What Is an RHP?

By the time a Red Herring Prospectus reaches the market, the regulatory review is finished, the dates are fixed, the bid lot is known and in most cases the price band has been declared. What is still missing is the one number everyone is waiting for: the final issue price, which in a book-built issue cannot exist until investors have finished bidding. That deliberate gap is precisely what the phrase "red herring" refers to, and it is why this document, rather than the draft that preceded it, is the one under which the offer is actually made.

An RHP is therefore not simply a newer version of the draft. It is a different stage of the same document, with a different legal status, a different audience and a different job to do.

The chain: DRHP, RHP, Prospectus

Three documents mark three stages of a book-built public issue, and mixing them up is the most common source of confusion for a first-time applicant.

1. Draft Red Herring Prospectus. Filed with SEBI and the exchanges for review. No price, no dates, no final structure. It is covered separately in What Is a DRHP?
2. Red Herring Prospectus. Filed with the Registrar of Companies once SEBI's observations have been incorporated, and registered before the offer opens. It carries the offer dates, the bid lot and normally the price band, but not the final price.
3. Prospectus. Filed with the Registrar of Companies after the issue closes and the price has been determined. It states the final issue price, the number of shares allotted and the amount actually raised.

Only the third document is complete, and it arrives too late to help anyone decide whether to apply. The RHP sits between a draft that could not be acted on and a final record that comes after the decision has been made, which is why it is the version an applicant actually needs to read.

What gets settled at the RHP stage

Almost every open item from the draft is closed by the time the RHP is registered. The document stops describing a possible offer and starts describing a scheduled one.

• SEBI's observations are incorporated, along with any additional disclosures the regulator asked for during the review.
• Financial statements are brought up to date. If enough time has passed since the draft, a more recent stub period is added so that the accounts are not stale when the offer opens.
• The bid lot is fixed, so an applicant knows the minimum number of shares in a single application and the multiples in which bids must be placed.
• The offer opening and closing dates are stated, together with the anchor investor bidding date, which falls before public bidding begins.
• The category-wise allocation between qualified institutional buyers, non-institutional investors and retail individual investors is specified for that particular issue.
• The registrar, the bankers to the issue, the sponsor banks and the ASBA and UPI mechanics for applying are all named, along with the grievance contacts.
• Pre-issue and post-issue shareholding, minimum promoter contribution and the applicable lock-in arrangements are set out in the capital structure section.

The price band usually appears here too, either printed in the RHP itself or announced in a price-band advertisement issued alongside it, depending on how the issue is structured. Some issues state a floor and a cap outright; others state a floor with the cap fixed in a prescribed relationship to it. How a band is arrived at in the first place is covered in IPO Price Band Explained.

What stays open, and why it has to

In a book-built issue the price is discovered, not announced. Investors submit bids at prices within the band, or at cut-off in the retail category, and the issuer and lead managers determine the final price after the book closes by examining where demand actually sits. A document printed before bidding starts therefore cannot state that price without pre-empting the entire mechanism it is meant to describe.

“The final price is missing from a red herring prospectus by design, not by omission. In a book-built issue it does not yet exist to be printed.”

One consequence is that either the share count or the rupee size of the offer must be variable. Take an illustrative example: an issue aiming to raise ₹500 crore through a fresh issue with a band of ₹180 to ₹190 would need roughly 2.78 crore shares if priced at the floor and about 2.63 crore shares if priced at the cap. The rupee target is fixed and the share count adjusts to it. An offer for sale works in the opposite direction, because selling shareholders offer a fixed number of shares and the amount they receive depends on the price. These numbers are illustrative arithmetic, not data from any actual issue.

That is why an RHP expresses so many figures in the alternative, using phrases such as "up to X equity shares" or "aggregating up to ₹Y". The exact rupee split between the fresh issue and the offer for sale only becomes precise in the final prospectus, once the price exists. Fresh Issue vs Offer for Sale explains why that split matters so much to a reader.

What the RHP does during the offer period

Once the issue opens, the RHP is the legal basis of the offer. Every application, whether submitted through a bank's ASBA facility or through a broker with a UPI mandate, is in law an offer to subscribe on the terms of that document. The application form is accompanied by an abridged prospectus, which is a condensed statutory summary of the RHP rather than a separate or lighter document, and it exists because handing several hundred pages to every applicant is impractical.

This matters more than it first sounds. If a question arises later about what was disclosed, the RHP and the final prospectus are the reference point, not a research note, a news report or a social media summary. The people who sign the document, including directors and the lead managers, carry statutory responsibility for its contents, and that liability is the reason its language is so careful.

When the RHP changes mid-offer

Occasionally something material changes after registration: a regulatory development, a significant litigation event, a change in the offer structure or the price band. The issuer then publishes an addendum or corrigendum, which becomes part of the offer document and must be brought to investors' attention through public notices in the same newspapers where the original announcements appeared. Depending on the nature of the change, the bidding period may be extended.

