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What is Abridged prospectus and when It is Issued

31 May 2023

Like you wouldn't go to a movie without watching the trailer first, you wouldn't want to invest in something without checking out its Abridged Prospectus! These documents are handy little summaries that give you all the critical information about an investment opportunity, including its features and risks, in a quick and easy-to-digest format. This quick glimpse helps you determine whether the investment opportunity interests you and whether you should seek more information or read the entire prospectus.

Similar to how a movie trailer is necessary for a movie's release, an Abridged Prospectus is a crucial component of an investment opportunity.

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In this article, you will learn what an Abridged Prospectus is and how and when it is issued.

What is Abridged Prospectus?

Companies file an Abridged Prospectus to publish critical information about the investment opportunity in the company. It is designed to give you a concise overview of the investment opportunity in just a few pages, usually no more than five.

Companies looking to raise capital from the public are required to file a copy of the prospectus, including the shelf, red herring prospectus, and Abridged Prospectus, with the Securities and Exchange Board of India (SEBI) for review. SEBI may provide comments and observations on the Abridged Prospectus if it deems the disclosures inadequate. However, the lead managers, registrar issuers, and bankers are responsible for the information mentioned in the prospectus. 

Importance of Abridged Prospectus

As a potential investor, you may wonder why the Abridged Prospectus is such an important document. There are several reasons:

  1. It provides a concise and easily understandable summary of the investment opportunity. That helps you quickly assess whether the investment aligns with your goals since it contains all the critical information you may need about the investment. Companies are required to provide this information accurately and completely.
  2. The Securities and Exchange Board of India (SEBI) and other regulatory authorities require companies to comply with predefined disclosure requirements. Doing so enhances investor confidence and trust in the securities market. That, in turn, may attract more investors to the market, benefiting investors and companies seeking to raise capital. 
  3. By requiring companies to provide complete and accurate information, these prospectuses protect investors and help prevent fraud.

It's essential to understand that the Abridged Prospectus is a crucial document that helps you make informed investment decisions while ensuring transparency and fairness in the securities market.

When is the Abridged Prospectus issued?

An Abridged Prospectus is typically issued by companies when they want to raise funds through a public offering of securities such as shares or debentures. The Abridged Prospectus is issued along with the final prospectus (or the offer document), which contains more detailed information about the investment opportunity.

According to the Securities and Exchange Board of India (SEBI) regulations, companies must file the prospectus, including the Abridged Prospectus, with SEBI at least 30 days before the public offering. SEBI must review and approve the prospectus and Abridged Prospectus before making it available to the public.

An Abridged Prospectus summarises vital information about the company and its securities. To ensure credibility, the issuer must back up qualitative statements with quantitative data, such as Key Performance Indicators (KPIs).

What is included in an Abridged Prospectus?

There are usually the following items included in an Abridged Prospectus:

  1. The name and address of the issuing company
  2. Details of OFS by the promoter, promoter group and other shareholders.
  3. The company, subsidiary and joint venture details
  4. The type and nature of the securities being offered, such as equity shares or debentures
  5. The objectives of the issue, such as raising capital for expansion or debt repayment
  6. The terms of the issue, such as the number of securities being offered and the price at which they are being offered
  7. The financial and operating performance of the company, including key financial ratios such as earnings per share (EPS) and return on equity (ROE)
  8. Share reservations information
  9. The risks associated with the investment, such as market risks and business risks
  10. The use of proceeds from the issue, such as funding capital expenditures or working capital requirements
  11. Information about the management team and their experience and qualifications
  12. Details about the underwriters and other intermediaries involved in the issue
  13. A Quick Response (QR) code on the front page of the Abridged Prospectus

Conclusion

Remember that the Abridged Prospectus is only a summary document when considering an investment opportunity. You can access more detailed information by downloading the final prospectus from the link provided by registrars to issuers and lead managers, and issuer companies in the price band advertisement. Even so, the Abridged Prospectus offers an easy-to-understand and concise overview of the essential information you need to make an informed decision. So, before investing your hard-earned money, watch the "trailer" first!

 

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