{"id":39303,"date":"2022-01-14T14:31:59","date_gmt":"2022-01-14T09:01:59","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=39303"},"modified":"2022-01-15T16:55:30","modified_gmt":"2022-01-15T11:25:30","slug":"red-herring-prospectus","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/red-herring-prospectus\/","title":{"rendered":"Red herring Prospectus: Explained"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Red herring Prospectus refers to a prospectus that does not enclose entire details of the quantum or price of the securities entailed therein. In layman terms, a red herring prospectus encloses most of the details regarding the company&#8217;s business affairs and future prospects but does not enclose critical share information such as its numbers or price.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/red-herring-prospectus\/#Role_of_Red_Herring_Prospectus_as_per_Company_Act_2013\" >Role of Red Herring Prospectus as per Company Act, 2013<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/red-herring-prospectus\/#Where_can_investors_locate_the_Red_Hearing_Prospectus\" >Where can investors locate the Red Hearing Prospectus?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/red-herring-prospectus\/#Detailed_to_be_looked_out_in_RHP_from_Investors_standpoint\" >Detailed to be looked out in RHP from Investor&#8217;s standpoint<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/red-herring-prospectus\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Role_of_Red_Herring_Prospectus_as_per_Company_Act_2013\"><\/span>Role of Red Herring Prospectus as per Company Act, 2013 <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Red herring prospectus encloses\ninformation about the organization&#8217;s operations and prospects. However, it does\nnot offer key detail pertaining to the issue, such as its price &amp; the no of\nshares offered. A red herring prospectus shall adhere to the same obligations\nas are applicable to a prospectus, and any difference between these two shall\nbe reflected as variations in the prospectus.<\/p>\n\n\n\n<p>Upon the closing of the offer of\nsecurities, the prospectus reflecting the overall capital raised, whether via\ndebt or share capital, and the closing prices of the securities and other\ninformation that are not enclosed in the red herring prospectus shall be filed\nwith the RoC as well as the Securities and Exchange Board.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Where_can_investors_locate_the_Red_Hearing_Prospectus\"><\/span>Where can investors locate the Red Hearing Prospectus?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>Investors\ncan locate a <\/em><\/strong><strong><em>Red\nHearing Prospectus at any of the given places: <\/em><\/strong><\/p>\n\n\n\n<ul><li>SEBI&#8217;s\nofficial portal under the &#8220;Offer Document&#8221; section<\/li><li>Stock\nExchanges&#8217; s official website under the Merchant Bankers section <\/li><\/ul>\n\n\n\n<p>After furnishing the Red herring\nprospectus to SEBI, the issuing company should make a public announcement via\nat least one newspaper. The newspaper can be English, Hindi, or Regional\nlanguage. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Detailed_to_be_looked_out_in_RHP_from_Investors_standpoint\"><\/span>Detailed to be looked out in RHP from Investor&#8217;s standpoint<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Red herring\nprospectus entails the following sections and usually briefs them out in an\nexplanatory manner to better clarify the company\u2019s financial standing. It is\nvitally important for investors to carefully dig down these sections to make an\ninformed decision regarding future investment.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Details of the Offer<\/h3>\n\n\n\n<p>This section facilitates detailed information about the IPO, including the no of shares offered through fresh issue and offer for sale. Furthermore, it also facilitates a break-up of the <strong>QIB (Qualified Institutional Buyers)<\/strong><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Qualified_institutional_buyer\"><strong>[1]<\/strong><\/a><\/sup>, Non-Institutional, and Retail portions.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Capital Structure<\/h3>\n\n\n\n<p>This section renders info regarding the\nEquity Share Capital of the issuing entity as of the date of the RHP. This\nincludes the following; <\/p>\n\n\n\n<ul><li>authorized\nshare capital and issued, subscribed<\/li><li>paid-up\ncapital prior to the offer<\/li><\/ul>\n\n\n\n<p>It also entails detail about the history\nrelating to equity share capital held by the company&#8217;s promoter. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Objects of the Offer<\/h3>\n\n\n\n<p>This section clarifies how the entity\nprojects to use the funds collected via the IPO. As an investor, this info can\nbe utilized to determine if the company is paying attention to growth factors\nor shall utilize the fund to repay debt, to fulfill capital requisites, or any\nother vital goals. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Industry overview<\/h3>\n\n\n\n<p>A red herring prospectus entails detail\nregarding the company&#8217;s standing compared to its rivals. The performance trend\nof the concerned industry is also enclosed in the document. If you are aiming\nto invest in a specific organization&#8217;s IPO, you must consider various business\nand economic variables at play, the supply and demand mechanism, and the future\npossibilities. