ANALYSIS OF PROSPECTUS

1.0 what is a prospectus A prospectus is a document, covering all relevant information and regulatory compliances, inviting (offering) general public to subscribe for shares or debenture of company (issuer). If we analyze the above definition of prospectus, we find; A Prospectus
i) Is an invitation to the general public for purchasing shares; ii) includes all relevant information; iii) Complies all required regulatory matters as per Companies Act 1994, Securities And Exchange Ordinance 1969, Public Issue Rules 2006, depository Act 1999 Etc; iv) Is issued by an issuer Company.

2.0 Who are the related parties to the Prospectus

Following parties are involved with a prospectus: Securities and Exchange Commission; Stock exchanges; Manager to the Issue; Underwriters; Bankers to the Issue; Auditors; Company (Issuer); Public.

3.0 What are the major contents of a prospectus

3.1 Conditions under section 2CC of the Securities And Exchange Ordinance,1969:
Followings are the salient features of the said provisionI. numbers of shares and value of IPO; II. publication procedure of prospectus; III. submission requirements of prospectus to different authorities including SEC; IV. listing with stock exchanges; V. agreement with CDBL; VI. application procedure by NRB; VII. Procedure and time frame to provide information to SEC; VIII.consequence of under subscription; IX. market lot; X. procedure and timing of lottery incase of over subscription

3.0 What are the major contents of a prospectus

3.2 Due diligence certificate by the issue manager: A certificate by the issue manager in respect that the prospectus contains all the required information and complies all legal requirements. 3.3 Due diligence certificate by underwriters :
A certificate issued by the underwriters in respect that they have approved the prospectus and will take over unsubscribed portion of shares as per terms as specified in the prospectus.

3.4 Risk factors of the issuers business: All business and industrial ventures have certain risks. In this part of prospectus the issuer mentions all probable risks and uncertainties of their business and the remedial measures to overcome such risks.

3.0 What are the major contents of a prospectus

3.5 Description of business: Nature of operation or nature of business of the issuer company is described here. 3.6 Sponsors, Directors, management and ownership: In prospectus a brief description and life sketch of sponsors and directors are included. In addition to this, some information regarding management, top executives and their remuneration are also mentioned in the prospectus. 3.7 Ownership: Existing shareholding proposition is mentioned in the prospectus. Readers can understand that who are the owners of the issuer company before materializing the proposed IPO.

3.0 What are the major contents of a prospectus

3.8 Capital structure:
Through IPO the Issuer intends to raise its paid-up capital. From this part an idea can be taken about the pre IPO and post IPO capital structure. Paid up capital before IPO IPO Paid up capital after IPO xxx xxx xxx

3.0 What are the major contents of a prospectus

3.9 Utilization of fund:
It is obvious that through IPO the issuer company raises fund from general public. A clear understanding is given in the prospectus about how raised fund to be utilized by the issuer company and at the same time from where the fund to be collected. From this part the user of the prospectus will know NRB portion of IPO, general portion of IPO and any other fund collected (pre IPO) before publishing the prospectus for the proposed expansion or investment program.

3.0 What are the major contents of a prospectus

3.10 Lock-in period:
After listing of the Company with the Stock Exchanges, the shares are eligible to be traded in the secondary market. All the IPO shareholders are at liberty to sell their shares. But a lock-in period is imposed on selling shares of the sponsors, directors and shareholders at the time of according consent of IPO. A clear description in this respect is given in the prospectus.

3.11 Tangible asset per share/ Net asset value (NAV) per share.
This is one of the basic calculations of the prospectus. It represents the book value per share. Total of paid up capital, retained earnings, reserves and other equity less intangible assets and fictitious assets is divided by numbers of issued shares to find out book value per share. Alternatively, net assets excluding intangible assets and fictitious assets is divided by numbers of issued shares.

3.0 What are the major contents of a prospectus

3.12 Determination of offer price: Every share has a face value. But shares can be offered at face value or at premium if it is justified. A justification is given, showing the book value per share as mentioned above, in the prospectus about the offer price of shares. 3.13 Application Procedure: A detail procedure of application, along with specimen form, such as numbers of shares and value per lot, joint applicants, how to fill up, where to deposit, how to pay, NRB applicants, FC accounts etc. are mentioned in the prospectus.

3.0 What are the major contents of a prospectus

3.14 Allotment procedure:

Generally, a quota is reserved for NRB and mutual funds. A detail Break up is given in the prospectus about the proposed allotment procedure. It is also mentioned how oversubscription and under subscription to be managed.

3.0 What are the major contents of a prospectus

3.15 Refund of subscription money: In case of oversubscription in any category of shares to be allotted on the basis of lottery .So it is mentioned in the prospectus that how and when refund of subscription money to be made to the failed applicants. 3.16 Track record of performance: Specially authenticated financial statements for last five years (if applicable) are given in the prospectus. From these financial statements prospective investors may have ideas about trend of revenue generation; trend of profitability-GP, OP,NP etc; retained earnings; earning per share (EPS); change in capital structure year by year; liabilities and obligations; financial strengths; Cash flow situation etc.

3.0 What are the major contents of a prospectus

3.17 Financial analysis of recent financial statements:
In this part, key financial ratios are given to facilitate the users to analyze the statements in respect of profitability, efficiency, liquidity etc. A prospective investor may have a look on the following important ratios EPS- to have an idea about profit per share and its trend to forecast dividend in future; NAV per share- to have an idea about the justification of offer price and to forecast the market value of shares in future; ROE to have an idea about the earning ratio of shareholders fund. --

3.0 What are the major contents of a prospectus

--In addition to above, details of business and products, future plan and prospects, related party transactions, CIB report, list of bankers to the issue, auditors report, latest financial statements, Credit Rating reports (in case of banks and financial institutions) etc. are given in the prospectus.

4.0 Conclusion.
The basic objectives of a prospectus is to invite general public, with complete, true and fair disclosure of facts and information, to subscribe in the share and securities of a company. Although the ultimate goal is same, the different authority, people or group of people may analyze the prospectus in different manner.