What is a Red Herring Prospectus?
The Red Herring Prospectus (RHP) is the final, legally binding IPO document filed with the Registrar of Companies (RoC) and available to investors during the IPO subscription window. It is derived from the Draft Red Herring Prospectus (DRHP) — the initial filing with SEBI — after incorporating SEBI's observations and final details like the price band.
The term "red herring" comes from the red ink traditionally used on the cover of draft US prospectuses to warn readers that the information is preliminary and incomplete. The name stuck, even though modern Indian RHPs are complete documents.
DRHP vs RHP: Key Differences
| Feature | DRHP | RHP |
|---|---|---|
| Filed with | SEBI | RoC + Stock Exchanges |
| Price band | Not disclosed | Disclosed |
| SEBI observations | Not yet received | Incorporated |
| Allotment dates | Tentative | Specific dates |
| Legal binding | Draft — not binding | Legally binding document |
| Available to public | Yes (on SEBI website) | Yes (on BSE/NSE/company website) |
Key Sections of the RHP
The RHP typically runs 400–800 pages. Here are the most important sections for investors:
- Cover page: Issue type, price band, issue dates, BRLM names
- Table of Contents: Essential navigation tool for a long document
- Summary of the Issue: Quick overview of the company and offering
- Risk Factors: Typically 30–80 detailed risks — read this first
- Use of Proceeds / Objects of the Issue: What the company will do with IPO money
- Business Overview: Company history, products, markets, competitive position
- Industry Overview: Market size, growth drivers, industry dynamics
- Management Discussion & Analysis (MD&A): Management's own explanation of financial performance
- Financial Statements: 3 years audited, with notes
- Capital Structure: Pre/post-IPO shareholding, lock-in details
- Issue Structure: QIB/NII/Retail allocation, minimum lot size, price band
- Basis of Allotment: How allotment will be done if oversubscribed
- Statutory and Other Information: Legal disclosures, litigation, regulatory approvals
Where to Download the RHP
- SEBI website: sebi.gov.in → DRHPs (filed prospectuses)
- BSE website: bseindia.com → search by company name → Prospectus
- NSE website: nseindia.com → Corporates → IPO filings
- Company's investor relations website: Usually in the IPO section
- Your broker app: Many broker apps link directly to the RHP from the IPO application page
How to Read a 600-Page RHP in 45 Minutes
You do not need to read everything. Prioritize:
- Pages 1–3 (Cover): Issue size, price band, dates, BRLMs
- Risk Factors section: Scan all risks, mark any that seem material or unusual
- Use of Proceeds: 1–2 pages — critical for understanding why they need money
- Business Summary: 5–10 pages — understand the business model
- Financial Highlights: Revenue, EBITDA, PAT for 3 years
- Capital Structure table: Pre/post-IPO promoter holding, lock-in
- Valuation / Peer Comparison table: P/E, EV/EBITDA vs. peers
With practice, this 7-step review takes 30–45 minutes and covers the most decision-relevant information in any RHP.
Key Takeaways
- The RHP is the legally binding, final IPO document — the DRHP is a draft
- Key difference: RHP has the price band, specific dates, and SEBI-addressed disclosures
- Focus on: Risk Factors, Use of Proceeds, Financials, Capital Structure, Valuation
- Available for free on BSE, NSE, SEBI, and company websites
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