RHP Overview

The Red Herring Prospectus (RHP) is the definitive source of truth about a company going public. It serves one purpose: to protect the investor by disclosing EVERYTHING—good, bad, and ugly.

Why is it called "Red Herring"?

Historically, the cover page had a bold red disclaimer stating that the information is not complete (price is not yet decided). It's a legal warning: "Read this before you blame us later."

How to Speed-Read an RHP (400+ Pages)

Nobody reads line by line. Use the "CTRL+F Strategy" focusing on these keywords:

1. "Litigation" or "Legal Proceedings"

Go to the Outstanding Litigation section.

Does the company have pending tax fraud cases?
Are there criminal cases against the promoters?
Red Flag: If the litigation amount > 10% of profit, be scared.

2. "Related Party Transactions"

Check if the company is funneling money to the promoter's other businesses.

Example: The public company rents an office from the promoter's wife at 5x market rate. (Theft).

3. "Risk Factors" (Top 5)

By law, they must list specific risks.

Look for: "We depend on Top 5 customers for 90% of revenue" (Client Concentration Risk).
Look for: "Our raw material prices are volatile and we cannot pass costs to customers" (Margin Squeeze).

4. "Management"

Look at the salary of the Promoter/CEO compared to the Net Profit.

If Profit is ₹10 Cr and CEO Salary is ₹5 Cr? Avoid.

Where to Find the RHP?

SEBI Website: Filings -> Public Issues -> Red Herring Prospectus.
Exchanges: NSE/BSE -> Corporates -> IPO.
Your Broker: Usually links the PDF on the IPO bidding page.

Start with the "Offer Document Summary" usually found in the first 20 pages. It condenses the entire book into key financial tables and business details.

❓Quick Quiz

You find a section in the RHP called 'Outstanding Litigation'. Which of the following is a major Red Flag?

Sources & Disclaimer

SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018
SEBI Guidelines for Red Herring Prospectus (RHP) Format

Note: Any benchmarks (e.g., "Good ROE is > 20%", or specific P/E ranges) are simplified industry heuristics for educational purposes. True evaluation depends on specific industry context, market cycles, and individual company circumstances.