This article is written by Kaushal Kumar, pursuing a Certificate Course in Capital Markets, Securities Laws, Insider Trading and SEBI Litigation from LawSikho.

Offer document

‘Offer document’ is a document that contains all the relevant company information, promoters, initiatives, financial details, money-raising items, problem types, etc., and is used by the issuer to invite subscription to the issue. In the case of a public issue, the offer document is called ‘Prospectus’ and the letter of offer in the case of rights issues.

Draft offer document

It means the drafted offer document, i.e. the first document submitted for approval by SEBI companies and stock exchanges, which, after examination, communicates their feedback to the Company, which the Company is expected to integrate into the offer document. For processing a drafted offer paper, SEBI usually needs a period of 30 days. SEBI will put the drafted offer document on its website. It is also put on the websites of registered stock exchanges where it is proposed to list specified securities and to comment publicly on the merchant bankers associated with the issue for a period of at least 21 days. In addition, the issuer must either make a public announcement in one English national daily newspaper, one Hindi national daily newspaper and one regional language newspaper at the place where its registered office is located on the date of filing of the drafted offer document with SEBI or on the next day, disclosing to the public the fact of filing the drafted offer document and inviting the public to give their comments to SEBI.

Companies seeking to raise up to Rs 750 crore can now send their drafted documents to the SEBI Market Regulator Regional Offices.

So far, on behalf of the firms, merchant bankers have been authorized to file with the regional office of SEBI concerned papers for issues worth up to Rs 500 crore.

In a circular issued by SEBI, It was agreed that the drafted offer documents shall be filed with the appropriate regional office of the board under the jurisdiction of which the registered office of the issuer company falls, in respect of issues of a size up to Rs 750 crore.

In addition, the Securities and Exchange Board of India (SEBI) announced that for all regions, companies may file their drafted offer documents at SEBI ‘s headquarters for issues larger than Rs 750 crore in size.

SEBI has listed four regional offices, northern, eastern, southern and western, in which companies can, on the basis of the estimated size of the issue, file their drafted offer documents or offer documents with the appropriate board office.
The new criteria would come into effect for all draft offer documents for issues that are filed with SEBI later on.

Content of offer document

Following should be the structure of the presentation of the content in an offer document. The basic objective is to help the reader to navigate through the content of an offer document:

• Cover page

Complete contact details of the Issuer Firm, lead managers and registrars under this heading, the type, number, price and amount of instruments offered and the size of the issue, and the listing details. Other information is also disclosed, if necessary, such as credit rating, IPO grading, risks in relation to the first issue, etc.

• Risk Factors

Under this heading, the management of the issuer business shall present its views on the internal and external risks envisaged by the business and, if any, its proposals to resolve those risks. A notice on the forward-looking statements is also issued by the firm. This detail is disclosed in the document’s initial pages and in the abridged prospectus as well. It is usually recommended that before making an investment decision, investors should go through all of the company’s risk factors.

• Introduction

Under this heading, a description of the sector in which the issuer company works, the business of the issuer company, a description of the consolidated financial statements and other data relating to the general information concerning the firm, the merchant bankers and their responsibilities, the details of the brokers/ syndicate members of the issuer company, the credit rating (in the case of debt issuance), the debtors and their responsibilities, the details of the brokers/ syndicate members of the problem Significant specifics of the capital structure, of the items of the bid, of the funding criteria, of the funding strategy, of the implementation timetable, of the funds deployed, of the sources of financing of the funds already deployed, of the sources of financing of the balance fund requirement, of the provisional use of the funds, of the specific conditions of issuance, of the basis for the issue price, of the tax advantages are also covered.

• About us

A summary of the company’s business facts, business strategy, competitive strengths, insurance, industry regulation (if applicable), history and corporate structure, key objects, subsidiary data, board of directors and management, compensation, corporate governance, related party transactions, exchange rates, presentation currency and dividend policy are provided under this heading.

• Financial statements

In compliance with the specifications of the Guidelines and discrepancies between any other accounting policies and the Indian Accounting Policies (if the Company has already submitted its financial statements as per either US GAAP / IFRS), this head financial statement and restatement are presented.

