When a company wants to raise funds from the public by allowing subscription to its securities, it has to draft and file a prospectus. A prospectus is a legal document that details the company’s financial securities – stocks or equities – available to the public. All companies issuing shares to the public are required to file a prospectus with the regulator for prospective customers, enabling them to make informed investment decisions.
Published on 12 July 2022
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An IPO prospectus tells the public about the company’s fundamentals, business model and growth plan. A prospectus can be a circular, manuscript, notification or advertisement that explicitly details the company shares being sold to the public.
According to the Companies Act 2013, there are four types of prospectus in India. These include Deemed Prospectus, Shelf Prospectus, Red Herring Prospectus and Abridged Prospectus. Of the different types of a prospectus, the Deemed Prospectus is the most common.
Here is everything you should know about a Deemed Prospectus:
What is a Deemed Prospectus? What Are its Contents?
According to Section 25(1) of the Companies Act, 2013, a Deemed Prospectusis a document through which a company offers its securities for sale to the investors. In general, any document issued by a company that explicitly details the sale offer for its securities to the public is a Deemed Prospectus.
A Deemed Prospectus is used when a company wants to issue shares to the public through an intermediary to bypass the SEBI (Securities Exchange Board of India) regulations and compliance standards. First, the company allows or agrees to allot its securities to a third party for sale to the public. Then, the intermediary, such as a merchant bank, issuing house or another company, files an ‘Offer for Sale’ for the securities received. This offer for sale is referred to as a Deemed Prospectus when it fulfils these criteria:
The Offer for Sale is made to the public within six months of the share allotment to the intermediary.
The company allotting the shares to the intermediary has not received any consideration or compensation until the issuing house files the Offer for Sale.
If any of these conditions are fulfilled by the Offer of Sale document, the document is a Deemed Prospectus of the company allotting its shares to the intermediary. All provisions and regulations of a prospectus also apply to the Deemed Prospectus. The accountability of the share issue is on the company issuing the shares to the intermediary. However, the director of the prospectus is the director of the issuing house.
Elements of Deemed Prospectus
Company details, such as name, address, business, etc.
Memorandum signatories including details of their shareholdings
Details about the company directors
Financial information as per the audited reports
Details like the share issue, issue class, voting rights, etc.
The minimum subscription amount
The sum due at share application, allotment and subsequent calls
Auditors of the company
Underwriters of the share issue
Example of Deemed Prospectus
Assume ABC Ltd. wants to raise funds by issuing its shares to the public. However, it does not want to comply with the SEBI regulations. In this case, ABC Ltd. contacts a merchant bank in May 2021 and asks them to issue the shares to the public on its behalf. The merchant bank is the intermediary or the issuing house in this case.
To make the shares available to the public, the issuing house creates an Offer for Sale. The document contains all information regarding ABC Ltd, its financials, directors, auditors, memorandum signatories, and the share issue (issue class, voting rights, the sum due at application, allotment, etc.). This Offer for Sale is deemed to be a prospectus for ABC Ltd. if the issuing house offers the shares to the public by October 2021 (within six months of receipt of shares) or the company does not take any compensation from the issuing house until the Offer for Sale.
Conclusion
As an investor, a Deemed Prospectus is of crucial significance for you. You can make an informed investment decision by understanding details about the company and its shares. In addition, a careful analysis of the Deemed Prospectus can potentially help you avoid selection risks when investing. You can also seek help from professional investment brokers to comprehensively understand a prospectus and its implications.
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IPO or Initial Public Offering is a process whereby a private company offers shares to the public through new stock issuance. The objective of the IPO is to raise capital from the public. Multiple businesses, including several well-known companies, are launching their IPO with the intent to go public.
This year is the year of IPOs - Zomato, Nykaa, PayTM, Star Health Insurance and so many more. Investing in an IPO is exciting because it can deliver high profits to investors. However, the popularity of IPOs is also a drawback since it causes an IPO to be subscribed multiple times, reducing an investor’s chance of allotment.
