What are RHP and DRHP in an IPO- ICICI Direct- ICICI Direct

In this detailed blog post, we will look at the red herring prospectus meaning, benefits, and examples, highlighting its significance in the financial world. A red herring prospectus can function as a source of information regarding a potential offering that is currently being crafted by a particular company. Versions of the prospectus that have not been fully reviewed by the SEC may present a company “too” favorably. This view may be adjusted after the SEC has requested revisions before final approval. This thorough process not only aids in regulatory approval but also builds investor confidence, ultimately facilitating a successful IPO on platforms like the BSE SME.

You learn about the company’s unique products, market potential, and growth methods. The red herring prospectus is a significant tool for firms and investors throughout the IPO process. To explain the concept further, consider a hypothetical scenario in which a technological firm is considering an IPO.

And a 1697 work on horsemanship noted how a red herring could be used to train horses to follow hounds amid the chaos of a hunt. As one account goes, hunters would drag red herring along the ground to train hounds to follow a scent. Then, the hunters would introduce the hounds to the scent of another animal, such as a badger. The hounds were supposed to follow the scent of the badger and not be distracted by the red herring, apparently as a way of teaching the dogs to stay focused on their trail—or as a way for escaped criminals to throw off hounds chasing them down. Now, it’s often said that the figurative red herring—referring to a distraction from a matter at hand or a misleading clue—comes from historic uses of the fish to make hounds lose their scent while hunting.

1. After considering the feedback, the Merchant Banker will make updates and submit the Prospectus (RHP) to SEBI, the Registrar of Companies (ROC), and the stock exchanges.
2. By concentrating on these key areas, one can gather valuable information without having to wade through the entire document.
3. This article aims to shed light on this complex term and provide a comprehensive understanding of its meaning, importance, and implications in the trading world.
4. The table below describes the main sections of the preliminary prospectus.
5. The Red Herring Prospectus is a preliminary document drafted by companies during the initial stages of undergoing an initial public offering (IPO).

Recent Issues

Red herring prospectus does not include the complete information of the quantum or value of the securities. In general terms the red herring prospectus consists of the particulars relating to the company’s functions and operations and the prospectus, ultimately enabling the potential investors to acquire the required information to arrive to a decision. The Red herring prospectus should be filed before the concerned registrar 3 days prior to the list of subscription or offer. The obligations to the Red herring prospectus are similar to the obligations of the other prospects and if at all there is any variation between the prospectus and the Red herring prospectus, then such variations needed to be highlighted. After the closing of the offer the prospectus should state the total capital raised by ways of share capital or debt and also the securities closing price. The author systematically analyzes the process for the issuance of the Red herring prospects, the role of SEBI and judicial pronouncements concerning the same.

Investment in the securities involves risks, investor should consult his own advisors/consultant to determine the merits and risks of investment. The RHP serves as a vital prospectus for communicating the investment opportunity, showcasing the company’s strengths and growth prospects to generate interest and build investor confidence. After receiving the DRHP approval, merchant banker files RHP, which serves as a more comprehensive document. The table below describes the main sections of the preliminary prospectus.

Role of the Securities Regulator

Bajaj Finance Limited (“BFL”) is a Non-Banking Finance Company (NBFC) and Prepaid Payment Instrument Issuer offering financial services viz., loans, deposits, Bajaj Pay Wallet, Bajaj Pay UPI, bill payments and third-party wealth management products. The details mentioned in the respective product/ service document shall prevail in case of any inconsistency with respect to the information referring to BFL products and services on this page. To be approved by relevant stock exchanges in case of SME IPO and by SEBI in mainboard IPO.

Following chapters are included in DRHP:

The regulator can ask the company to revise the prospectus if it finds any deficiencies or inaccuracies. It is a mandatory document that must be filed with the securities regulator before a company can proceed with its IPO. The regulator reviews the document to ensure that it contains all the necessary information and complies with the relevant securities laws and regulations. Another theory suggests that the term originated from the red ink used to print the disclaimer on the cover of the prospectus. This disclaimer states that the document is not complete and may be changed before the securities are sold. Regardless of its origins, the term has been widely adopted in the financial world and has a significant impact on the IPO process.

For example, a company operating in a highly competitive market may face challenges in maintaining its market share and profitability. Given what red herring means, you might think that a red-herring prospectus is designed to mislead the SEC—and investors. The name actually comes from the bright-red disclaimer on the prospectus that states that the information in the prospectus may change and is incomplete.

A red herring prospectus goes through various phases before it is finalised. Initially, the firm sends a draft prospectus to the regulatory authorities. This document, frequently referred to as the “red herring,” is carefully examined to verify compliance with regulations and the accuracy of content. Once authorised, it is the final red herring prospectus, ready for distribution to potential investors. During this procedure, the regulatory body guarantees that all relevant information is given, although some specifics, such as the IPO price, are retained until the registration statement is official.

1. A red herring is a preliminary prospectus filed by a company with the Securities and Exchange Commission (SEC), usually in connection with the company’s initial public offering (IPO).
2. The S&P Midcap 400/BARRA Growth is a stock market index that provides investors with a benchmark for mid-cap companies in the United States.
3. 10 The book building is a process of collecting offers from prospective investors based on an indicative price range which aims at fair pricing of the issue to be emerged out of the offers given by various investors.
4. The SEC does not approve the securities registered with it, does not pass on the investment merits, nor guarantee the accuracy of the statements within the registration statement or prospectus.
5. The Preliminary (or Red Herring) Prospectus is distributed during the quiet period, before the registration statement has become effective with the Securities and Exchange Commission (SEC).

We are a team of dedicated industry professionals and financial markets enthusiasts committed to providing you with trading education and financial markets commentary. Our goal is to help empower you with the knowledge you need to trade in the markets effectively. Now that you’re equipped with the knowledge of what a Red Herring Prospectus is and its significance in the IPO process, take the next step in your trading journey with TIOmarkets. As a top rated forex broker, we provide an online trading platform where you can trade over 300 instruments across Forex, indices, stocks, commodities, and futures markets with low fees. Join our community of 170,000+ traders in over 170 countries and enhance your trading skills with our comprehensive educational resources.

The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The aggrieved approached the commission claiming that the enterprise was abusing its dominant position and this fact could be proved based on its red herring prospectus. (1) A company proposing to make an offer of securities may issue a red herring prospectus prior to the issue of a prospectus.

DRHP of a company is made available on various the company’s website, investment banker website and exchange website. Here we look at three of the most important documents in the IPO process which is the RHP, the DRHP and the Prospectus. The Sections 447 and 448 have been reported to come into existence from September 12, 2013. Filed and submitted red herring prospectus meaning on the website of NSE/ BSE exchanges or SEBI at the time of application submission.