IPO MANAGEMENT
BY MERCHANT BANKS
AGENDA
Introduction to merchant banks in India
IPO machanism
Intermediaries involved
Pre issue activities
Post issue activities
DEFINITION
Rule 2(e) of SEBI (merchant bankers) Rules 1992, defines who
a merchant banker is.
“merchant banker means any person who is
engaged in the business of issue management
either by making arrangements regarding
selling, buying or subscribing to securities as
manager-consultant, advisor or rendering
corporate advisory services in relation to such
issue management”
MERCHANT BANKING IN INDIA
Till early 1960s there was no merchant banking in
the Indian banking system.
It was the Grindlays Bank which started merchant
banking services in India in the year 1967.
REGISTRATION
Compulsory registration under SEBI
They fall under four categories:
Category I merchant bankers : Can act as Issue
managers
Category II merchant bankers : can act only as co-
managers
Category III merchant bankers : can act as co-
managers but cannot undertake portfolio
management
Category IV merchant bankers :can merely act as
consultant or advisor to issue of capital
CAPITAL ADEQUACY NORMS
CATEGORY NORMS
I 5 crores
II 0.5 crores
III 0.2 crores
IV NIL
REGISTRATION FEE
CATEGORY YEAR 1 AND 2 YEAR 3
I 2.5 lakhs 1 lakh
II 1.50 lakhs 50,000
III 1 lakh 25,000
IV 5,000 1,000
RENEWAL FEE
CATEGORY FIRST TWO THIRD YEAR
YEARS
I 1,00,000 20,000
II 75,000 10,000
III 50,000 5,000
IV 5,000 2,000
ISSUE MECHANISM
Issue launch
I have
reviewed
them sebi
granted
ROC
Issuer Merchant
company bank
offer
docs
INTERMEDIARIES TO THE
ISSUE
LEAD MANAGER
ISSUE SIZE NO. OF LEAD
MANAGERS
< RS. 50 CRORES TWO
50-100 CRORES THREE
100-200 CRORES FOUR
>200 CRORES FIVE
>400 CRORES MORE THAN FIVE (SEBI)
RESPONSIBILITIES OF A LEAD
MANAGER
UNDERWRITERS
He makes a commitment to get the issue subscribed
either by others or himself
They are appointed by the issuing companies in
consultation with the lead managers
REGISTRATION
With SEBI
Capital adequacy of not less than the net worth of Rs.
20 lakhs.
Underwriting commission
Maximum obligation under all underwriting
agreements of an underwriter cannot exceed
twenty times his net worth
They have to subscribe for securities under the
agreement within 45 days of the receipt of
intimation from the issuers
BANKERS TO THE ISSUE
Engaged in activities such as acceptance of
applications along with application money from
investors and refund of application money
Registration under SEBI
Come in agreement with the issuing company
Details need to be given to SEBI
BROKERS TO THE ISSUE
Mainly concerned with the procurement of
subscription to the issue from the prospective
investors
Appointed by the issuer company
Appointment is not compulsory
Company can appoint any member as a broker
to the issue
PRE ISSUE ACTIVITIES
Signing of MoU
To decide over the terms between the issuer
and the merchant banker
The role and responsibility of the merchant
banker
Obtaining appraisal note
Sources of funding
Optimum capital structure
The amount of money that would be raised
Convening meeting
Meeting of the board of directors
Appointment financial Intermediary
Underwriters
Registrars
Legal advisors
Advertising agencies
Preparing documents
Initial applications of submission to those stock exchanges
Due diligence certificate
Lead manager issue a due diligence certificate
Submission of offer document
SEBI
Filing with RoC
Offer document is then filled with Registrar of Companies
Issue closure
Launching the issue
Process of marketing the issue starts
Conducting press conferences,
Brokers’ meets,
Issuing advertisements in various newspapers
The announcement regarding opening of issue
is also required to be made through advertising
in newspapers, 10 days before the opening of
the public issue.
POST ISSUE ACTIVITIES
Collect figures of applications money from the
collection centres
Send report to the SEBI
If the Company does not receive the min.
subscription amount of 90% of the issued
amount including underwriters, within 120
days from the date of issue, the subscription
amount needs to be refunded within 128 days
Write to the related stock exchange regarding
closure of subscription list and advertisements
declaring issue to be closed are published
Compliance reports to the SEBI are to be sent.
Obtain letter from regional stock exchange
approving basis of allotment for different
categories.
Send copy of the letter of regional stock
exchange to other exchanges where listing
permission is sought.
Make public a copy of basis of allotment in two
national dailies
Publish advertisements mentioning the various dates on
which refunds/ allotments and listing were dispatched
and sought respectively.
Confirm that the listing formalities have been completed
where the listing has been sought
Confirm that various commissions/brokerage/payments
to various intermediaries ranged by the merchant banker
have been paid by the company.
Thank you