Understanding Abridged Prospectus in Detail
As per the Indian Companies Act, an abridged prospectus is a memorandum with all the important features of a prospectus as specified by the stock market regular – the Securities and Exchange Board of India (SEBI).
When a company invites the public to purchase its securities, it is required to issue a full prospectus, which tends to be an exhaustive document that has all the necessary information about a company's financial position, its directors, signatories’ names to the memorandum, the objectives of the public offer, etc.
An abridged prospectus contains all the necessary information from a full prospectus in less than five pages. Hence, it is a concise document that helps people decide if they want to invest in a company. Having explained the meaning of an abridged prospectus, let us talk about the types of abridged prospectus.
Types of Abridged Prospectus
The type of abridged prospectus depends upon the reason for issuing it. For example, the companies going for an IPO release an abridged prospectus that talks about a company’s history, its business overview, key financial parameters, risk factors, etc.
Another type of abridged prospectus is issued by companies when they announce a rights issue. Such a prospectus provides the details of a rights issue, the purpose of the issue, the number of shares being made available, the price of subscription, etc.
The third type of abridged prospectus is issued by companies when they raise finance through debt instruments. This prospectus provides information about the interest rate being offered, the date of maturity, the terms of repayment, etc.
Additional Read: What Is An IPO: Everything You Need To Know
Example of an Abridged Prospectus
Find below a snapshot of the abridged prospectus filed by Cyient DLM Ltd. when it came out with an IPO. It clearly says that the total issue size was up to Rs 592 crores. Then, it says that the bid/issue opened on June 27, 2023, and closed on June 30, 2023.
The abridged prospectus also says that Axis Capital Ltd. and JM Financial Ltd. were the book running lead managers of this issue. Under Company Review, the prospectus says that Cyient DLM is a leading integrated electronic manufacturing services and solutions provider.
It also provides a year-wise breakup of revenue, which helps investors understand the segments that are contributing to Cyient DLM’s top line. Then, the data about gross profit and net profit is provided.
Further, the names, designations, and experience of the board of directors are provided. Put together, this information can help investors make up their minds about such an IPO.
How to Find an Abridged Prospectus?
There are multiple ways in which you can find an abridged prospectus of a company. If a company is coming out with an IPO/FPO, it will physically distribute its abridged prospectus along with its application form. Such a prospectus is also available on the websites of the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
Alternatively, you can also check a company’s website for its abridged prospectus. Typically, companies upload their abridged prospectus on their website.
Additional Read: Difference Between IPO and FPO
Impact of an Abridged Prospectus for New-Age Investors
New-age investors are well-informed, as they have lots of information at their fingertips. For such investors, an abridged prospectus can be extremely useful. It can tell them about the nature of a company’s business, how it has performed financially in recent years, and how much its sales and profits have been in the recent past.
Besides, it can tell them about a company’s board of directors, their experiences, education, and what they bring to the table. With such detailed information in a few pages, new-age investors can decide whether they want to invest in a company or not.
They can even combine the insights from an abridged prospectus with news and updates about a company to make an even more informed decision.
Significance of Abridged Prospectus
Summary of a prospects: A full prospectus is an exhaustive document. However, an abridged prospectus is less than five pages long, and yet it contains all the essential details of a prospectus.
Saves investors’ time: As it is a concise document, it helps save investors their precious time. By reading less than five pages of an abridged prospectus, they can decide if they want to invest in a company.
Provides information about investors’ rights: Whether a company is coming out with an IPO/FPO, rights issue, or debt issue, an abridged prospectus is an excellent document because it lets investors know their rights. It also contains important information about the nature of an investment.
Elements of an Abridged Prospectus
The elements of an abridged prospectus are explained below:
- Overview of a company: An abridged prospectus explains the nature of a company’s business and also provides a brief about its history.
- Financial information: It provides essential financial data about a company that can help investors make up their minds.
- Details of the offering: It also furnishes information about the number of shares/bonds to be issued, the price range, and the objective of an offering.
- Risk factors: An abridged prospectus explains the risk factors for making an investment.
Conclusion
An abridged prospectus is a valuable document because it provides important information about a company regarding its business, financial performance, and board of directors. As an investor, it is important to understand the meaning of an abridged prospectus and develop a habit of reading it. Hence, if you have a trading account and want to invest in a company that has come out with an IPO/FPO, rights issue, or debt issue, you should definitely go through its abridged prospectus.
Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.
This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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