What is a DRHP?

DRHP stands for Draft Red Herring Prospectus, a preliminary document filed by a company with regulators (like SEBI in India) to announce its intent to go public via an Initial Public Offering (IPO). It provides potential investors with detailed information on the business, financials, risks, and management but lacks the final IPO price and exact share quantity, which are filled in later for the final Red Herring Prospectus (RHP) after regulatory review.

What is the purpose of a DRHP?

The purpose of the DRHP is to provide transparent information to potential investors, allowing SEBI and the public to review and raise queries before the final prospectus is approved.

What is the DRHP of an IPO?

The Draft Red Herring Prospectus is an initial document filed with regulatory bodies by a company intending to launch an Initial Public Offering (IPO) or a public issue. The DRHP contains essential information about the company's business, operations, financial performance, and prospects.

What happens after a DRHP is filed?

Once the DRHP is filed, SEBI reviews it for compliance and may provide observations or ask for clarifications. The company must address these points before filing the final Red Herring Prospectus (RHP). Post-approval, the company proceeds with roadshows, pricing, and eventually the IPO launch.

What is the difference between RHP and DRHP?

Content: A DRHP includes high-level descriptions of the company's business strategy and financial situation and a summary of its key services. An RHP, on the other hand, contains all the information an investor needs to know before investing in the company.

What is DRHP? | Meaning of Draft Red Herring Prospectus #drhp

Is a DRHP legally binding?

A DRHP is not just a formality. It is a legally binding disclosure document.

What are the 4 types of investors?

Types of investors include personal investors, institutional investors, angel investors, and venture capitalists, each with unique roles and objectives. Investors and traders differ in their approach, with investors focusing on long-term gains and traders on short-term profits.

How long does it take for DRHP to be approved?

DRHP approval typically takes 2-3 months for approval. Following the exchange's approval, the Issuer company along with Lead Manager(s) must incorporate all required changes specified by the exchange.

Is it good to buy stock right after IPO?

Waiting until the stock starts trading

In many cases, it may be beneficial for investors to wait until after a stock starts trading—in other words, to let the dust settle.

What are common red flags in a DRHP?

A few red flags to watch for in a DRHP include: a history of significant losses, a high level of debt, revenue concentration from a single customer, pending legal disputes or regulatory issues, and the use of IPO proceeds to pay off existing promoters instead of for business growth.

What is the 30 day rule for IPO?

You can sell the shares you received through IPO access at any point in time. However, if you sell IPO shares within 30 days of the IPO, it's considered flipping and you may be prevented from participating in IPO access for 60 days. This policy applies to all IPOs offered with IPO access.

What is the 3 month rule of SEBI?

If a stock in derivatives segment fails to meet the abovementioned criteria for three consecutive months, then such stock shall exit from derivatives segment i.e. no new contract shall be issued on that stock, however, the existing unexpired contracts may be permitted to trade till expiry and new strikes may also be ...

Is it good to buy IPO on first day?

Do IPOs usually go up on the first day? According to Statista, first-day IPO stock performance does historically show returns. In 2020, when 471 companies (including blank-check holding companies) went public, the average first-day IPO gain was 36%. That broke the previous record in 2013 of 21%.

Who prepares the DRHP?

A draft red herring prospectus (DRHP), also known as the offer document, is prepared by the merchant bankers as a preliminary registration document for companies looking to float an IPO for book building issues.

What if I invested $1000 in Coca-Cola 30 years ago?

A $1,000 investment in Coca-Cola 30 years ago would have grown to around $9,030 today. KO data by YCharts. This is primarily not because of the stock, which would be worth around $4,270. The remaining $4,760 comes from cumulative dividend payments over the last 30 years.

How to turn $10,000 into $100,000 in a year?

Here are the most effective ways to earn money and turn that 10K into 100K before you know it.

1. Buy an Established Business. ...
2. Real Estate Investing. ...
3. Product and Website Buying and Selling. ...
4. Invest in Index Funds. ...
5. Invest in Mutual Funds or EFTs. ...
6. Invest in Dividend Stocks. ...
7. Peer-to-peer Lending (P2P) ...
8. Invest in Cryptocurrencies.

How much turnover is needed for an IPO?

The applicant company should have been listed for at least 3 years. Minimum average daily turnover during last 6 months (value) - INR 10 lakhs. Minimum average daily number of trades during last 6 months (count) – 50.

What comes first, DRHP or RHP?

The DRHP is the starting point, giving SEBI and investors an early look at the company's plans. The RHP takes it a step further, providing refined details to help investors make smart choices. Together, these documents ensure transparency, protect investors, and make the IPO process smooth and fair.

Can I sell IPO shares immediately after listing?

On the day the company is listed on the stock market, you can only start trading after 10:00 a.m., and the session lasts until 3:30 p.m. You can sell your IPO shares on the listing day and enjoy significant profits, but you will have to trade between this five-and-a-half-hour period.

What is the best investment for beginners?

Mutual funds are one of the best investments for beginners because they give investors the opportunity to invest in a basket of stocks or bonds (or other assets) that they might not be able to easily build on their own.

How do investors get paid?

Dividends are a form of cash compensation for equity investors. They represent the portion of the company's earnings that are passed on to the shareholders, usually on either a monthly or quarterly basis. Dividend income is similar to interest income in that it is usually paid at a stated rate for a set length of time.