SEBI nudges towards an abridged IPO prospectus…

This should have come long ago. One keeps wondering why should an IPO prospectus be so so long? There is close to zero chance any investor (barring the biggies) reads the mammoth prospectus leave alone the retail investors.

As per recent SEBI notice, a company going for an IPO needs to issue a 10 page abridged prospectus as well. It has issued broad guidelines on what to be included in the abridged version:

  • (I) The abridged prospectus shall be submitted to the Board (one copy).
  • (II) The abridged prospectus including the application form shall not exceed 5 sheets (printed both sides).
  • (III) Information which is of generic nature and not specific to the issuer shall be brought out in the form of a General Information Document (GID) as specified by the Board.
  • (IV) Abridged Prospectus shall be printed in a booklet form of A4 size paper.
  • (V) The Abridged Prospectus shall be printed in a font size which shall not be visually smaller than Times New Roman size 11 (or equivalent) with 1.0 line spacing.
  • (VI) Information required to be given in Tabular Format shall not appear in running text format.
  • (VII) The order in which items appear in the abridged prospectus shall be as specified by the Board.
  • (VIII) 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.”

The ones highlighted are really specific and micro-nudging. Ensuring that the issuers do not game the system by having really small fonts and again making it a huge task to read.

This is one of the cases when somehow market players just did not get the idea. As far as I know, nothing prevented them from issuing a smaller prospectus. It was a crying need which was ignored. It needed a regulator to notify and nudge…

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