Indian capital market regulator SEBI has made it easier for small investors to go through IPO prospectus by notifying that companies seeking to bring IPOs will now be required to file an abridged prospectus. In an order on its website, the regulator said companies will need to file the five-sheet abridged prospectus which will include the application form for IPO. The new requirements for condensed prospectuses come into force with effect from 1 December 2015.
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The sheets will be printed on both sides and the font cannot be less than Times New Roman size 11. As of now, the bulky draft prospectuses run into several hundred pages and sometimes cross even 1,000 pages. As a result, it becomes difficult for small investors to go through the lengthy document. In absence of vital information, investors end up making uninformed investing decisions.
“Information as is material and appropriate to enable the investors to make an informed decision shall be disclosed in the abridged prospectus,” said the regulator in its order. At the same time, information which is of generic nature and not specific to the issuer would need to be brought out in the form of a General Information Document (GID) as specified by SEBI.
The order in which items appear in the abridged prospectus shall be as specified by SEBI. The application form shall be so positioned that on the tearing-off of the application form, no part of the information given in the abridged prospectus is mutilated
– SEBI notification
The new requirements will make it easy for investors to access vital information about a company before making an investment decision. At the same time, it will result in savings for the companies bringing IPOs. As of now, companies need to print lengthy application forms.
Investors looking for more information can access detailed prospectus on the websites of SEBI and the IPO’s merchant bankers.