Merchants of Public Issue Management

MERCHANTS OF PUBLIC ISSUE MANAGEMENT

Classification of Securities Issue

1. Public Issue

2. Right Issue

3. Private Placement

Decision to Raise Capital Funds Preparation and Finalization of Prospectus Obtaining SEBI Approval Arranging underwriting Selection of Registrars, Brokers, Bankers, etc. Printing and Publicity of Public Issue Documents Arranging Press for investor Conference Issue Launch SEBI Compliance

1. Public Issue of Securities When capital funds are raised through the issue of a prospectus, it

is called ‘‘public issue of securities’. It capital market. A security issue may take place either at part, or at a premium or at a discount.

The Prospectus has to disclose all the essential facts about the company to the prospective purchasers of the shares. Further, the prospectus must conform to the formal set out in Schedule II of the Companies Act, 1956, besides taking into the account SEBI guidelines. SEBI insists on the adequacy of disclosure of information that should serve as the basis for investors to make a decision about the investment of their money.

2. Rights Issue When shares are issued to the existing shareholders of a company on a privileged basis, it is called as ‘Rights -emptiveIssue’rightto. The subscribe to the new issue of shares. Rights shares are offered as additional issues by corporate to mop up further capital funds. Such shares are offered in proportion to the capital paid up on the shares held by them at the time of the offer. It is to be noted that the shareholders, although privileged to be offered on the issue, are under no legal obligation to accept the offer. Right shares are usually offered on terms advantageous to the shareholders.

3. Private Placement When the issuing company sells securities directly to the investors, especially institutional investors; it takes the form of private placement. In this case, no prospectus is issued, since it is presumed that the investors have sufficient knowledge and experience and are capable of evaluating the risks of the investment. Private placement covers shares, preference shares and debentures. The role of the financial intermediary, such as the merchant bankers and lead managers, assures great significance in private placement. They involve themselves in the task of preparing an offer memorandum and negotiating with investors.