• Legal and other information

Under this heading, outstanding litigation and material developments are disclosed, litigation affecting the company, the company’s promoters, its subsidiaries, and group companies. After the last balance sheet date, material developments, government approvals / licensing agreements, investment approvals (FIPB / RBI etc.), technical approvals, and indebtedness, etc. are also disclosed.

• Other regulatory and statutory disclosures

Under this head following information to be disclosed:

Authority to be issued, prohibition by SEBI, the company’s eligibility to join the capital market, etc.

Also, the issuer’s and the lead manager’s disclaimer statement, disclaimer as to jurisdiction, dissemination of details to customers, stock exchange disclaimer clause, listing, impersonation, minimum subscription to be displayed.

Letters of allocation or reimbursement orders, consents, expert opinion, changes in auditors over the last three years, costs of the issue, fees payable to the intermediaries involved in the issue process, information of all previous problems, all pending instruments should also be disclosed.

Commission and brokerage on, prior issues, capitalization of reserves or earnings, choice to subscribe in the question, acquisition of land, revaluation of properties, classes of securities, stock market data for the company’s equity securities, pledge vis-à – vis success in past issues and mechanism for redressing investor grievances should also be displayed.

• Offering information

In this heading, the terms of the issue should include the ranking of equity securities, dividend payment process, face value and issue price, equity shareholder rights, market lot, investor nomination facility, issue procedure.

In addition to the procedure of making an application, signing the underwriting agreement and filing a prospectus with SEBI / ROC, the notice of statutory ads should also be listed in detail.

It is important to report payment orders, submission of bid form, other orders, disposal of application and application money, interest on refund of excess bid number, allocation basis or allocation.

It is important to disclose the method of proportionate allocation, dispatch of refund orders, correspondence, undertaking by the company, use of issuance proceeds, restrictions on foreign ownership of Indian securities.

• Other information

This includes the summary of the shares in equity and the terms of the Articles of Association, content contracts and inspection papers, statements, descriptions, abbreviations, etc.

Procedure for filing offer document with SEBI

• In order to facilitate operations in the quest for comments on drafted offer papers, drafted offer letters and drafted agreement schemes pursuant to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 SEBI (Listing Obligations and  Disclosure  Requirements) Regulations, 2015, SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and SEBI (Buy-Back of Securities) Regulations, 1998 and the various circulars issued thereunder, SEBI has implemented an online system for filings relating to public issues, rights and insurance issues, institutional placement programme, schemes of arrangement, takeovers and buy backs.
• All merchant bankers who are required to file offer documents and related documents in physical form with SEBI in compliance with the provisions of the Regulations referred to above shall file the same online at the same time through the SEBI Intermediary Portal at https://siportal.sebi.gov.in.
• Recognized stock exchanges filing with SEBI under the provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 the drafted scheme of arrangement and relevant documents in physical form shall concurrently file the same online through SEBI Intermediary Portal at https://siportal.sebi.gov.in.
• As mentioned above, the simultaneous filing of papers, i.e. physical and online, will start from 1 February 2018 and continue until 31 March 2018. Subsequently, physical filing of the aforementioned records will be discontinued as of 1 April 2018 and only online filing will be approved.

To get started on Portal following steps need to be followed:

Step 1: Self-Registration

Step 2: Check status

Step 2: Login ID creation and activation

Step 4: Login to SEBI portal

Payment options:

Applicants will be asked to collect application fee payment information as part of self-registration. For the payment of application fees, the following methods of payment will be approved.

Offline mode:

1. Demand Draft

Online mode:

1. Internet Banking
2. Debit Card
3. IMP

Submission of draft and final offer document

Step 1

1. Offering documents up to Rs. 20 crores shall be sent by lead merchant bankers to the regional office of the Board under whose jurisdiction the issuer company is licensed.
2. The jurisdiction of the regional offices/ headquarters shall be in compliance with Schedule XXII.

Step 2

1. The draft offer document submitted with the Board shall be made public in compliance with Clause 5.6 of Chapter V of the Guidelines.
2. The Lead Merchant Banker shall make available to the Board 10 copies of the draft offer document and 25 copies of the Stock Exchange(s) where it is proposed to list the issue.
3. The Lead Merchant Bankers / Stock Exchange shall make copies of the draft offer document available to the public.
4. Such a fair fee may be paid by the lead merchant banker and the Stock Exchange(s) for supplying a copy of the draft offer paper.

