 The management of issues for raising funds

though various types of instruments by

companies is known as Issue management.
 The function of capital issue management in
India is carried out by Merchant Bankers who
have the requisite professional skill and
competence.
 One of the Main functions of MB is issue
management.
 Factors such as the tremendous growth in the
number and size of public listed companies,
and the complexity arising due to the ever
increasing SEBI requirements have all
attributed to the increasingly significant role
played by merchant bankers in the recent past.
 The definition of merchant banker as mentioned
in SEBI (Merchant Banker) Rules and Regulations,
1992 clearly brings out the significance of Issue
Management.
 A fast growing economy like India offers
tremendous scope for issue management and the
merchant bankers provide their skills and
expertise to companies in the management of
capital issues.
 This essentially aims at channeling household
savings into the corporate sector through the
issue of corporate securities.
 Companies raise funds for the purposes of
financing new projects, expansion /modernization
/diversification of existing units and augmenting
long term resources for working capital purposes.
1. Obtaining approval for the issue from SEBI.
2. Arranging for underwriting the proposed
issues.
3. Preparation of draft and finalization of the
prospectus and obtaining its clearance from
the various agencies concerned.
4. Preparation of draft and finalization of other
documents such as application forms,
newspaper advertisements and other
statutory requirements.
5. Making a choice regarding registrar to the
issues, printing press, advertising agencies
brokers and bankers to the issue and
finalization of the fees to be paid to them.
6. Arranging for press conference and the
investors conferences, coordinating - printing,
publicity and other work in order it get
everything ready at the time of the public issue.
7. Complying with SEBI guidelines after the issue
is over by sending various reports as required
by the authorities.
 The issuer shall appoint one or more MB of
which at least one should act as Lead
Managers.
 SEBI regulations have prescribed restrictions
on the number of issue managers who can be
associated with an issue.
 Issue Size Permissible No. of
Lead Managers
Less than Rs 50 crores 2

Rs 50 Crores to less than Rs 100 Crores 3

Rs 100 Crores to less than Rs 200 Crores 4

Rs 200 crores to less than Rs 400 Crores 5

Rs 400 Crores and above 5 or more

 All lead managers, before taking up the
assignment relating to an issue, shall enter into
an agreement with the concerned company
setting out their rights and obligations.
 In case more than one lead manager is
associated, demarcation of responsibilities is a
must.
 A minimum underwriting agreement is to be
made.
 No lead manager can exit during the issue
period.
 The capital issues are managed by Category I
MB. There are several activities that have to
be performed by them in order to rise money
from the capital market.
 The procedure for managing the public issue
by a MB is divided into 2 stages , they are :
◦ Pre Issue Management
◦ Post Issue Management
 The client company and the MB have to Sign a
Memorandum of Understanding (MoU) which
clearly mentions the role and responsibility.
 The Appraisal Note containing the details of
the proposed capital outlay of the project and
the sources of funds is prepared.
 The Level Of Capital Structure that would
maximize the shareholders value and
minimize the overall cost of capital has to be
determined.
 MB has to apply to stock exchanges where
the issuing company intends to get its
securities listed.

 Following documents are required :

◦ Initial listing application
◦ MOU with registrar
◦ MOU with bankers, advisors to the issue
◦ Prospectus etc.
 Financial intermediaries such as underwriters,
registrars, accountants, auditors, advertising
agency etc. are appointed.
 The lead MB has to independently assess the
capability of these intermediaries so that they
carry out their obligations.
 After they are appointed MB get them
registered with SEBI.
 In order to issue securities, an issuer has to file a
draft offer document with SEBI thru MB and pay
the requisite fees.
 The company has to file the offer document at
least 30 days prior to registering the prospectus
with ROC.
 If SEBI specifies changes in the offer document,
the issuer and lead MB should make the changes.
 The lead MB when filling the offer document with
SEBI should also file a copy of the document with
recognised stock exchange where it is going to
be listed.
 The draft offer document submitted to SEBI has
to be made Public by posting it on SEBI website
and proposed stock exchange. The MB has to
wait for at least 21 days for comments and
thereafter submit the comments to SEBI.
 The lead MB are responsible for the dispatch of
the issue materials to stock exchange,
underwriters, bankers, investors association etc.
 The MB has also to announce the opening of the
IPO thru advertisement 10 days before the
opening.
 The MB has to see that a minimum of 90% of
the allotment amount is received thru
subscription.
 In case the minimum is not received all the
money should be refunded back to the
applicants within 15 days from the date of
closure of the issue.
 The MB has to ensure that specified
securities are allotted with 15 days from the
date of closure of the issue.
 If the issue is over subscribed to the extent of
5 times greater, then SEBI nominated public
representative is required to participate in the
finalization of basis of allotment
 If the shares are not allotted to the applicant
then a refund need to be carried out by the
MB within 15 days from the closure of the
issue.
 If not then, an interest needs to be paid.
 The MB has to report to SEBI periodically
about the progress of the allotment and
refund.
 Ensure listing of the securities at the stock
exchange.
 Attending the investors grievances regarding
the public issue.
 MB also has to make an announcement in the
newspaper regarding the basis of allotment,
no of application recd, the date of dispatch of
share certificate, refund order etc.
1. Prohibition of payment of Incentives :
No person connected with the issue shall offer
any incentives directly or indirectly, in any
manner to any person for making an application
for allotment of specified securities.
2. Public Communication :
MB has to follow the regulations regarding
advertisements.
MB has to submit a compliance certificate to SEBI
for the period between date of filing the offer
document and the date of closure of the issue.
3. Publicly available document :
MB along with the issuer shall ensure the
content of the offer documents are available on
their websites.
MB has to submit a copy of the offer document
to the investor as and when requested.
4. Redressal of Investors Grievances :
MB is required to look into and monitor the
redressal of investor grievances
5. Post Issue Reports :
MB is required to submit the post issue report to
SEBI.
The initial post issue report has to be submitted
within 3 days of closure of the issue and the final
report within 15 days of the date of finalization of
allotment.
It should also submit due diligence certificate to
SEBI.
6. Post Issue Advertisement :
MB also has to make an advertisement in the
newspaper regarding the basis of allotment, no of
application recd, the date of dispatch of share
certificate, refund order, percentage of successful
allottees etc.
7. Coordination with other intermediaries
MB has to maintain a close coordination with
the registrars to the issue and arrange to
depute its officers to the offices of various
intermediaries at regular intervals to monitor
process of application, collection of money
allotted etc.
1. It shall be fair and truthful. It should not be
manipulative and not contain any statement ,
promise which is untrue.
2. Slogans and brand names for the issue should
not be used except the normal commercial
name of the issues already in use.
3. Advertisement shall not use extensive technical
terminology or complex language.
4. It should not contain statements with promise
or guarantee rapid increase in profits.
5. It shall not display models, celebrities,
factional characters, landmarks etc.
6. The advertisement regarding any issue on
billboards should not contain information
other then what is specified in the SEBI
Regulations.
7. No advertisement shall be issued giving any
impression that the issue has been fully
subscribed or over subscribed during the
period of issue.
 Refer to book