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Draft Red Herring Prospectus (DRHP)

  • IASbaba
  • February 14, 2022
  • 0
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Draft Red Herring Prospectus (DRHP)

Part of: Prelims and GS-III Economy

Context: The Union government has filed a draft red herring prospectus with the SEBI for selling 5% of its shares in the Life Insurance Corporation (LIC) of India.

Key takeaways 

  • A Draft Red Herring Prospectus (DRHP) is a document that is prepared to introduce a new business or product to a potential investor.
  • This is not a final document for an investor.
  • It is 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.
  • SEBI is required to assess the facts stated in the DRHP and recommend changes if required, before giving the share sale a green signal.

The Securities and Exchange Board of India (SEBI) 

  • It is the regulator of the securities and commodity market in India owned by the Government of India. 
  • It was established in 1988 and given statutory status through the SEBI Act, 1992. 
  • SEBI is responsible to the needs of three groups:
    • Issuers of securities
    • Investors
    • Market intermediaries
  • Functions
    • Quasi-legislative – drafts regulations 
    • Quasi-judicial – passes rulings and orders 
    • Quasi-executive – conducts investigation and enforcement action 
  • Powers:
    • To approve by−laws of Securities exchanges.
    • To require the Securities exchange to amend their by−laws.
    • Inspect the books of accounts and call for periodical returns from recognised Securities exchanges.
    • Inspect the books of accounts of financial intermediaries.
    • Compel certain companies to list their shares in one or more Securities exchanges.
    • Registration of Brokers and sub-brokers

News Source: TH

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