Step 3

1. As per the format specified in Schedule XXIII, the Lead Merchant Banker shall also submit to Board the draft offer document on a computer floppy. 

Step 4

1. Lead Merchant Bankers shall apply to the dealing offices of the Board at least two copies of the final printed copy of the final offer document ‘within three (3) days of the filing of the offer document with the Registrar of Companies / concerned Stock Exchange(s), as the case may be.’
2. The lead merchant banker shall, within three (3) days of filing the offer document with the Registrar of Companies / concerned Stock Exchange(s), send one final printed copy of the final offer document to the Primary Market Department, SEBI, Head Office, as the case may be.
3. The lead merchant banker shall send to the Primary Market Department, SEBI, Head Office, within three (3) days of filing the final prospectus/ letter of offer with the Registrar of Companies / Stock Exchange(s) concerned, a computer floppy containing the final prospectus/ letter of offer, as defined in Schedule XXIII. The lead manager shall send to SEBI, along with the floppy, an undertaking certifying that the contents of the floppy are in HTML format and are similar, as the case may be, to the printed version of the prospectus/ letter of offer filed with the Registrar of Companies / Stock Exchange concerned.

Step 5

1. Whenever offer documents are filed with any department/ office of the Board (for public/ rights issues, takeovers or for any other purpose), the following information “certified to be correct” shall be issued by the lead merchant banker in the forwarding letters:

• Registration No.
• Date of registration / Registration renewal.
• Expiration date of registration.
• If submitted for renewal, the date of the submission.
• Any correspondence by the Board that forbids the acting of a merchant banker.
• Any inquiry/ inquiry that the Board conducts.
• Duration of payment of registration/ renewal fees.
• Whether any promoter/ director/ group and/or associate of the issuer company is affiliated and registered with SEBI with securities-related undertakings. If SEBI registers one or more of these persons/ entities, their respective registration numbers. Reasons for non-renewal if registration has expired. Details of every enquiry/ inquiry at any time conducted by SEBI. The penalty levied by SEBI (Penalty includes letter of deficiency/ warning, adjudication proceedings, suspension/ cancellation/ prohibition orders) Unpaid payments, if any, payable by such entities to SEBI.

Step 6

• The offer papers, which are not followed by the details referred to in clause 16.1.5, may be refused.

Step 7

1. Equivalent information shall be collected from other intermediaries by Lead Merchant Bankers to ensure that they comply with these requirements and are eligible for association with the issue concerned.
2. In their letters, the intermediaries often suggest that they have received certain knowledge from other intermediaries.

Conclusion

In a nutshell, SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 require each issuer to file a draft offer document with SEBI via a merchant banker(s), being an unlisted company eager to make an initial public offer and a listed company eager to make a rights issue for a value exceeding Rs. 10 Crore or a public offer. The merchant banker(s) shall, on behalf of the issuer, correspond to SEBI. With regard to the Regulations, SEBI can, within 30 days, submit comments on a draft offer document filed with it.

Certain abbreviations have been used in the report, the meaning of which is as under: 

• IPO (Fresh) = Initial public offer by equity issuance
• IPO (Offer for Sale (OFS)) = Initial public offer by way of an offer to sell existing shares
• IPO (Fresh + OFS) = Initial public offer by selling stock and agreeing to sell existing shares.
• FPO (Fresh) = Public offer via the issue of stock by a listed company 
• FPO (Fresh + OFS) = Public offer by a listed company by issuing shares and offering to sell existing shares 
• FPO (OFS) = Public offer by a listed company for the sale of existing shares via an offer
• RI = Rights issue for a value exceeding Rs 50 lacs by a listed company
• Composite Issue = Public offer cum rights issue by a company listed
• SE = Stock Exchange 
• OD = Offer Document 
• LM = Lead Manager to the Issue coordinating 
• LM (Pre-issue) = Lead Manager responsible for coordinating with SEBI in respect of the offer document. 

This report is intended for the limited purpose of informing SEBI of the processing status of draft bid documents submitted. The issuer/ public should contact the LM(s) concerned for any further information.

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