In order to provide more clarity and transparency, markets regulator Securities and Exchange Board of India (SEBI) has announced a new layout for disclosures under an abridged prospectus, in which critical information will be quoted on the front page of the offering statement.
Under the laws, every application form for the possession of any securities of a company requires to be supported by an abridged prospectus. After studying the disclosure provision, it was felt that due to the multitude of data that is expected to be disclosed, the look and text on the front page occurs to be crowded, Sebi noted in a circular published on Friday.
Under the new format, a firm will have to reveal the name of the promoter, details of the offer to the public — kinds of issue, fresh issue and offer for sale (OFS)component, total issue size — and share reservations facts on the front page of the abridged prospectus (DRHP or RHP).
Moreover, the firm is expected to make revelations about details of OFS by the promoter, promoter group and other shareholders. In the abridged prospectus comprising salient characteristics of the Red Herring Prospectus (RHP), the firm will have to disclose about price band and minimum bid lot under the new setup.
Furthermore, the issuer firm has to announce indicative timelines for beginning and ending of the issue, initiation of refunds, credit of equity shares to demat accounts of allottees and advent of trading of equity shares among others. The new layout is part of Sebi’s step to further easing, giving greater transparency and consistency in the disclosures across several documents and delivering additional but critical data in the abridged prospectus.
Sebi told that the abridged prospectus will be brought in available on the website of issuer firm, lead managers, registrar to issuers and a connection for downloading the prospectus will have to be given in price band advertising. The issuer firm and merchant bankers (MBs) will have to guarantee that the exposures in the abridged prospectus are sufficient, accurate and does not comprise of any misleading or mis-statement.
Similarly, the issuer company/MBs will have to guarantee that the qualitative statements in the abridged prospectus will be confirmed with Key Performance Indicators (KPIs) and additional quantitative factors. Also, no qualitative statement will be prepared which cannot be substantiated with KPIs. Additionally, they will have to put in a Quick Response (QR) code on the front page of the papers such as the front outer cover page, abridged prospectus, price band advertisement, etc as deemed twitch by them.
The scan of the QR code will direct to downloading of prospectus, abridged prospectus and price band poster as applicable. The new framework will be in the run for all issues opening after February 4.
