Registrar to the Issue
The Registrars normally receive the share application from various collection centers. They recommend the basis of allotment in consultation with the Regional Stock Exchange for approval. They arrange for the dispatching of the share certificates.
Underwriters
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. Underwriters stand as back-up supporters and they charge commission for this assurance.
Underwriters are divided into two categories:
- Financial Institutions & Banks
- Brokers and approved investment companies
Bankers
Bankers collect the application money along with the application form. The bankers to the issue generally charge commission. Depending upon the size of the public issue more than one banker to the issue is appointed.
Advertising Agents
The advertising agency takes the responsibility of giving publicity to the issue on various media including newspapers, magazines, hoardings, and press release etc.
Government and Statutory Agencies
The various regulatory bodies related with the public issue are:
- Securities Exchange Board of India (SEBI)
- Registrar of companies
- Reserve Bank of India
- Stock Exchange
SEBI Role
SEBI scrutinizes the various offer documents from the view point of investors’ protection and full disclosure. SEBI has the power to delete the unsubstantiated claims and ask for additional information where ever needed. SEBI’s nominee is appointed in the allotment committee to make sure of transparency in share allotment.
Collection Centers
Generally there should be at least 30 mandatory collection centers inclusive of the places where stock exchange are located.
Book Building Method of Pricing the Issue
Book Building is price discovery mechanism used in Initial Public Offer (IPO). It is a process used for marketing a public offer of equity shares of a company. It is a mechanism where, during the period for which the book for the IPO is open, bids are collected from investors at various prices, which are above or equal to the floor price. The process aims at tapping both wholesale and retail investors. The offer/issue price is then determined after the bid closing date based on certain evaluation criteria. As per SEBI guidelines, companies choose to go for book building method in their IPO in following manner:
- 100% of the net offer to the public through the book building route.
- 75% of the net offer to the public through the book building process and 25% through the fixed price portion.
- Under the 90% scheme, this percentage would be 90 and 10 respectively.
Market Outcome of Public Issues
After the global slowdown started in 1999-2000, Indian markets saw a recovery in primary market activity in 2003-04. In 2003-04 funds mobilization by way of IPOs and new issues by listed companies jumped to Rs. 200,592 million from Rs. 40,703 million in 2002-03 (Refer to Table 2-2 in Appendix). The listed companies mobilized Rs. 167,826 million through 35 issues during 2003-04, accounting for 84% of the resources, while in 2002-03, there were 20 issues by listed companies for Rs. 30,316 million.
Most of the issues were made by private sector companies. Out of total 52 issuers who tapped the market in 2003-04, 34 issues where by private sector issuers. They mobilized around 19.6% of the total resources raised. The public sector companies made 18 issues mobilizing 80.4% to the total resources mobilized (Refer to Table 2-3 in Appendix). The joint sector has not been making any issue of capital for the past few years.
During the slowdown period, debentures have been pre-dominant in the public issues. However, in 2003-04, there has been a reversal in this trend. The share of debt in resource mobilization through public issues decreased from 82% in 2002-03 to mere 19.53% in 2003-04 (Refer to Table 2-4 in Appendix).
The Banks and Financial Institutions (FIs) had assumed a dominant role in fund mobilization. Their offers in 2001-02 and 2002-03 were 68.16% and 84.58% respectively, however, the year 2003-04 saw a significant fall to only 15.5% (Refer to Table 2-5 in Appendix). The chemical and the Information Technology (IT) industry collectively contributed approximately 10.2% in the resource mobilization in 2003-04.
Appendix
