Prospectus is an invitation to the public for the subscription or purchase of any shares or debentures of a corporate body. It can be a notice, circular, or and other document. Prospectus usually contains risk factors, issue highlights and details of the company such general information, term and particulars of the issue etc.
The format of the Prospectus (with respect to the revisions made by SEBI IN 2000) requires it to be divided into 3 parts. Contents and format of the cover pages are also specified. Important details such as risk factors and issue highlights such as name of issuer company and regd. office, size of issue, issue opening date, credit rating etc. must be mentioned on the cover pages.
In the first part brief particulars are to be given about matters like;-
1) General Information; E.g. Name and address of the registered office of the company
a) Disclaimer clause taking no responsibility for statements other than those made in the prospectus.
b) Name of stock exchange where application for listing is made.
c) Minimum subscription clause.
a) Issue schedule i.e. date of opening, closing, earliest closing
b) Name and address of the auditors, lead manager, registrars etc.
c) Credit rating.
d) Name and addresses of the trustees of the debenture trust deed, in case of debentures.
2) Capital Structure of the Company
a) Authorized, issued, subscribed and paid-up capital.
b) Size of the present issue, giving separately reservation for preferential allotment to promotion and others.
3) Term of the Present issue;
a) Terms of payment.
b) How to apply (using the application form, on the basis of the study of the prospectus and mode of payment, disclosure for stock invests, Application Supported By Blocked Amount ( ASBA ) etc.)
c) Refund orders, utilization of issue proceeds.
4) Particulars of the issue
a) Object(s) of the issue
b) Project cost
c) Means of financing (Promoters condition)
d) Appraisal
5) Company management and project
a) History and main objects and present business of the company.
b) Promoters and their background.
c) Key managerial personnel.
d) Location of the project.
e) Technology, collaborations, capacity, future prospectus etc.
f) Stock market data, if any of last three years.
6) Management discussion and analysis of financial condition and results of operation.
7) Financial information of group companies
8) Promise vs. Performance of earlier issues
9) Internal and external risk factors
Part II requires the company to give detailed information. This part is divided in to 3 sub- part.
a) General information regarding directors, lead manager etc.
b) Financial information including ratios etc.
c) Statutory information like detail about minimum subscription, underwriting, revaluation etc.
Part III gives the explanation of terms used in Parts I and II
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