The term Merchant Banking has its origin in the trading methods of countries in the late eighteenth and early nineteenth century when trade-taking place was financed by bill of exchange drawn by merchanting houses

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18MB0408T - Unit II

Preparation of Offer Document Offer Document for IPO

Detailed Disclosures on Company

Indian Capital Markets are governed by disclosure-based Regulations. Hence, detailed disclosures on various aspects of a company are must. Some of the important disclosures required in an SME IPO include the following :

	Audited Annual Reports
	Peer Review by Reputed Chartered Accountant firms (since its inception or last 5 years, whichever is shorter)
	Due diligence on the applicability of various regulations
	Due Diligence on various approvals required from regulatory bodies
	Detailed disclosures about the profile of the company
	Detailed disclosures on Promoters & Management
	Detailed disclosures about the Past Performance of the company
	Detailed disclosures about the Risk Factors associated with the company
	Detailed disclosures about the External Environment affecting the company
	Detailed disclosures about litigations and documenting its magnitude and ramifications
	Detailed disclosures about the Business activity, Industry background, competition and business environment
	Objects of the issue and issue structure
	Future plans and strategy of the company
	Management's discussion and analysis of the financial results

Material Contracts and Agreements

	Articles of Association (AoA) for allowed lines of business
	Letters of Contract with each member of issue management team
	Loan agreements and sanction letters with Financial Institutions/Banks
	Deeds of hypothecation /mortgages executed in favour of lenders
	Underwriting agreements
	Agreement with the Key Management Personnel (KMP)
	Purchase Orders with major suppliers
	All utilities contracts and permissions
	Syndicate and Escrow agreement

Promoters and Management

	Quality experience, qualifications, reporting structures, composition of Board of Directors
	Quality of human resources
	Details of Key Management
	Pledge details

Preparation of Offer Document

Offer Document for IPO

The offer document explains the company's competitive strengths, strategy and market opportunity. The offer document also informs investors of the risks relating to the company in order to protect the company and its directors from potential liability.

The offer document is the main marketing document for any IPO and SME IPO is no exception. Therefore, it is important that the offer document is prepared with utmost diligence, and by merchant bankers with professional team having technical knowledge and domain business expertise.

The offer document should not contain statements that are ambiguous or not supportable. This involves checking that each statement in the offer document has a legitimate source. Otherwise, the company and the directors may be liable for any misleading statements in the offer document.

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