Section 32 Red herring prospectus Companies Act Integrated Ready Reckoner Companies Act 2013 CAIRR

offer of securities
frequently asked questions

Don’t miss out on this important resource – read our guide to red herring prospectuses today. The role of the merchant banker, in this case, is to take care of the legal compliance issues and ensure that prospective investors are aware and kept in the loop of public issue. “KYC is one time exercise while dealing in securities markets – once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.” Sebi has made it compulsory for all companies to file a DRHP prior to approaching the ROC.

This is to inform that, many instances were reported by general public where fraudsters are cheating general public by misusing our brand name Motilal Oswal. The fraudsters are luring the general public to transfer them money by falsely committing attractive brokerage / investment schemes of share market and/or Mutual Funds and/or personal loan facilities. Though we have filed complaint with police for the safety of your money we request you to not fall prey to such fraudsters. You can check about our products and services by visiting our website You can also write to us at , to know more about products and services.

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Thus, you can understand the manufacturing procedures, internal procedures, quality monitoring systems, red herring prospectus meaninging strategies, pricing policies etc. You can also understand how the company operates and runs its business. This section outlines all the risks that the company’s shareholders may face. The Red Herring Prospectus also discusses the company’s internal and external strengths. These strengths highlight the company’s uniqueness and how it is different from its rivals.

ClearTax offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. ClearTax serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India. In case a private company wishes to convert to a public company, it is required to either issue a prospectus or file a statement in lieu of prospectus of which the provisions are mentioned under Section 70 of the Companies Act, 2013. And other appropriate information about the company, which helps investors make informed decisions.


It will also help to get an idea of future dividends based on the profits disclosed. You can project the safety and profitability of your future investment based on the financial statement. IPOs present a good opportunity for investors to be part of companies with good growth potential and strong fundamentals. But it is important to know all the important aspects of the offer before investing in it. The RHP is the reference point for the investors to get information about the IPO. To invest in an IPO, an investor must have a Demat and trading account with a registered broker.

For instance, if you are investing in a tech company, your investor will want to know how much tech knowledge you have and how competitive your technology is. This document should be able to communicate the product vision and target audience. This is not a final document for an investor, but rather a way of demonstrating value and providing investors with enough information for them to decide whether they want to invest in the company or not. Hence, it is crucial for all investors to read this part to get some clarity on the offer’s minute details. In this section, you’ll know how the company intends to utilize the capital/ money raised through the IPO.

It may also refer to statements within the prospectus that list the requisite documents as per the provision of Section 26. In an IPO, the prospectus tells potential shareholders about the company’s plans and business model. It is a very powerful tool that provides them with all the necessary information about the company in order to help make an informed decision.

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This certificate demonstrates that IIFL as an organization has defined and put in place best-practice information security processes. Furthermore, you can read a brief biography of each Director, know their salary information of Directors, and a list of Board committee members. Below accounts are used for other internal purposes and should not be used to transfer money to Upstox. An issuing company needs to make an announcement of the upcoming IPO in newspapers once it has submitted its RHP to SEBI.

The offer document is reviewed by Sebi, and after all the recommended changes are made and the final document is reviewed and approved by Sebi, the ROC and stock exchanges, the document finally becomes a Red Herring Prospectus . The management of a company plays a crucial role in determining its business prospects. After all, the management is in charge of strategizing on matters like expansions, renovations, marketing and overall growth. This section mentions the names, designations, and qualifications of key management personnel, promoters and directors. It may also include risk factors like pending litigations or cases against any of them, so it’s necessary to read this section thoroughly. You can also look at the dividend declared by the company on equity shares in the previous financial years if applicable.

Liability for misstatement in a prospectus

This is used by companies to raise funds for achieving further growth or other objectives. The issuance of prospectus or application forms for securities that are similar to securities that have previously been issued, traded or listed on recognised stock exchanges will also be exempt from its applicability. The document clarifies the reason why the company wants to raise money from the public, how the money will be used and risks involved in investing in the company. It does not contain details of either price or number of shares being offered or the amount of issue. This means that in case price is not disclosed, the number of shares and the upper and lower price bands are disclosed.

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Sebi’s observations or recommendations are given to the merchant banker, who makes the changes and files the final offer document with Sebi, the ROC) and stock exchanges. Again the document is reviewed and observations are given to be implemented. Once that is done,final approval is provided and the document then becomes a RHP . Sebi’s observations or recommendations are given to the merchant banker, who makes the changes and files the final offer document with Sebi, the ROC) and stock exchanges.

