DRHP- What is the meaning of it and why it is important in IPO

A DRHP is a preliminary registration document prepared by merchant bankers for prospective IPO-making companies in the case of a book-building issue. It includes information that is necessary to issue an IPO. Here in this post, we will understand the Term DRHP- Meaning of DRHP and Full Form of DRHP.

What is the full form of DRHP?

DRHP refers to “Draft Red Herring Prospectus”. The document includes information about the company’s business operation, promoters, financials, its standing in the industry it deals in, and listed or unlisted peers.

Also Read: How to Invest in IPO in India- Simple Way to Invest

What is the Meaning of DRHP?

Meaning of DRHP- The DRHP or say Draft Red Herring Prospectus is a preliminary document submitted by a company as part of its Initial public offering of securities.

It is needed when the company is planning to raise money from the public, provides detailed and full information about its business operation and financials.

The preliminary document clarifies the reason why the company is raising money from the general public, how the raised money will be used, and what is the risk associated with investing in the companies share.

It is noted that the DRHP does not contain information on the prize or size of the offering.

Why DRHP (Draft Red Herring Prospectus) is important?

After knowing the meaning of DRHP and the Full form of DRHP, it is important to know why it is important and the answer to the question is given hereunder.

The SEBI has made it mandatory for companies to file a DRHP before going to the ROC. The Securities and Exchange Board of India (SEBI) reviews the offer documents and check whether adequate disclosures are made.

SEBI’s final recommendations are given to the merchant banker, who makes the necessary changes and files the final DRHP with SEBI, ROC, and the stock exchanges.

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After receiving the DRHP from the merchant banker, it is reviewed again and the necessary implementations or observations of the merchant banker need to be implemented. Once it is done final approval is provided and then the documents become an RHP i.e. Red Herring Prospectus.

Frequently Asked Questions- FAQs

  1. Where can investors find a company’s DRHP?

    DRHP can be view by investors publicly and it is available on various platforms such as the company’s website, stock exchange, websites, or the SEBI websites.

  2. How is the DRHP is useful to the investors?

    It is a very powerful tool to understand the information about the company’s business operation, promoters, financials, its standing in the industry it deals in, and listed or unlisted peers. It helps investors in making an informed decision.

  3. What can investors do if they notice discrepancies?

    If anyone finds any inaccurate or incomplete information in the DRHP, he can register a company with the merchant bankers or SEBI.

  4. What is the difference between DRHP and RHP?

    DRHP refers to Draft Red Herring Prospectus and RHP refers to Red Herring Prospectus. Once the final approval has been provided to DRHP then it becomes RHP.

  5. What is DRHP in Stock Market?

    The DRHP or say Draft Red Herring Prospectus is a preliminary document submitted by a company as part of its Initial public offering of securities. It is needed when the company is planning to raise money from the public, provides detailed and full information about its business operation and financials.

Also Read- OFS: Meaning of offer for sale in share market

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Disclaimer: The information contained in the above article are solely for informational purpose after exercising due care. However, it does not constitute professional advice or a formal recommendation. The author does not own any responsibility for any loss or damage caused to any person, directly or indirectly, for any action taken on the basis of the above article.

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