1],"tags":[],"class_list":["post-49","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog"],"_links":{"self":[{"href":"https:\/\/prefyle.com\/blog\/wp-json\/wp\/v2\/posts\/49","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefyle.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefyle.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefyle.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefyle.com\/blog\/wp-json\/wp\/v2\/comments?post=49"}],"version-history":[{"count":3,"href":"https:\/\/prefyle.com\/blog\/wp-json\/wp\/v2\/posts\/49\/revisions"}],"predecessor-version":[{"id":73,"href":"https:\/\/prefyle.com\/blog\/wp-json\/wp\/v2\/posts\/49\/revisions\/73"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/prefyle.com\/blog\/wp-json\/wp\/v2\/media\/74"}],"wp:attachment":[{"href":"https:\/\/prefyle.com\/blog\/wp-json\/wp\/v2\/media?parent=49"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefyle.com\/blog\/wp-json\/wp\/v2\/categories?post=49"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefyle.com\/blog\/wp-json\/wp\/v2\/tags?post=49"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}