# Red Herring Prospectus (Section 32)

## Concept

A Red Herring Prospectus (RHP) = a prospectus which does not include complete particulars of the quantum or price of the securities included therein.

Purpose: Introduced to facilitate the Book Building method for public issue of securities — where the issue price is determined by investor bids during the subscription period.

## Key Provisions — Section 32

### (1) Issue Before Main Prospectus

A company proposing to make an offer of securities may issue a Red Herring Prospectus prior to the issue of a prospectus.

### (2) Filing Requirement

A company proposing to issue an RHP shall file it with the Registrar at least 3 days prior to:

The opening of the subscription list, and
The offer.

### (3) Same Obligations as Prospectus

An RHP shall carry the same obligations as a prospectus. Any variation between the RHP and the final prospectus shall be highlighted as variations in the prospectus.

### (4) Final Prospectus on Closing

Upon closing of the offer, the prospectus stating:

Total capital raised (whether by way of debt or share capital),
Closing price of the securities, and
Any other details not included in the RHP,

...shall be filed with the Registrar AND SEBI.

## RHP vs. Shelf Prospectus — Quick Distinction

Feature	Red Herring	Shelf
Missing element	Price / quantum	None (full details, but allows multiple issues)
Updates via	Final prospectus at closing	Information memorandum
Filing timeline	≥ 3 days before subscription opens	At stage of first offer
Validity	Single issue	Up to 1 year, multiple issues

## Memory Hook

"Red Herring = Price not fixed — File 3 days early — Variations highlighted — Final prospectus to ROC + SEBI on closing."

Worked example

### Example 1

Example 1 — Filing timing: XYZ Ltd intends to open its book-built IPO subscription on 20 May. Required: File the RHP with ROC by 17 May or earlier (at least 3 days prior).

### Example 2

Example 2 — Variation: The RHP indicated a price band of ₹100–120. The book-built final price came out at ₹118. The final prospectus must highlight this as the variation between RHP and the final prospectus.

### Example 3

Example 3 — Post-closure filing: IPO closes on 22 May, with ₹500 crore raised at ₹118 per share. The final prospectus stating the total capital raised, the closing price, and any other previously omitted details must be filed with both ROC and SEBI.

⚠️ Common exam mistakes

Believing an RHP can be issued WITHOUT a final prospectus afterwards — a full prospectus is mandatory upon closing.
Confusing the 3-day rule — it is 3 days before the opening of the subscription list, not 3 days before filing with SEBI.
Filing the final prospectus only with ROC and forgetting SEBI — both filings are required.
Treating RHP as a 'lesser document' — it carries the same obligations as a full prospectus.

Bare-Act text Section 32 · Companies Act, 2013 · click to expand

Section 32 — (1) A company proposing to make an offer of securities may issue a red herring prospectus prior to the issue of a prospectus. (2) A company proposing to issue a red herring prospectus shall file it with the Registrar at least three days prior to the opening of the subscription list and the offer. (3) A red herring prospectus shall carry the same obligations as are applicable to a prospectus and any variation between the red herring prospectus and a prospectus shall be highlighted as variations in the prospectus. (4) Upon the closing of the offer of securities, the prospectus stating therein the total capital raised, the closing price, and other details not included in the red herring prospectus shall be filed with the Registrar and SEBI.

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