Merchant banking services: Management of capital issues

The capital issue are managed are category-1 merchant banker and constitutes the most important aspects of their services. The public issue of corporate securities involves marketing of capital issues of new and existing companies, additional issues of existing companies including rights issue and dilution of shares by letter of offer,. The public issues are managed by the involvement of various agencies i.e. underwriters, brokers, bankers, advertising agency, printers, auditors, legal advisers, registrar to the issue and merchant bankers providing specialized services to make the issue of the success. However merchant banker is the agency at the apex level than that plan, coordinate and control the entire issue activity and direct different agencies to contribute to the successful marketing of securities. The procedure of the managing a public issue by a merchant banker is divided into two phases, viz;

  • Pre-issue management
  • Post-issue management

Pre-Issue Management:-

Steps required to be taken to manage pre-issue activity is as follows:-

(1) Obtaining stock exchange approvals to memorandum and articles of associations.

(2) Taking action as per SEBI guide lines

(3) Finalizing the appointments of the following agencies:

  • Co-manager/Advisers to the issue
  • Underwriters to the issue
  • Brokers to the issue
  • Bankers to the issue and refund Banker
  • Advertising agency
  • Printers and Registrar to the issue

(4) Advise the company to appoint auditors, legal advisers and broad base Board of Directors

(5) Drafting of prospectus

(6) Obtaining approvals of draft prospectus from the company’s legal advisers, underwriting financial institutions/Banks

(7) Obtaining consent from parties and agencies acting for the issue to be enclosed with the prospectus.

(8) Approval of prospectus from Securities and Exchange Board of India.

(9) Filing of the prospectus with Registrar of Companies.

(10) Making an application for enlistment with Stock Exchange along, with copy of the prospectus.

(11) Publicity of the issue with advertisement and conferences.

(12) Open subscription list.

Post-issue Management:-

Steps involved in post-issue management are:-

(1) To verify and confirm that the issue is subscribed to the extent of 90% including devolvement from underwriters in case of under subscription

(2) To supervise and co-ordinate the allotment procedure of registrar to the issue as per prescribed Stock Exchange guidelines

(3) To ensure issue of refund order, allotment letters / certificates within the prescribed time limit of10 weeks after the closure of subscription list

(4) To report periodically to SEBI about the progress in the matters related to allotment and refunds

(5) To ensure he listing of securities at Stock Exchanges.

(6) To attend the investors grievances regarding the public issue

The Merchant Bankers for managing public issue can negotiate a fee subject to a ceiling. This fee is to be shared by all lead managers, advisers etc. 0.5% of the amount of public issues up to Rs.25 crores 0.2% of the amount exceeding Rs.25crores, if more than one Merchant bankers are managing the issue.