If you follow the share market closely, you might have heard of the term “IPO” multiple times, especially in recent times with great marketing done around the Zerodha and Nykaa IPOs. IPO full-form in share market is Initial Public Offering. When a company decides to become a publicly-limited company from a private company, it floats its IPO.
The prospectus gives you exclusive information about a potential investment opportunity as an investor. Once you have an in-depth understanding of the offer, you can make a wise investment decision and avoid pitfalls.
A minimum subscription is a minimum sum that a company should raise at the time of capital issue.
Yes, all companies aiming to raise capital by issuing their shares or securities to the company have to file a prospectus. However, private companies not looking to raise any funds from the public do not have to file a prospectus.
Intermediaries, including underwriting firms, merchant banks or other companies, can make an Offer for Sale to the public on behalf of another firm. However, this Offer for Sale is a deemed prospectus if it is made available to the public within six months of the share allotment to the intermediary and if the original firm does not take any compensation for allotting shares to the intermediary.
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Investment in an IPO and its Benefits
IPO or Initial Public Offering is a process whereby a private company offers shares to the public through new stock issuance. The objective of the IPO is to raise capital from the public. Multiple businesses, including several well-known companies, are launching their IPO with the intent to go public.
This year is the year of IPOs - Zomato, Nykaa, PayTM, Star Health Insurance and so many more. Investing in an IPO is exciting because it can deliver high profits to investors. However, the popularity of IPOs is also a drawback since it causes an IPO to be subscribed multiple times, reducing an investor’s chance of allotment.
If you follow the share market closely, you might have heard of the term “IPO” multiple times, especially in recent times with great marketing done around the Zerodha and Nykaa IPOs. IPO full-form in share market is Initial Public Offering. When a company decides to become a publicly-limited company from a private company, it floats its IPO.
The prospectus gives you exclusive information about a potential investment opportunity as an investor. Once you have an in-depth understanding of the offer, you can make a wise investment decision and avoid pitfalls.
A minimum subscription is a minimum sum that a company should raise at the time of capital issue.
Yes, all companies aiming to raise capital by issuing their shares or securities to the company have to file a prospectus. However, private companies not looking to raise any funds from the public do not have to file a prospectus.
Intermediaries, including underwriting firms, merchant banks or other companies, can make an Offer for Sale to the public on behalf of another firm. However, this Offer for Sale is a deemed prospectus if it is made available to the public within six months of the share allotment to the intermediary and if the original firm does not take any compensation for allotting shares to the intermediary.
Sharekhan Comtrade Private Limited (TM) operates the web site accessible from the URL www.myespresso.com (the “web site”').
Sharekhan Comtrade Private Limited is committed to protecting your privacy and utilising technology that gives you the most powerful, safe, online experience that you can get anywhere else.
Sharekhan Comtrade Private Limited does, however, gather certain information that is provided by you to the Web Site. Sharekhan Comtrade Private Limited believes that by collecting this information Sharekhan Comtrade Private Limited is able to provide you with a personalised web experience, and to assist its own sales team and advertisers in efficiently reaching an appropriate audience.Sharekhan Comtrade Private Limited does, however, gather certain information that is provided by you to the Web Site. Sharekhan Comtrade Private Limited believes that by collecting this information Sharekhan Comtrade Private Limited is able to provide you with a personalised web experience, and to assist its own sales team and advertisers in efficiently reaching an appropriate audience.
Sharekhan Comtrade Private Limited requests the minimum information it believes necessary to achieve this goal.
The following discloses Sharekhan Comtrade Private Limited's information gathering and dissemination practices for the Web Site:
System Data:
Sharekhan Comtrade Private Limited uses your IP address to help diagnose problems with our server and to administer the web site. Your IP address is used to identify you and your shopping cart and to gather broad demographic information.
