A large number of new companies float public issue. Most of these companies are genuine, but quite a few may want to exploit the investors. Therefore it is important for Investors to obtain detailed information about a Company before investing i it.
What is Prospectus?
As per the guidelines issued by SEBI (Securities and Exchange Board of India), it is mandatory for disclosure to the public. This disclosure includes detailed information like the reason for raising the money, the way money is proposed to be spent, the return expected on the money etc. This information is in the form of ‘Prospectus’.
- It acts as both, a disclosure document and a marketing document.
- It required to contain a detailed description of the business, its current and past performance, the projects, cost of the projects, means of financing, product and capacity etc.
- It must also give a description of management structure, management salaries, operations, and financial conditions, dividend policy and Market capital of the company etc.
- It should also include information regarding the size of the issue, the current status of the company, its equity capital, details of promoters, underwriting, statutory compliances etc.
- It normally starts with a table of contents, definitions, risk factors, the summary of an issuer and financial data.
- This is followed by a detailed disclosure under three sections.: a)Issue Structure b) Issuer Information c) General and Statutory Information
- This way the Offer document covers all the relevant information to help an investor to make his/her investment decision.
‘Draft Offer document ‘
- Draft offer document means the offer document in draft stage. The draft offer documents are filed with SEBI,
atleast 21 days prior to the filing of the Offer Document with Registrar of Companies (ROC)/ Stock Exchanges (SEs). - The Draft Offer document will be available on the SEBI website for public comments for a period of 21 days from the filing with the Draft Offer document with SEBI.
- SEBI may specify changes if any which Company with the help of Merchant Banker shall carry out before submitting offer document to the ROC/SEs
Abridged
- Abridged Prospectus is shorter version of Prospectus.
- It contains all the salient features of a Prospectus.
- It accompanies the application form of public issue.
Red-Herring
Red Herring Prospectus is a prospectus which does not have details of either price or number of shares being offered or the amount of issue.
Shelf
A Prospectus in respect of which the securities or the class of securities included therein are issued for subscription in one or more issues over a certain period without the issue of a further prospectus is called as Shelf Prospectus.