A red herring prospectus is a final document issued to investors after the approval of SEBI; before that, the company files a Draft Red Herring Prospectus (DRHP) when it plans to go public through IPO. Red herring refers to the red cover page of the file, which states that the information is incomplete and subject to change until the registration statement becomes effective. It has detailed information about the company and its activities, such as finances and objectives. Red herring prospectus contains Capital details, Offer details and objectives, an Overview of the industry, Financial details, Business description, Strategies, Company management, Promoters, Risks, and Dividends. It helps the investor to have comprehensive insight into the company’s finances and operations to make effective investment strategies.
A red herring prospectus (RHP) is a prospectus document a company submits to the Securities and Exchange Board of India ( SEBI). Before getting approved, a number of drafts are created to be considered eligible. That is known as the Draft Red Herring Prospectus. The SEC reviews the RHP for incorrect or misleading information or any statement violating the laws or regulations. The SEC may also note any failure to disclose required information and ask the company to make changes.
Once it is approved by SEBI, the Red Herring Prospectus becomes a vital tool for public companies. It ensures transparency, protects investor interests, helps gauge market sentiment, optimizes fundraising, and mitigates risks. By carefully reviewing the RHP, investors can make informed decisions about investing in the IPO.
Red herring prospectus can be registered under the SEBI website
https://www.sebi.gov.in/sebiweb/home/HomeAction.do?doListing=yes&sid=3&ssid=15&smid=11
AUTHOR:
J. Jeslin Jesiya, 5th year BBA. LL.B (Hons.), Saveetha School of Law, Chennai