The reason for that extension is procedural rather than courteous. An application is an offer made on the basis of disclosed terms, so if the terms change materially, applicants need a genuine opportunity to reconsider or withdraw. An addendum is therefore not a formality to scroll past; it is the only place where a change to the deal is recorded.

Revising and withdrawing bids

The application rules interact directly with the RHP timeline. Retail individual bidders may revise their bids upward or downward and may withdraw them until the issue closes. Qualified institutional buyers and non-institutional investors face tighter restrictions and generally cannot withdraw once they have bid, which is one reason institutional demand is treated as a firmer signal than a headline subscription multiple alone. The categories themselves are explained in QIB, NII and Retail IPO Categories.

Anchor investors sit outside this arrangement entirely. They bid on a separate day before public bidding opens, at a price fixed then, and the shares allotted to them carry a lock-in. Their participation is disclosed publicly alongside the RHP in a separate allocation intimation, which is often the first hard information available about institutional interest in an issue.

Reading an RHP when you have already read the draft

If you read the DRHP, the efficient approach is to read the RHP for differences rather than from page one. Most of the descriptive material about the business, the industry and the promoters carries over unchanged, so the new content is concentrated in a handful of places.

1. Go to the updated financial statements first. A stub period added since the draft is genuinely new information that has had little public commentary.
2. Read the basis for the issue price again, because it can now be read against an actual band. Dividing the cap price by restated earnings per share gives a concrete multiple to place beside the peer table.
3. Recompute the fresh issue and offer for sale split in rupees at the cap price, so you can see how much money reaches the company and how much goes to selling shareholders.
4. Check the capital structure table for changes since the draft, including any pre-IPO placement completed in the interim and the price at which it was done.
5. Scan the risk factors for newly added entries. A risk that appears only in the RHP was added for a reason, often after the regulator's review.
6. Note the post-issue shareholding and the lock-in expiry structure, which tells you when currently restricted shares become eligible to be sold.

That last item is regularly skipped. Lock-in arrangements are disclosed in the RHP, and knowing when they expire tells you something about the supply of shares that arrives well after listing day. The mechanics are covered in IPO Lock-In Period Explained.

If the RHP is the first document you open

Many readers encounter an issue for the first time when the offer has already been announced and there are two or three days in which to decide. The RHP is the right document for that situation, because it carries the entire descriptive content of the draft and is complete on everything except the discovered price. A focused route through it takes about an hour.

1. The front pages and the offer structure. Note the split between the fresh issue and the offer for sale, who the selling shareholders are, and how large the offer is relative to post-issue share capital.
2. Objects of the issue, to see where fresh money is going and whether the line items are specific with deployment timelines or grouped under general corporate purposes.
3. Risk factors, prioritising the ones with numbers attached: customer concentration, dependence on a single facility or geography, contingent liabilities and pending proceedings.
4. The restated financials together with the newest stub period, checking the revenue and margin trend, the movement in working capital, and operating cash flow against reported profit.
5. The basis for the issue price computed at the cap, read beside the peer comparison table in the same section.
6. The capital structure: what earlier investors paid and when, the post-issue promoter holding, and the lock-in schedule attached to it.

That sequence covers the material capable of changing a conclusion. What it skips — the commissioned industry chapter, the general regulatory description and the standard offer procedure text — is either paid-for material or boilerplate that reads much the same across every issue, and it can be returned to if time allows.

Where to find it, and four common misreadings

The RHP is published on the company's website, the lead managers' websites, the exchange websites and SEBI's website, and the abridged version travels with the application form. It is free in every one of those places, so there is no reason to obtain an offer document from an unofficial source. A file circulated through a messaging group cannot be checked against the registered version, and the registered version is the one that carries legal weight.

Four misreadings are worth naming explicitly, because each of them leads a reader to a conclusion the document does not support.

• Registration of an RHP is not a regulatory endorsement of the company. It confirms that the disclosure process has been completed, nothing more.
• The price band in it is the issuer's and lead managers' proposal, arrived at through their own assessment and market soundings. It is not an independent valuation opinion.
• The industry chapter carried over from the draft is still a study commissioned and paid for by the issuer, and should be read on that basis.
• A long risk factors chapter is a sign of thorough drafting by people who carry liability for omissions, not automatic evidence that the company is unusually risky.

After the issue closes

When bidding ends, the book is examined, the issue price is determined and allotment is finalised with the registrar under a basis of allotment approved by the exchange. The company then files the final prospectus with the Registrar of Companies, stating the issue price and the allotment details, and the offer document chain is complete. The gap between the issue closing and listing is compressed and governed by regulation, and it has been shortened over the years, so the current timeline should be confirmed with the exchange rather than assumed from memory.

The practical value of understanding this sequence is that it tells you when each piece of information becomes available and how firm it is. A draft tells you about the company. A red herring tells you about the offer. A prospectus tells you what actually happened. Anything circulating outside those three documents during the offer period is commentary, and is worth exactly as much as the evidence it cites from them.