RHP (Red Herring Prospectus)
A Red Herring Prospectus (RHP) is the final offer document filed by a company with SEBI and the Registrar of Companies (RoC) after receiving SEBI's observations on the Draft Red Herring Prospectus, containing all material disclosures about the company except the final issue price and the number of shares offered, which are determined through the book-building process.
The Red Herring Prospectus derives its name from a historical warning notation — printed in red ink — that was once placed on the cover of draft offer documents in the United States, cautioning readers that the document was incomplete and subject to change. In the Indian context, the RHP is a near-final disclosure document that contains virtually all the information a prospective investor needs to evaluate an IPO, except for the specific issue price and the exact number of shares being offered in the public issue, which are filled in only after the book-building process concludes.
The journey from Draft Red Herring Prospectus (DRHP) to RHP is an important one in the IPO lifecycle. The DRHP is filed with SEBI as the initial disclosure document. SEBI reviews the DRHP and issues its observations — which may include queries, clarifications, or requirements for additional disclosures — within thirty days of the filing (or within seventy-five days in case of public issues by companies with a track record of less than three years). Once the company and its merchant bankers address SEBI's observations satisfactorily, SEBI issues an observation letter. The company then incorporates these changes, finalises the price band, and files the RHP with both SEBI and the Registrar of Companies.
The RHP must contain a comprehensive set of disclosures mandated by SEBI's ICDR Regulations, 2018. These include: the objects of the issue (how the proceeds will be used), the risk factors specific to the company and industry, the company's financial statements for at least three preceding years audited by an independent chartered accountant, the details of the promoters and their backgrounds, details of pending litigation, related-party transactions, details of the anchor investor allocation (if applicable), and the basis for the issue price.
The RHP is the primary reference document for investors during the IPO application window, which typically spans three days for the mainboard segment. It is publicly available on the websites of SEBI, the lead merchant banker, the stock exchanges (BSE and NSE), and the Registrar to the Issue. Retail investors are strongly encouraged to read the risk factors section carefully, as it discloses material risks such as dependence on key customers, regulatory uncertainties, litigation, and competition that could affect the company's financial performance after listing.
After the book-building process closes and the issue price is determined, the company files the final Prospectus (sometimes called the Prospectus or the Prospectus cum Application Letter) with the RoC, which incorporates the final price and quantity. This Prospectus is the definitive legal document of the issue and serves as the basis for allotment. For investors, the RHP and the final Prospectus together constitute the complete information package for any IPO.