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Business Description<\/h3>\n\n\n\n<p>This section pays attention to the\ncompany&#8217;s core operations and briefs out how it performs the business affairs.\nAs a shareholder, you must emphasize this section as the organization in its\ncore business will use your investment. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Financial information<\/h3>\n\n\n\n<p>This section is quite important as it\nentails critical information such as the company&#8217;s audit reports and financial\nstatements. As a potential investor, the financial statement will aid you get\nfamiliar with the company&#8217;s financial standing in the past. <\/p>\n\n\n\n<p>It will also provide adequate clarity\nabout how future dividends will stand out based on the profits disclosed. Based\non these details, you can figure out whether it is profitable to make future\ninvestments in the company. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Strengths<\/h3>\n\n\n\n<p>This section manifests the company\u2019s\nstrength in details- both internal and external. These factors distinguish the\ncompany from its rivals. It is imperative to dig deeper into this section only\nafter understanding the company&#8217;s business affairs and its competition. Simply\nput, this section predicts the potential of the company from the investor&#8217;s\nviewpoint. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Strategies<\/h3>\n\n\n\n<p>This section briefs out the strategies\nleveraged by the company to establish and thrive in its business. This can\ninclude the following; <\/p>\n\n\n\n<ul><li>geographic\nstrategies<\/li><li>product-level\nstrategies<\/li><li>market-level\nstrategies<\/li><\/ul>\n\n\n\n<p>This section sheds light on the approach\nadopted by the company to reap profits. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Risk Factors<\/h3>\n\n\n\n<p>Companies briefs out the major risk that\ncould hamper their business and operations under this very section. While many\nare prevalent risks, some risks seek in-depth evaluation. For instance, if you\ncome out with a finding that the company has yet to clear several due legal\ncases, it may be beneficial to avoid the IPO. As an investor, you must have the\npotential to pinpoint the real risk that could jeopardize the company&#8217;s growth\nin the future.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Management<\/h3>\n\n\n\n<p>This section briefs out key details of\nthe company&#8217;s directors, promoters, and other management officials, such as\nnames, qualifications, and designations. It also specifies any criminal cases\nor pending litigations against these people. Thus, it is vitally imperative to\ndig down this section carefully to avert any future complications. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Promoters and Promoter Group<\/h3>\n\n\n\n<p>This section renders complete particulars\nabout the company&#8217; promoters and\/or promoter group <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Dividend Policy<\/h3>\n\n\n\n<p>Companies are not under any mandate to\ndisclose dividend policy. But, some companies voluntarily reveal such\ninformation in this section owing to the presence of a formal dividend policy. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Red herring prospectus serves as a legitimate source for determining a company&#8217;s prowess in terms of financial stability. Apart from that, it keeps the investors on the edge when it comes to making an informed decision regarding future investment. Although it is a lengthy document, it renders a plethora of crucial information regarding the company&#8217;s operations and financials to the potential investor. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important\"><a href=\"https:\/\/corpbiz.io\/learning\/penalty-for-non-filing-of-annual-return-with-roc-under-companies-act-2013\/\">Penalty for Non Filing of Annual Return with Roc under Companies Act 2013<\/a><\/mark><\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Red herring Prospectus refers to a prospectus that does not enclose entire details of the quantum or price of the securities entailed therein. In layman terms, a red herring prospectus encloses most of the details regarding the company&#8217;s business affairs and future prospects but does not enclose critical share information such as its numbers or [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":39304,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[120],"tags":[2077],"acf":{"service_id":"321"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":4543,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/39303"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=39303"}],"version-history":[{"count":8,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/39303\/revisions"}],"predecessor-version":[{"id":39330,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/39303\/revisions\/39330"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/39304"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=39303"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=39303"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=39303"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}