Draft Red Herring Prospectus or DRHP does not have any details of either the price or the number of shares being offered or the amount of initial public offering. Draft red herring Prospectus means that in case of price is not disclosed, the number of shares and the upper and lower price bands are disclosed.
When a company that is planning to raise money from the public provides detailed information about its business operations and financials in the DRHP. This includes details about its promoters, the reason for raising money, how the money will be used, risks involved with investing in the company and so on. Investors should bear in mind that it does not provide information about the price or size of the offering. The issuer company approaches a merchant banker to prepare the offer document. In this type of bankers take care of the legal compliance issues as well ensure that prospective investors are aware and kept in the loop of the public issue.
The DRHP is a very powerful tool that provides them with all the necessary information about the company in order to help make an informed decision. This can function as a source of information regarding a potential offering that is currently being crafted by a particular company. In the versions of the draft red herring prospectus that have not been fully reviewed by the SEC may present a company in a particularly favorable light. This type of view may be adjusted after the SEC has requested revisions before final approval. This contains substantial information on the company as well as information regarding the intended use of proceeds from the offering, the market potential for its product/service, financial statement.
The investors can access a company’s Draft Red Herring Prospectus on various platforms of the company website, the merchant banker website, stock exchange or SEBI websites.