Understand Red Herring Prospectus (RHP)

Red Herring Prospectus is a crucial document which is filed with the Securities and Exchange Board of India (SEBI). Every company that plans to go public through IPO launch is required to file this document. This article will serve as a guide for those who want to learn about the Red Herring Prospectus. 

Red Herring Prospectus is a prospectus which details a company’s financial condition, planned use of funds and risk factors associated with the investment. It is perhaps the most important document in the IPO application process. It serves as a crucial source of data to potential institutional and individual investors. However, it doesn’t include the price or amount of securities offered by the company.

Let’s understand the RHP by taking an example. Zomato is a leading platform for food delivery services in India. To expand its business operations, Zomato wanted to go public by launching an IPO. Before the IPO could be launched, Zomato had to issue its draft RHP which outlined crucial details regarding the company’s financial health, business activities and growth strategy.

What is the Importance of Red Herring Prospectus?

Because of this document, the potential investors get a detailed insight about a company that’s planning to launch an IPO. Because of this prospectus, potential investors are made aware of the company’s financial health, business activities, management, current major stakeholders, pending litigations and any potential risks. This allows potential investors to make the right investment decisions. By going through a company’s RHP, potential investors get an idea about the company’s future plans, how it plans to grow and its goals.

The RHP is a mandatory document for all the companies who intend to go public. It ensures the company’s compliance with the regulatory requirements of SEBI. Without this document, a company cannot go public through IPO in India.

In Conclusion

Red Herring Prospectus is filed with SEBI by a company planning to go public. It is an essential document for launching an IPO. By referring to a company’s red herring prospectus, investors get an idea about the company’s financial standing, growth prospects and so on. 

If you’re interested in launching an IPO, we recommend availing our IPO consulting services. We’ll provide you professional advice and assistance throughout the entire IPO process so that your company can go public through IPO as soon as possible! 

Disclaimer : This blog is for educational purposes only. It does not constitute any professional advice.

Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.