Registration Data:
The Web Site's registration form may require users to give us contact information (like their name, phone number and e-mail address), unique identifiers (like their PAN Number) and demographic information (like their pin code, age or income level). The Web Site uses customer contact information from the registration form to send the users information about Sharekhan Comtrade Private Limited and promotional material from some of Sharekhan Comtrade Private Limited's partners. The customer's contact information is also used to contact the visitor when necessary. Unique identifiers (such as PAN numbers) are collected to verify the user's identity. Demographic and profile data is also collected at the Web Site. We use this data to tailor the visitor's experience at the Web Site, showing them contents that we think they might be interested in, and displaying the contents according to their preferences. This information is shared with advertisers on an aggregate basis.
Links and Co-Branded Sites:
This site contains links to other Web Sites which are not necessarily been screened or reviewed by www.myespresso.com. Sharekhan Comtrade Private Limited is neither responsible for the privacy practices or the contents of such Web Sites nor shall be held answerable for the inaccurate, inappropriate or offensive data, material, information, products and services that may be viewed on those sites.
Sharekhan Comtrade Private Limited may operate a number of co-branded sites. Policies regarding information collection and sharing may differ on some of these co-branded sites. If you have any particular questions, you should check the privacy statement that appears on each co-branded site.
Order Forms:
The Web Site uses an order form for customers to request information, products and services. The Web Site collects visitors' contact information (like their mobile number or e-mail address), unique identifiers (like their PAN number) financial information (like their account or credit card numbers) and demographic information (like their pin code, age or income level). Contact information from the order form is used to send orders, information about Sharekhan Comtrade Private Limited, and promotional material from some of Sharekhan Comtrade Private Limited's partners to the visitors of the Web Site. The visitor's contact information is also used to get in touch with the visitor when necessary. Financial information that is collected is used to check the users' qualifications and bill the user for products and services. Unique identifiers (such as PAN numbers) are collected from Web Site visitors to verify the user's identity.
Surveys and Contests:
The Web Site's online surveys ask visitors for contact information (like their mobile number or e-mail address) and demographic information (like their pin code, gender, age or income level). The Web Site uses contact data from its surveys to send the user information about Sharekhan Comtrade Private Limited and promotional material from some of Sharekhan Ltd.'s partners. The customer's contact information is also used to contact the visitor when necessary. Users may opt-out of receiving future mailings; see the choice/opt-out section below. Demographic and profile data is also collected at the Web Site. The Web Site use this data to tailor its visitor's experience at the Web Site, showing them content that it thinks they might be interested in, and displaying the content according to their preferences. This information is shared with advertisers on an aggregate basis.
Sharekhan Comtrade Private Ltd run contests on the Web Site in which we ask visitors for contact information (like their e-mail address). Sharekhan Comtrade Private Limited uses contact data from its contests to send users information about Sharekhan Comtrade Private Ltd. and promotional material from some of our partners. The customer's contact information is also used to contact the visitor when necessary. Users may opt-out of receiving future mailings; see the choice/opt-out section below.
Third-Party Advertisement Servers:
Sharekhan Comtrade Private Limited engages the services of an outside advertisement company to display advertisement on the Web Site. These advertisements may contain cookies. While Sharekhan Comtrade Private Limited uses cookies in other parts of the Web Site, cookies received with banner advertisements are collected by the Advertisement company, and Sharekhan Comtrade Private Limited does not have access to this information.
Protection of your Data and Information:
The privacy and protection of your data and information provided to us is of vital importance. Sharekhan Comtrade Private Limited shall ensure to safeguard the security and confidentiality of any information you share with us. Any personally identifiable information of the customers obtained by us shall not be used or shared other than for the purposes to which the customers consents. However security and confidentiality of information cannot be guaranteed cent percent. Hence despite our utmost efforts to protect your personal information, Sharekhan Comtrade Private Limited and www.myespresso.com cannot warrant the security of any information you transmit to us through our online services. Such transmission of your personal information is done at your own risk.
