What is Red Herring Prospectus (RHP)?

Red Herring Prospectus (RHP) is a document often filed to the regulatory body when a company raises capital through Public Offering. It includes details about the company’s operations, growth strategies and projections, promoters and management, and risk factors. The concerned regulatory body may dictate the format.

• Security And Exchange Commission (SEC) vets RHP in the US.
• Security And Exchange of India (SEBI) vets RHP for mainline IPO in India.

Red Herring Prospectus is not a final prospectus. It keeps on changing until approved by the Regulatory body. That is why its name begins with Red Herring, as it may give a false impression.

RHP in IPO

Although the Red Herring Prospectus is not a final prospectus, it is a critical document in an initial public offering (IPO). It contains essential information about the firm that was previously unavailable or dispersed across many media. So, it can help analyze the company for making investment decisions.

Final Prospectus (approved) of a company contains additional information on issue size, issue price, and issue dates.

In India, the term Draft Red Herring Prospectus (DHRP) refers to not the final prospectus. On approval of DHRP by SEBI, it is sent to Stock Exchanges for the issue finalization. Red Herring Prospectus (RHP) is considered a final Prospectus.

How to find Red Herring document

For the USA

You can find form S-1 (in the context of IPO) on EDGAR system of SEC site.

Go to SEC site Under FILLINGS Menu > EDGAR - Search & Access > Latest Fillings > Search for form S-1

For India

Go to SEBI site.
Under FILLINGS Menu > Public Issues > Red Herring Documents filed with ROC or Draft Offers Document filed with SEBI.

Or

Summary

Even though the RHP is a draft, it might provide vital information about a previously unavailable company. It acts as a knowledge factory about the firm raising capital until the final prospectus is published. Always use the latest or final document for making financial decisions.

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