Red herring prospectus
Also called: RHP, Draft red herring prospectus, DRHP · Topic: Financial Markets, Instruments, Insurance and Pensions · NCERT: Beyond NCERT
Meaning
A red herring prospectus (RHP) is the offer document a company publishes before its IPO opens. It gives details of the company and the price band, but not the final price or the final number of shares. Those are fixed only after investors have bid. The documents come in this order:
- The draft red herring prospectus (DRHP), which the company files with SEBI for review.
- The RHP.
- The final prospectus, which contains the final price.
Example
Before its IPO, a company files a DRHP with SEBI. After review, it issues an RHP with a price band of Rs 100-110. Once bidding ends and the price is fixed at, say, Rs 108, it issues the final prospectus.
Don't confuse with
- Final prospectus: it has the final issue price and number of shares. The RHP has only a price band.
Related concepts
- Primary market
- Initial Public Offering
- Book building
- Anchor investor
- Qualified Institutional Buyer
- Application Supported by Blocked Amount
- Green shoe option
- Underwriting
- Grey market premium
- Follow-on Public Offer