Last Updated on January 2, 2024 by BFSLTeam BFSLTeam
DRHP and RHP are the two types of prospectus that a company has to file with market regulator SEBI for floating their IPO. The purpose of these is to inform potential investors about a company so that they can make their decisions on whether or not to invest in its stock.
A company primarily files a DRHP with the Securities and Exchange Board of India to get the regulator’s approval. Upon receiving the same, it files an RHP with the Registrar of Companies to provide updated information to investors. Learn the meaning of RHP and DRHP and their differences.
Table of Content
What Is a DRHP?
A DRHP or Draft Red Herring Prospectus is the first or preliminary document that a company has to file with SEBI for approval of its upcoming IPO. It is an initial document that presents all public details about a company.
From a DRHP, the public can learn about a company’s financial performance over recent financial years, its strengths, risks, and other details. This will help them make an informed decision about their investment.
Upon receiving approval from SEBI, a company can file their RHP with any modification, if recommended by SEBI.
What Is an RHP?
Red Herring Prospectus or RHP is a more detailed and finalised document than DRHP submitted with SEBI’s approval to launch its IPO. It includes all crucial information regarding the company’s operations and prospects. This document should be filed with RoC three days before launching its IPO.
The primary function of an RHP is to provide an unbiased view of all aspects of a company, including its business and non-business aspects, financial performance, industry overview, promoter’s background and more. It contains essential information that helps investors do their due diligence before investing in an IPO.
An RHP usually does not contain information such as the price band of issue and subscription date. However, the total number of shares offered, utilisation of funds raised, and IPO type are mentioned.
DRHP and RHP: What is the Difference?
There are a lot of similarities in the information offered in a DRHP and RHP. However, there are still some differences that are summarised in the table below:
| Parameters | DRHP | RHP |
| Meaning | Stands for Draft Red Herring Prospectus and is sent to SEBI as a preliminary document for approval. SEBI may suggest some changes if deemed necessary | Stands for Red Herring Prospectus and is submitted to SEBI as the final document before launching an IPO |
| Usage | Create awareness about the company and measure investors’ interest | Offers core and finalised details regarding a company and its IPO |
| Regulatory Prerequisites | To seek SEBI’s approval and receive a nod from the same to proceed with the IPO | It is submitted to SEBI, and filed with the Registrar of Companies and stock exchanges |
| Inclusion | Contain details regarding a company that must be in the public knowledge to make a sound investment decision | Contains all details included in a DRHP with changes made, if deemed appropriate by SEBI and the final size and price of an issue |
| Status | Unofficial document | Official document |
| Availability | On merchant banker’s website, stock exchange website, SEBI website, and the company’s website | On the SEBI website under the “Offer Document” section |
| Applicability | Required for every IPO | Only required in case of book-building issues and not fixed-price issues |
What Are the Requirements of an IPO Prospectus?
An IPO prospectus should follow the SEBI guidelines regarding the same and include all the details as mentioned below:
- Definitions and abbreviations used in the documents with their meanings and/or full forms
- A summary of the prospectus including the company’s primary business, promoters’ names, operating industry, objectives of the offer and other relevant details
- Risk factors such as business-related risks, market risks, and lawsuits filed against the company or its promoters, if any, and other negative impacts
- Summary of financial information such as profits, losses, expenses, income, etc., for three recent financial years at the time of filing the prospectus
- Details regarding the offer such as its size, type, face value, investor allocation, market share, employee discount detail, if any, etc.
- Capital structure details such as information regarding share premium account, authorised share capital, and subscribed/ paid-up/ issued capital before as well as after the issue
- Details regarding management, promoters, and group subsidiaries
- Provisions of the Articles of Association, calling and transfer of shares, forfeiture of shares, etc.
- Other information such as documents and contracts regarding the IPO
Also Read: Greenshoe Option in an IPO
Summary
A company’s DRHP and RHP include almost similar information. The DRHP is the draft document filed by a company to get SEBI’s approval. If any changes are required, it is included in the RHP, a document that is submitted a few days before the company launches its IPO.
It should be noted that a company should file its RHP within one year of filing its DRHP to avoid the lapse of its preliminary document. In that case, it has to refile its DRHP.
Additional Read: Upcoming IPO in January 2024
Frequently Asked Questions About DRHP and RHP
You can find the RHP of a company on the official website of SEBI. Navigate to the ‘Filings’ section and click on ‘Public Issues’ followed by ‘Red Herring Documents’.
A potential investor needs to go through the company’s RHP to learn about the company and its upcoming IPO. It will help them get an idea about the investment and make a responsible decision.
A DRHP is the first public document by the company. It wants to inform the public about its upcoming IPO and itself. An investor might find this document useful to know what they are getting into. However, they should go through the RHP before investing.
Under the Companies Act, a company must attach an abridged prospectus with its application form. It is a summarised version of the offering document and gives investors access to crucial details without having to go through the whole prospectus.
Draft Red Herring Prospectus, Red Herring Prospectus, Shelf Prospectus, Deemed Prospectus, and Abridged Prospectus are the different types of IPO prospectuses.