Disclosure of Customer Information :
Sharekhan Comtrade Private Limited and www.myespresso.com shall not deliberately disclose customer's personally identifiable information to any unauthorized third person, save and except where such information shall be disclosed in good faith and for the purpose of law for the time being in force or to protect the rights and property of Sharekhan Comtrade Private Limited and www.myespresso.com.
Public Forums :
The Web Sites makes chat rooms, forums, message boards and/or news groups available to its users. Please remember that any information that is disclosed in these areas becomes public information and you should exercise caution when deciding to disclose your personal information.
Supplemental Information :
The Web Site supplements the information that you provide with information that is received from third parties.
The Web Site DOES NOT entice by the prospect of a special game, prize or other activity, to divulge more information than is needed to participate in the activity.
Further to the above, in light of the recently notified Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011. (Hereinafter referred to as the Rules)
The following shall be deemed to be sensitive information :
Password;
Financial information such as Bank account or credit card or debit card or other payment instrument details;
Physical, physiological and mental health condition;
Sexual orientation;
Medical records and history;
Biometric information;
Any detail relating to the above clauses as provided to body corporate for providing service; and
Any of the information received under above clauses by body corporate for processing, stored or processed under lawful contract or otherwise:
provided that, any information that is freely available or accessible in public domain or furnished under the Right to Information Act, 2005 or any other law for the time being in force shall not be regarded as sensitive personal data or information for the purposes of Rules.
Collection of Information:
Compliance with KYC guidelines as per SEBI / Exchanges / Or any other Act, law or regulation requiring the same and any internal KYC guidelines formulated by Sharekhan Comtrade Private Limited.
In order to provide enhanced trading experience to the client.
In order to provide any further information to be provided to regulators.
Such information may be collected in a manner that the client is always aware of the collection and purported usage of the same. The client shall have an option to withdraw consent to share the information. However such intimation shall be required in writing. Such intimation shall only be taken into account from the date on which the same is received. Sharekhan Comtrade Private Limited may choose to stop services to such a client in case such intimation is received. Such information shall only be used for the purpose it is collected.
Clients would be allowed an option not to disclose any information to be collected, provided the same is in compliance with regulatory requirements.
Disclosure of information:
Disclosure of sensitive information would be as per the terms agreed by the clients. For any change in such terms, the clients would be informed.
Provided no consent may be required in case the same is being shared as per compliance guidelines or as required by regulators.
Any information being disclosed to third parties would be in accordance with the Rules and would be done provided such third party has the same level of compliance guidelines as Sharekhan Comtrade Private Limited.
Sharekhan Comtrade Private Limited shall allow clients to review their personal information and the same shall be allowed to be edited provided exchange guidelines relevant to the same are followed.
Sharekhan Comtrade Private Limited shall maintain reasonable security practices and procedures and maintain a comprehensive documented information security programme. In the event of an information security breach, Sharekhan Comtrade Private Limited or a person on its behalf shall be required to demonstrate as and when called upon to do so by the agency mandated under the law, that there have implemented security control measures as per their documented information security programme and information security policies and information security policies that contain managerial, technical, operational and physical security control measures that are commensurate with the information assets being protected with the nature of business.
KYC Languages
Download Client Registration Documents (Rights & Obligations, Risk Disclosure Document, Do's & Don't's) in Vernacular Language :
Note: "This document is a translated version of the client registration documents in English and is being provided in vernacular language to facilitate better understanding by the investors. In case of any ambiguity, the contents of the English version would prevail."
NDNCR Terms & Conditions
By accepting the Terms & Conditions, you authorise Espresso, its representatives and agents to provide information about various products, offers and services provided by Espresso through any mode, including telephone calls, SMSes, emails, letters and any other mode of communication. You also confirm that laws in relation to unsolicited communication referred in "National Do Not Call Registry" as laid down by "Telecom Regulatory Authority of India" will not be applicable for such information/communication.
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