December 11, 2023

Difference Between DRHP And RHP

Difference Between DRHP And RHP

The primary difference between Draft Red Herring Prospectus (DRHP) and a Red Herring Prospectus (RHP) is that the DRHP is an initial document filed by a company with the Securities and Exchange Board of India (SEBI) for approval, while the RHP is a more detailed and refined version published after receiving SEBI’s observations. 


Red Herring Prospectus Meaning

A Red Herring Prospectus (RHP) is an initial document filed by a company with SEBI, containing detailed information about the company’s business operations, financial statements, and the specifics of the stock offering, along with the offer date.

It is called ‘red herring’ because it includes a bold disclaimer stating that the company is not attempting to sell its shares before the registration with SEBI is approved. This document is crucial for investors, as it provides a window into the company’s workings and its potential for the future. 

The RHP outlines the company’s strategic intentions, the risks investors face, and the use of funds raised through the IPO. It’s essentially the blueprint for potential investors to understand the company’s strengths, weaknesses, opportunities, and threats (SWOT analysis) before making an investment decision.

Draft Red Herring Prospectus

A Draft Red Herring Prospectus (DRHP) is an initial offer document filed with SEBI by a company. It provides essential investment information but lacks details about the offer date. It includes financial details, past performances, and future prospects, marking the first step towards public share issuance.

The DRHP includes information on the company’s management, the reason for raising the money, the business model, and legal and other details. This document is subject to scrutiny by SEBI, which may ask for clarifications or additional details, ensuring that all significant information is disclosed before the company goes public.

Difference Between DRHP And RHP

The primary difference between a Draft Red Herring Prospectus (DRHP) and a Red Herring Prospectus (RHP) is that the DRHP is submitted initially for SEBI’s approval, while the RHP, released after SEBI’s review, is more detailed and includes the offer date for the IPO.

Key Differences Between DRHP and RHP

FeatureDRHP (Draft Red Herring Prospectus)RHP (Red Herring Prospectus)
PurposeTo give an initial overview of the company and its financials for SEBI’s scrutiny.To provide finalized details including price and number of shares for investors.
TimingSubmitted before the pricing of the IPO is determined.Filed after SEBI’s review, closer to the actual IPO date.
DetailsLacks details on share pricing and final offer size.Includes specific offer details like share pricing and the final number of shares.
SEBI’s RoleSEBI reviews and suggests modifications if needed.Reflects changes post-SEBI’s comments and approval.
Investor UseUsed by investors for a preliminary assessment of the IPO.Used for making final investment decisions.

Difference Between DRHP And RHP? – Quick Summary

  1. The DRHP is an initial offer document filed with SEBI lacking price details, while the RHP is the final offer document with all pricing and issue details included.
  2. DRHP marks the beginning of a company’s public offering process, whereas RHP signifies the final step before the securities are listed on the stock exchange.
  3. Alice Blue offers no-cost stock investments in the company. Most importantly, with our 15 Rs brokerage plan, you can save up to ₹ 1100 brokerage every month when compared to other brokers. We also don’t levy clearing charges. 

Difference Between DRHP And RHP FAQs

What is the Difference Between DRHP And RHP?

The DRHP, or Draft Red Herring Prospectus, outlines a company’s intention to raise funds, minus the specifics of pricing, while the RHP, or Red Herring Prospectus, includes finalized details on pricing and the number of shares offered.

What is the difference between DRHP and RHP prospectus?

The primary difference between a Draft Red Herring Prospectus (DRHP) and a Red Herring Prospectus (RHP) is in their stage of finalization; the DRHP is an initial, tentative offer document submitted before an IPO, while the RHP is a more refined version, incorporating regulator and investor feedback. 

What is the timeline between DRHP and RHP?

The timeline between the DRHP and RHP varies depending on the company’s readiness and SEBI’s review process. Once a DRHP is filed, SEBI reviews it and may suggest revisions. This process can take a few weeks to a few months.

What is the meaning of RHP?

The Red Herring Prospectus (RHP) is a document that signifies a company’s intent to go public, containing specific details about the IPO, including the price band of the shares and the number of shares to be issued. It’s called “red herring” because it contains a warning statement that it does not contain complete information about the offering, although it’s much closer to the final prospectus than the DRHP.

Who prepares DRHP?

The Draft Red Herring Prospectus (DRHP) is prepared by the company that intends to go public, often with the assistance of investment bankers, legal advisors, and auditors. The document is crafted to provide a detailed look into the company’s business, including its operational and financial aspects, to SEBI and potential investors.

Why is DRHP filed with SEBI?

The DRHP is filed with SEBI to start a public offering process, providing details on the company’s business and finances. SEBI reviews it to confirm regulatory compliance and accuracy, ensuring investor protection. Upon approval, the company can progress to the RHP and then the IPO.

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