[Analysis] SEBI’s New Abridged Prospectus Format | A Quantum Leap for Investors’ Clarity & Confidence in Indian Markets

Table of Contents

1. Introduction
2. Legal provisions on the abridged prospectus
3. SEBI revises disclosure format of abridged prospectus to provide greater clarity & enhanced disclosure
4. Abridged prospectus shall now contain a QR code
5. Issuer/Merchant bankers must ensure that disclosures in the abridged prospectus are adequate and accurate
6. Conclusion

1. Introduction

An abridged prospectus, often referred to as simply an “abridged prospectus,” is a condensed version of a company’s full prospectus. It serves as a concise and informative document designed to provide potential investors with a quick overview of key information about the company and its upcoming securities offering.

Typically, an abridged prospectus includes essential details such as the company’s business model, financial performance, objectives, and the terms of the securities being offered, such as shares or bonds.

2. Legal provisions on the abridged prospectus

Section 2(1) of the Companies Act, 2013 defines an “abridged prospectus” as a memorandum containing such salient features of a prospectus as may be specified by the Securities and Exchange Board of India by making regulations in this behalf.

Section 33(1) of the Companies Act, 2013 states that no form of application for the purchase of any of the securities of a company shall be issued unless such form is accompanied by an Abridged Prospectus.

As per Regulation 2(1)(a) of SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 “abridged prospectus” means a memorandum accompanying the application form for a public issue containing such salient features of a prospectus as specified by the Board.

Further, in terms of Regulation 32(3) of the NCS Regulations, abridged prospectus shall be in the format as specified in Part B of Schedule I of the NCS Regulations.

3. SEBI revises disclosure format of abridged prospectus to provide greater clarity & enhanced disclosure

SEBI vide. Circular no¹. Dated September 4, 2023 has revised the format of the abridged prospectus for public issues of non-convertible debt securities and/or non-convertible redeemable preference shares. This format has been revised to further simplify and provide greater clarity and consistency in the disclosures across various documents.

The format for disclosures in the abridged prospectus has been provided as an annexure to the circular. As per the revised format, an issuer will have to disclose the type of instrument, base size, face value, the option to retain over-subscription, details of coupon, issue opening and closing date, rating of the instrument, and name of the exchange where it will be listed on the front page of the abridged prospectus.

Further, the issuer is also required to disclose the details of the promoter, experience and educational qualifications, board of directors, business overview, risk factors, objects of the issue, and issue procedure.

Also, Instructions to investors for completing the application form have also been specified in the circular. Issuer/Merchant Bankers/syndicate members like brokers who are involved in the public issue must disclose the same on their websites during the period a public issue is kept open.

4. Abridged prospectus shall now contain a QR code

The disclosure format of the abridged prospectus has been revised to provide additional but critical information on the front page of the offer document. Besides, the issuer or merchant bankers should include a Quick Response (QR) code on the last on the last page of the Abridged Prospectus. The scan of such a QR code on the Abridged prospectus would lead to the Prospectus.

Further, the issuer entity or Merchant Bankers should include a QR code on the front page of the documents such as the front outside cover page, advertisement, etc. as deemed fit by them. The scan of the QR code would lead to the prospectus or abridged prospectus as applicable.

Also, a copy of the abridged prospectus must be made available on the website of the issuer, merchant bankers, and registrar to an issuer. Besides, a link for downloading such a prospectus shall be provided in the advertisement for the public issue.

5. Issuer/Merchant bankers must ensure that disclosures in the abridged prospectus are adequate and accurate

The Issuer/Merchant Bankers must ensure that the disclosures in the abridged prospectus are adequate, and accurate and do not contain any misleading or misstatement. Further, the Issuer/Merchant Bankers must ensure that the qualitative statements in the abridged prospectus shall be substantiated with quantitative factors. Also, no qualitative statement shall be made which cannot be substantiated with quantitative factors.

The new format shall be applicable for all public issues opening on or after October 1, 2023. Accordingly, for public issues that open on or after October 1, 2023, the format of an Abridged Prospectus shall be as per the present circular instead of Part B of Schedule I of the NCS Regulations.

6. Conclusion

In conclusion, the revised format introduced by the SEBI with regard to abridged prospectuses marks a significant step towards enhancing transparency and simplifying the information provided to potential investors in public offerings.

The introduction of QR codes for simplified access to the complete prospectus, along with the requirement for qualitative statements to be substantiated by qualitative data marks a momentous stride towards bolstering transparency and investor empowerment.

By providing investors with clearer, more accessible information, these changes promote confidence and enable more well-informed decision-making within the dynamic Indian securities market.

1. Circular No. SEBI/HO/DDHS/PoD1/CIR/P/2023/150, Dated: 04.09.2023