📘 Chapter 5: Issue Management – Short Notes
🔹 1. Meaning of Issue Management
● Issue Management = Process of raising funds from public (IPO, FPO, Rights Issue, etc.)
● Managed by SEBI-registered Merchant Bankers
● Governed by SEBI ICDR Regulations, 2018
🧠 Key Roles of Merchant Banker
● Advisor → guides issuer company
● Coordinator → manages entire issue process
● Due diligence expert → verifies information
● Watchdog → ensures legal compliance
● Investor protector → works in fiduciary capacity
🔹 2. Types of Issues Covered
● IPO (Initial Public Offer)
● FPO (Further Public Offer)
● Rights Issue
● Preferential Issue
● QIP (Qualified Institutional Placement)
● SME IPO
● Bonus Issue
🔹 3. IPO Eligibility (Important)
Company CANNOT issue IPO if:
● Debarred by SEBI
● Promoters/directors are fraudulent or wilful defaulters
● Associated with companies banned from market
● Promoters are fugitive economic offenders
📊 4. Appointment of Merchant Bankers
✔️Key Points
● Issuer must appoint SEBI-registered Merchant Banker (Lead Manager)
● If multiple:
○ Roles & responsibilities must be clearly defined
● At least one lead manager must be independent
● Agreements must be signed with:
○ Lead managers
○ Other intermediaries
🧠 Other Intermediaries
● Registrar to issue
● Bankers to issue
● Syndicate members
● Underwriters
🔍 5. Due Diligence (VERY IMPORTANT)
📌 Meaning
● Investigation & verification of issuer company information
🎯 Objective
● Ensure true, fair & adequate disclosure to investors
🧠 Key Areas Checked
● Promoters & management
● Financial statements
● Risk factors
● Capital structure
● Business operations
● Litigations
⚠️Important Requirements
● Independent verification by lead manager
● Due diligence certificates submitted to SEBI
● Records maintained for 5 years
📑 6. Offer Document
📌 Meaning
● Legal document for investors (Prospectus / Red Herring Prospectus)
✔️Must Contain
● All material disclosures
● Financial data (not older than 6 months)
● Risk factors
● Business details
🧠 Key Concept: Materiality
● Only important (material) information must be disclosed
● Avoid misstatement or omission
📤 7. Filing of Offer Document
📌 Process
1. File Draft Offer Document (DOD) with SEBI
2. Submit:
○ Due diligence certificate
○ Agreement proof
3. File with Stock Exchanges
4. SEBI gives observations (within ~30 days)
5. Final document filed with ROC
📢 8. Public Issue Requirements
● Public announcement in:
○ English newspaper
○ Hindi newspaper
○ Regional newspaper
● Invite public comments
● Upload on websites
🏦 9. Underwriting (IMPORTANT)
📌 Meaning
Underwriter guarantees subscription of shares
✔️Rules
● Cannot earn anything except commission
● Max underwriting = 20× net worth
● Must subscribe within 45 days if required
📊 Book Building Issue
● Underwritten by:
○ Lead managers
○ Syndicate members
● Lead manager responsible if others fail
📂 10. Key Documents (Due Diligence)
📜 Contracts
● Issue agreement
● Underwriting agreement
● Escrow agreement
● Syndicate agreement
📄 Other Documents
● MOA & AOA
● Financial reports
● Board resolutions
● Legal opinions
● IPO grading report
📈 11. Listing Requirements
📌 Steps
1. In-principle approval
2. Listing of securities
3. Trading permission
✔️Conditions
● Minimum capital requirements
● No restrictive clauses in AOA
● Compliance with listing agreement
⚖️12. Compliance & Investor Protection
● Appointment of Compliance Officer
● Responsible for:
○ Legal compliance
○ Investor grievance redressal
🧠 FINAL QUICK REVISION (1-Minute)
● Merchant Banker = Key manager of issue
● Due Diligence = Core responsibility
● Offer Document = Full disclosure
● SEBI ICDR = Main regulation
● Underwriting = Risk coverage
● Materiality = Only important info disclosed
● Compliance Officer = Investor protection
If you want, I can also convert this into:
✅ 1-page revision sheet (super short)
✅ MCQ-based revision for exam
✅ Flowcharts for issue process