The term “red herring” is thus derived from the bold disclaimer in red on the cover page of the preliminary prospectus. At the same time, it informs the investor that the company has filed for an IPO. The DRHP helps companies take advantage of early-stage investments without requiring all the legal disclosure steps. This may also help companies to test their business model and see if they have a viable proposition before going through with a more expensive, time-consuming process of creating a final, legally compliant prospectus. It is a way for companies to file for an IPO without having any concrete plans to go through with it.

You are therefore advised to read the following terms and conditions carefully before reading, accessing or making any other use of the Red Herring Prospectus. Check your Securities /MF/ Bonds in the consolidated account statement issued by NSDL/CDSL every month. As you can see from the above, the DRHP is all that you need to know if a company’s IPO is worth investing in or not.

Where Can You Find an RHP?

Email and mobile number is mandatory and you must provide the same to your broker for updation in Exchange records. You must immediately take up the matter with Stock Broker/Exchange if you are not receiving the messages from Exchange/Depositories regularly. Update your e-mail and phone number with your stock broker/depository participant and receive OTP directly from depository on your e-mail and/or mobile number to create pledge.

It is important to go through this section only after understanding the company’s business and its competition. The strengths of the company can help you understand the potential it has to grow in the near future. It is essential to go through this section only after understanding the company’s business and its competition.

Investors are requested to note that Stock broker is permitted to receive/pay money from/to investor through designated bank accounts only named as client bank accounts. Stock broker is also required to disclose these client bank accounts to Stock Exchange. Hence, you are requested to use following client bank accounts only for the purpose of dealings in your trading account with us.

Trading in “Options” based on recommendations from unauthorised / unregistered investment advisors and influencers. We at Share India aim at transforming the millennial trading experience through a cutting-edge fintech platform. We strive to provide the best value for money trading solutions by incorporating Artificial Intelligence and Machine Learning technology. That said, considering the fact that a typical DRHP can range anywhere from 300 to 500 pages, it may not be practical to read through the entire document. In such case you can have a quick glance at the research page of ShareIndia website , where ShareIndia Research Team keeps on posting the details of the upcoming IPOs with the expert advice whether it is suitable for you or not. The Documents may contain statements about future events and expectations that constitute forward-looking statements.

Please note that your stock broker has to return the credit balance lying with them, within three working days in case you have not done any transaction within last 30 calendar days. Please note that in case of default of a Member, claim for funds and securities, without any transaction on the exchange will not be accepted by the relevant Committee of the Exchange as per the approved norms. Thus, a DRHP is a crucial document for investors and companies that can be a significant tool in helping to attract more investors for the company’s IPO and can help investors make the best choices.

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This section lists the strategies adopted by the company to establish and grow its business. This can include product-level strategies, geographic strategies, market-level strategies, etc. This can help you understand the approach taken by the issuing company to generate profits.

  • The details of the company’s promoters or promoter group is stated in this section.
  • On the site we feature industry and political leaders, entrepreneurs, and trend setters.
  • Stock brokers can accept securities as margins from clients only by way of pledge in the depository system w.
  • It is often the very first step in the process of raising funds by selling equity.
  • Once the draft version is approved, it is known as Red Herring Prospectus.

Once SEBI goes through the draft version of the RHP, it will recommend changes before approving it. Once the draft version is approved, it is known as Red Herring Prospectus. However, this document does not disclose details like the offer price, lot size or the issue date of the IPO.

Here, we will explain everything that an investor should know about RHP. The RHP elaborates on how the company intends to use the money that will be raised, the possible risks for investors. Arguments containing red herrings use irrelevant information to change the topic of discussion.

Investors must go through the document carefully and can go ahead and do some research on their own about performance of other companies in the space and so on. For example, Zomato’s objective to come up with an IPO was to fund its day to day operations and expand their business. Whereas, if we take a look at objects of the offer of Macrotech developers Ltd. , their objective to raise funds was to repay its debt to a great extent. Before you invest your hard-earned money, you must check what the company plans to do with the raised funds. Before buying any product or service you often go through each detail. Similarly, before investing in anyupcoming IPOit is important to know about the company.

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The value of the shares to be sold by the public sector insurer is big and it is a celebration time for the primary market. A Draft Red Herring Prospectus is a document that is prepared to introduce a new business or product to a potential investor. Sannihitha Ponaka is an MBA graduate from Symbiosis and has more than 5 years of experience in the financial sector. Following her dreams in the field of finance, she leverages writing to communicate the importance of investing.

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