CORPORATE LAW

CIA 1- PROSPECTUS ANALYSIS

Submitted by:
Shoa Afroz
3 BBA – A
Roll: 1820153
PROSPECTUS ANALYSIS
A prospectus is a report that offers a comprehensive overview of certain investments. Some of the topics
covered in a prospectus include past performance as well as future projections for the entity that issues the
prospectus. A prospectus also provides an outline of the investment's management and lists the fees that
potential investors incur. Management information includes the investment adviser, also referred to as the
management company or the investment manager, and the portfolio managers, who are typically listed by
name plus title, depth of experience and length of time spent with the investment adviser.

PURPOSE
Although a prospectus provides existing investors and potential investors with lots of information about an
investment vehicle, its primary purpose is to provide transparency about the possible risks of the investment.
Putting these risks on the table helps protect investors against uninformed investing decisions that may not be
right for them. Disclosing these risks also protects the issuing entity from a potential legal backlash because
of misleading or withheld information. A prospectus also includes shelf prospectus and red herring prospectus.
A prospectus is not merely an advertisement.
A document shall be called a prospectus if it satisfies two things:
1. It invites subscription to shares or debentures or invites deposits.
2. The aforesaid invitation is made to the public.

Following are the two examples; I have analysed the entire 300 page prospectus keeping in mind the contents
of the prospectus. Please check the next pages for the analysis of two companies.

Advertisement 1:
Advertisement 2:

Prospectus Analysis
Sec. 2(36) of the Companies Act describes a prospectus as “any document issued as a prospectus and includes
any notice, circular, advertisement or other document inviting deposits from the public or inviting offers from
the public for the subscription or purchase of any share in, or debentures of a body corporate.”
According to Sec 56, Part I of Schedule II, Matters to be specified in a prospectus are:
a) Overview and history of company: It provides a chronological listing of all the significant activities and
events of the company since its inception. It also includes information about the company’s strategies and
competitive advantage in the market. The company’s objective is also specified under this section.
b) Services/Products offered by the company: It provides detailed information regarding the products and
services produced by the company and any additions to its operations over the years.
c) Management Profile: This contains information about the qualifications of the executive management of
the organization. It provides details about the team’s experience and skills set that make them fit to lead the
company. This helps in building trust of the interested investors in the management of the company.
d) Desired Capital Structure: In case of companies that already have shares; they have to specify how the new
issue will affect the existing capital structure. It will give the investors an idea of the current equity ownership
structure and how their investment will influence the structure and the expected rate of return.
e) Use of proceeds: Use of proceeds provides information about the main purpose of the funds that will be
raised from the IPO. For example, for buying new machinery or opening a new branch etc.
f) Security offering details: The prospectus also provides data on the number of securities which can be being
supplied to the general public and the charge for every security. It additionally mentions the expected price of
return on the investor’s budget.
g) Financial Information: The prospectus should provide information regarding the company’s past
performance with the help of EBIT, net profit, stock performance, etc. The security performance can be
compared to a known benchmark such as the S&P 500 or Dow Jones Industrial Average.
h) Risks Involved: The prospectus should disclose the risks that investors face when investing in a mutual
fund. For example, an international mutual fund may include a disclosure detailing the currency risks that
investors face when investing in the fund.
Components of Prospectus Advertisement are:
a) Registered name of the company
b) Registered address of the company and Corporate Identity Number as per Companies Act
c) Contact information
d) Details about the promoter
e) Details about the Offer in terms of face value and process of bidding and procedure in case of revision of
face value to price band
f) All risks involved in taking up the issue
g) Responsibilities of issuing company and ‘selling shareholders’
h) Names of exchanges which have approved the company’s listing.
i) Registrar and Book Running Managers to the offer
j) Date and time of opening and closing of the bidding.