Offer Document: What it is, purpose, types & importance.

Key Highlights

An Offer Document is an official, SEBI-regulated disclosure filed by a company when raising capital through the primary market, such as an Initial Public Offering (IPO), Follow-on Public Offering (FPO), or Rights Issue.
Types of offer documents includes draft offer document, final offer document and offer letter.

What is Offer Document?

An Offer Document is an official, SEBI-regulated disclosure filed by a company when raising capital through the primary market, such as an Initial Public Offering (IPO), Follow-on Public Offering (FPO), or Rights Issue. It provides comprehensive information about the company’s business, financials, risks, governance practices, and the details of the securities being offered.

The Offer Document helps investors make informed decisions by ensuring transparency and full disclosure.

Purpose of an Offer Document

The primary objective is to give investors access to reliable, standardised, and complete information about the issuing company. This reduces information asymmetry and enhances market trust during equity or debt capital raising.

Types of Offer Documents

1. Draft Offer Document (DHRP / DRHP / DRHP): A preliminary document submitted to SEBI for review. It contains detailed disclosures but is open for regulatory and public comments.

2. Final Offer Document (RHP / Prospectus): The final approved document used during the public offering. It includes the final issue price, dates, and updated financial or risk information.

3. Offer Letter (For Rights or Certain Debt Issues): A simplified version used for specific capital-raising structures like rights issues or debt placements.

Key Sections Included in an Offer Document

An offer document follows a defined structure to ensure complete disclosure for investors. Some essential sections include:

Risk Factors: Lists potential risks that could affect the company’s business and financial performance.
Business Overview: Explains the company’s operations, market presence, competitive strengths, and strategy.
Financial Information: Presents audited financial statements, ratios, and management discussions to help investors assess performance.
Promoter & Shareholding Details: Discloses information about promoters, management team, and pre/post-issue shareholding.
Use of Proceeds: Specifies how the company intends to use funds raised from investors.

These sections collectively ensure transparency and help investors make informed investment decisions.

Importance for Investors

Helps evaluate company fundamentals before investing
Provides clarity on valuation, pricing, and use of funds
Enables comparison with industry peers
Highlights potential risks affecting investment decisions

FAQs on Offer Document

1. Who prepares the Offer Document?

It is drafted by the company along with its investment bankers, legal advisors, auditors, and other professional intermediaries.

2. Where can investors access an Offer Document?

Offer Documents are publicly available on SEBI, stock exchange websites, and the websites of the company and its merchant bankers.

3. How is a Draft Offer Document different from a Final Offer Document?

The Draft document seeks regulatory review and contains preliminary information, while the Final (RHP/Prospectus) includes updated details like the final issue price and offer timeline.

4. Is reading the Offer Document necessary before applying for an IPO?

While not mandatory, it is strongly recommended as it provides essential insights into the company and associated risks.

5. Does the Offer Document guarantee investment returns?

No. It is purely a disclosure document. Investment returns depend on company performance and market conditions.