Merchant Banking And Marketing of New Issues
Following are the steps involved in the marketing of the issue of securities to be undertaken by the lead manager:
1. Target market: The first step towards the successful marketing of securities is the identification of a target market segment where the securities can be offered for sale. This ensures smooth marketing of the issue. Further, it is possible to identify whether the market comprises of retail investors, wholesale investors or institutional investors.
2. Target concentration: After having chosen the target market for selling the securities, steps are to be taken to assess the maximum number of subscriptions that can be expected from the market. It would work to the advantage of the company if it concentrates on the regions where it is popular among prospective investors.
3. Pricing: After assessing market expectations, the kind and level of price to be charged for the security must be decided. Pricing of the issue also influences the design of capital structure. The offer has to be made more attractive by including some unique features such as safety net, multiple options for conversion, attaching warrants, etc.
4. Mobilizing intermediaries: For successful marketing of public issues, it is important that efforts are made to enter into contracts with financial intermediaries such as an underwriter, broker/sub-broker, fund arranger, etc.
5. Information contents: Every effort should be mad3e to ensure that the offer document for issue is educative and contains maximum relevant information. Institutional investors and high net worth investors should also be provided with detailed research on the project, specifying its uniqueness and its advantage over other existing or upcoming projects in a similar field.
6. Launching advertisement campaign: In order to push the public issue, the lead manager should undertake a high voltage advertisement campaign. The advertising agency must be carefully selected for this purpose. The task of advertising the issue shall be entrusted to those agencies that specialize in launching capital offerings. The theme of the advertisement should be finalized keeping in view SEBI guidelines. An ideal mix of different advertisement vehicles such as the press, the radio and the television, the hoarding, etc. should be used. Press meets, brokers and investor’s conference, etc. shall be arranged by the lead manager at targeted in carrying out opinion polls. These services would useful in collecting data on investors’ opinion and reactions relating to the public issue of the company, such a task would help develop an appropriate marketing strategy. This is because; there are vast numbers of potential investors in semi-urban and rural areas. This calls for sustained efforts on the part of the company to educate them about the various avenues available for investment.
7. Brokers and investors conferences: As part of the issue campaign, the lead manager should arrange for brokers‘ and investors‘ conferen centre which have sufficient investor population. In order to make such endeavors more successful, advance planning is required. It is important that conference materials such as banners, brochures, application forms, posters, etc. reach the conference venue in time. In addition, invitation to all the important people, underwriters, bankers at the respective places, investors‘ associations should also be sent.
8. A critical factor that could make or break the proposed pu8blic issue is its timing. The market conditions should be favorable. Otherwise, even issues from a company with an excellent track record, and whose shares are highly priced, might flop. Similarly, the number and frequency of issues should also be kept to a minimum to ensure success of the public issue.