What Is the Meaning of Prospectus?

It is a document that gives details regarding the company & invites for subscription or purchase of any shares or debentures from the public. The draft prospectus hast to be sent to the Regional Stock Exchange. It contains details regarding statutory provisions for the issue, programme of public issue-opening, closing & earliest closing date of the issue, highlights & risk factors, capital structure, board of directors, registered office of the company, brokers to the issue cost of the project & other such details.

OBJECTIVES
It informs the company about the formation of a new company. It serves as a written evidence about the terms and conditions of issue of shares or debentures of a company. It induces the investors to invest in the shares and debentures of the company. It describes the nature, extent and future prospectus of the company. It maintains all authentic records on the issue and make the directors liable for the misstatement in the prospectus.

Features
1) General Information
a)Name & Address of the registered office of the company. b)The name of the stock exchanges where applications have been made for permission to deal & for official quotations to deal in & for official quotations of shares/debentures. c)Opening, Closing & earliest closing dates of the issue. d)Name & Address of lead Managers. e)Name & Address of trustees under Debenture Trust Deed. f)Rating for debenture/preference shares, if any obtained from CRISIL or any recognized rating agency.

2) Capital Structure of the Company

a) Issued, Subscribed & Paid up Capital. b) Size of the present issue giving separately reservation for preferential allotment to promoters & others. c) Details regarding the promoters contribution.

3) Terms of the present issue

a) Authority for the issue, terms of payment, procedure & time schedule for allotment, issue of certificate & rights of the instruments holders. b) How to apply- availability of forms, prospectus & mode of payment. c) Special tax benefits to the company & shareholders under the Income Tax Act if any.

4) Particulars of the issue

a) Object of the issue b) Project cost

5) Company, Management & Project

a) History, main objects & present business of the company. b) Promoters & their background. c) Names, address & occupation of managing directors & other directors including nominee directors & whole- time directors. d) Location of the project. e) Plant & machinery, technological process etc. f) Collaboration, any performance guarantee or assistance in marketing by the collaboration. g) Infrastructure facilities for raw materials & utilities like water, electricity etc.

h) Schedule of implementation of the project & progress so for, giving details of land acquisition, civil works, installation of plant & machinery, trial production, consumer production etc. i) The product a) Nature of the products-consumer/industrial & end users. b) Approach to marketing & proposed marketing set up. c) Export possibilities & Export obligations, if any. J) Future Prospects- Expected capacity utilization during the first three years from the date of commencement of production & the expected year when the company would be able to earn cash profit & net profit. k) Stock market data for shares, debentures of the company (high, low price in each of the last 3 years & monthly high, low during the last six months.

6) Particulars regarding the other listed companies under the same management, which have made any capital issues during the last three years. 7) Details of the outstanding litigations pertaining to matters likely to affect the operations & finances of the company including disputed tax liabilities of any nature, any other default & criminal prosecution launched against the company etc. 8) Management perception of risk factors like sensitivity to foreign exchange rate fluctuations, difficulty in the availability of raw materials or in marketing of products, cost, time over-run etc. 9) Justification of the issue premium. The justification for price is given, taking into account the following parameters. a) Performance of the company as reflected by earnings per share & book value of shares for the past five years. b) Future projections in terms of EPS & book value of shares in the next three years.

c) Stock market data. d) Net asset value as per the latest audited balance sheet. 10) Financial Information a) Financial performance of the company for last five years should be given from the audited annual accounts in tabular form. b) Balance sheet data: equity capital, reserves & borrowings. c) Profit & Loss Data: sales, gross profit, net profit, if any. d) Any change in the accounting policy during the last three years & its effect on the profit & reserves of the company. 11) Statutory & other information a) Minimum subscription b) Details of the fee payable to Advisors, Registrar, Managers, Trustees of the debenture holders & underwriters. c) Details regarding the previous issue if any.