Stocks available for the first time are offered through New Issue Market. The issuer may be a new company or an existing company. These issues may be of new type or the security used in the past.
Managers to the issue Registrar to the issue Underwriters Bankers to the issue Advertising agents Financial institutions Government and Statutory agencies
Lead managers are appointed by the company to manage the public issue programmes. Their main duties area) Drafting of prospectusb) Preparing the budget of expenses related to the issuec) Suggesting the appropriate timings of the public issued) Assisting in marketing the public issue successfullye) Advising the company in the appointment of registrars to the issue, underwriter, bankers to the issue, advertising agentsf) Directing the various agencies involved in the public issue.
After the appointment of the lead managers to the issue, in consultation with them, the registrar to the issue is appointed. Quotations containing the details of the various functions they would be performing and charges for them are called for selection. Among them the most suitable one is selected. It is always ensured that the registrar to the issue has the necessary infrastructure like computer, internet and telephone
Underwriting is a contract by means of which a person gives an assurance to the issuer to the effect that the former would subscribe to the securities offered in the event of non subscription by the person to whom they were offered. The person who assures is called an underwriter.
Underwriters are divided into 2a) Financial institutions and Banksb) Brokers and approved investment companies. The underwriters do not buy or sell securities. They stand as back-up supporters and underwriting is done for a commission
They have the responsibility of collecting the application money along with the application form. The bankers to the issue generally charge commission besides the brokerage, if any. Depending upon the size of the public issue more than one banker to the issue is appointed.
Advertising plays a key role in promoting the public issue. Hence, the past track record of the advertising agency is studied carefully. Tentative programmes of each advertising agency along with the estimated cost are called for. After comparing the effectiveness and cost of each programme with the other, a suitable advertising agency is selected in consultation with the lead managers to the issue.
Financial institutions generally underwrite the issue and lend term loans to the companies. Hence, normally they go through the draft of prospectus, study the proposed programme for public issue and approve them. IDBI, IFCI&ICICI, LIC, GIC and UTI are the some of the financial institutions that underwrite and give financial assistance
SEBI Registrar of companies RBI Industrial licensing authorities Pollution control authorities.
Offer through prospectus Bought out deals (Offer for sale) Private Placement Rights Issue Book building
Prospectus is a document gives details regarding the company and invites offers for subscription or purchase of any shares or debentures from the public.
Definitions & Abbreviations Risk Factors & Proposals to address the risks thereof Highlights PART I I. General information II. Capital structure of the company III. Terms of the present issue IV. Particulars of the issue V. Description of industry and business VI. Company, management and project VII. Management discussion and analysis of the financial condition and results of the operations as reflected in the financial statements.
VIII. Financial of group companies IX. Basis for issue price X. Outstanding litigations or defaults XI. Risk factors and Proposals to address the risks on the same, if any PART II I. General information II. Financial information III. Statutory and other information PART III Declaration
In bought out deal, an existing company off- loads a part of the promoters capital to a wholesaler instead of making a public issue. The sponsors hold on to these shares for a period and at an appropriate date they offer the same to the public. The hold on period may be as low as 70 days or more than a year
In this method the issue is placed with a small number of financial institutions, corporate bodies and high networth individuals. The special feature of the private placement is that there is no need for underwriting arrangements since the placement itself amounts to underwriting. Through private placement equity shares, preference shares, cumulative convertible preference shares, debentures and bonds are sold.
If a public company wants to increase its subscribed capital by allotment of further shares after two years from the date of its formation or one year from the date of its first allotment, whichever is earlier, should offer share at first to the existing shareholders in proportion to the shares held by them at the time of offer. Shares of this type is called as rights shares.
Book building is a process of price discovery. The issuer discloses a price band or floor price before opening of the issue of the securities offered. On the basis of the demands received at various price levels within the price band specified by the issuer, Book Running Lead Manager (BRLM) in close consultation with the issuer arrives at a price at which the security offered by the issuer, can be issued.
According to SEBI, the allocation of shares is done under proportionate allotment method. The applications will be categorized according to the number of shares applied for. Then allocation is done by proportionate basis.
ASBA means “Application Supported by Blocked Amount”. ASBA is an application containing an authorization to block the application money in the bank account, for subscribing to an issue. If an investor is applying through ASBA, his application money shall be debited from the bank account only if his/her application is selected for allotment after the basis of allotment is finalized, or the issue is withdrawn/failed