# Section 32 - Red Herring Prospectus (RHP)

## Concept

A Red Herring Prospectus (RHP) is a prospectus that does not include complete particulars of the quantum or the price of the securities included in it. It is used in book-built issues where the price is determined through bidding, so the final issue price is not known when the offer document is circulated. The name 'red herring' comes from the warning printed in red on the cover.

## When Can RHP Be Issued?

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

## Filing With the Registrar

The company shall file the RHP with the ROC at least three days prior to the opening of the subscription list and the offer.
The RHP carries the same obligations as are applicable to a prospectus.
Any variation between the RHP and the final prospectus must be highlighted as variations in the prospectus.

## Filing After the Issue Closes

Upon closing of the offer, the final prospectus stating:

The total capital raised, whether by way of debt or share capital,
The closing price of the securities, and
Any other details that were not included in the RHP,

...shall be filed with the Registrar of Companies and SEBI.

## Liability

The RHP carries the same obligations as a prospectus; misstatements attract liability under Sections 34 and 35.

Worked example

### Example 1

Example 1 - Book-built IPO

ABC Ltd. is launching a book-built IPO with a price band of Rs. 100-120; the final price will be discovered through bidding.

Treatment: ABC Ltd. may issue an RHP showing the band but not the final price. The RHP must be filed with ROC at least 3 days before subscription opens. After closing, a final prospectus showing discovered price and capital raised must be filed with both ROC and SEBI.

### Example 2

Example 2 - Variation between RHP and Prospectus

The RHP indicated a price band of Rs. 100-120, but due to market conditions the company revises it downwards to Rs. 90-110 in the final prospectus.

Treatment: The revised price band is a variation from the RHP and must be highlighted as a variation in the final prospectus.

⚠️ Common exam mistakes

Confusing RHP (no price/quantum) with Shelf Prospectus (multiple issues over time) - they serve different purposes.
Missing the 3-day prior filing requirement before subscription opens.
Forgetting the post-closing filing with both ROC and SEBI of the final prospectus.
Believing RHP carries lesser liability than a prospectus - it carries the same obligations.

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. Section 32(2): A company proposing to issue a red herring prospectus under sub-section (1) shall file it with the Registrar at least three days prior to the opening of the subscription list and the offer. Section 32(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. Section 32(4): Upon the closing of the offer of securities under this section, the prospectus stating therein the total capital raised, whether by way of debt or share capital, and the closing price of the securities and any other details as are not included in the red herring prospectus shall be filed with the Registrar and the Securities and Exchange Board. Explanation.-For the purposes of this section, the expression 'red herring prospectus' means a prospectus which does not include complete particulars of the quantum or price of the securities included therein.

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