Definition
Red Herring Prospectus (RHP)
The RHP is the near-final IPO offer document filed with the Registrar of Companies just before the issue opens, containing the price band but not the final allotment price.
The RHP is filed after SEBI clears the DRHP and the company is ready to launch. It carries updated financials, the price band, the issue dates and the bid lot. The name 'red herring' comes from the disclaimer printed in red on early versions stating that information is still incomplete because the final price is set only through book building.
For Indian investors, the RHP is the document of record for an IPO application. Once the issue closes and the price is discovered, the company files a final prospectus (with the cut-off price) with the Registrar of Companies before listing on the NSE or BSE.
Related terms
- Draft Red Herring Prospectus (DRHP)A DRHP is the preliminary offer document a company files with SEBI when it wants to make an IPO, disclosing its business, financials and risks but not the final issue price.
- Abridged ProspectusAn abridged prospectus is a short, summarised version of the full prospectus that must accompany every IPO application form.
- Price BandA price band is the maximum permissible price movement, expressed as a percentage above and below a reference price, within which a security may trade during a session before being frozen.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.