Management of Capital Issues

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The Merchant Bankers with valid registration certificates from SEBI have been provided with statutory exclusivity in managing public offers such as IOPs, rights issue and secondary issues of equity as well as issues of debt securities. Therefore, whenever there is an offer of securities to the public, the involvement of Merchant banker is mandatory. The role of Merchant bankers has profound significance to the long term growth and development of capital market and for the sustenance of investor’s confidence.


Now-a-days, many more pure merchant banks have converted themselves into full services investment banks. In overall process of issue management, the Investment bankers plays a variety of important roles as an expert advisor to management of issuer company, as an auditor who performs due diligence on the company, as an event manager and coordinator to ensure timely completion of the issue and as a protection of the interest of investors. They also advise the Company on deciding the optimal capital structure, on the instruments to be offered and on issue timing, pricing, etc.


The pre-issue compliance work is laborious for investment banker in terms of several requirements of the regulations, tying up underwriting if required, selection and negotiation of terms of other intermediaries, formulating the issue budget and making preparations for roll out of the issues. It is customary for the issuer company to form core team for issue management including the key officials and the compliance officer and the investment banker so as to do the backup work and to complete all issue related milestone on a time bound basis.


The investment have to ensure that no publicity material or report is issued with information other than what is contained in the offer document, no incentives other than underwriting commission, etc. The main function during the issue is to ascertain daily figures from the bankers or the stock exchange as may be and to take decision on the closure of issued based on procurement of minimum subscription.


They should also carefully ensure that the issuer company or others associated with issue do not publish any advertisement stating that issue is over- subscribed or indicating investors response to the issue during the period when the issue is still open for subscription by the public. The investment banker shall accord high priority to redressal of investor grievances and take all preventive steps to minimize the number of complaints.


This multi-faceted role of investment bankers places a tremendous responsibility on them. During the issue, they become the interface between the issuer company and SEBI.
 
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