Capital issue management is concerned with the management of issues for raising funds through various types of instruments by the companies. Management of capital issues in India is a professional service rendered by merchant bankers. In fact, a major function of merchant bankers is issue management. This can be attributed to the tremendous growth of public listed companies in number and size and the complexity arising due it the ever-increasing SEBI guidelines and requirements. The issue can be a public issue through prospectus, a rights (offer of sale) issue or private placement and so on. Issue management involves the following function in respect of issues through prospectus:
1. Obtaining approval for the issue from the SEBI
2. Arranging underwriting for the proposed issue.
3. Drafting and finalizing of the prospectus and obtaining its clearance from the various agencies concerned.
4. Drafting and finalization of other documents such as applications, forms, newspaper advertisements and other statutory requirements.
5. Selection of registrar to the issues, printing press, advertising agencies, brokers and bankers to the issue and finalization of the fees and charges to be paid to them.
6. Arranging for the press conference and the investors’ conferences.
7. Coordinating printing, publicity and other work so as to get every thing ready at the time of the public issue.
8. Complying with the SEBI guidelines after the issue is over (both in case of over subscription or devolvement), by sending the various reports as required by the authorities.
The procedure and steps for managing public issues fall under two phases: (1) pre-issue management commencing with structuring of issues and up to the opening of subscription list; (2) post issue management up to listing of securities on the stock exchange. The management of capital issues in both the phases is regulated and monitored by the SEBI through regulations, guidelines and so on. The present article dwells on the merchant banking activities relating to capital issues in the form of public and rights issues.
Pre-Issue Job / Activity Card:
For public Issues
(1) Prepare the project report after preliminary discussions with promoters. The documents required from the promoters are to be annexed.
(2) Fill the questionnaire meant to be filled by the lead manager to assess the authenticity of the project.
(3) The project report and the findings from the filled questionnaire to be filed before the Board of Directors/Issue Acceptance Committee.
(4) Finalization of the lead manager(s) is done and Memorandum of Understanding (MOU) and inter se (if more than 1 merchant bankers are acting as lead manager to the issue).
(5) Check for the appraisal, if already done or not. If not done, then get it done, if so required.
(6) Memorandum of Association (MOA) after making desirable changes and Articles of Association (AOA) are sent to
the stock exchanges where the listing is
to be made.
(7) Site visit is made and the promoter is made to fill the questionnaire
Preparation of the draft prospectus:
(a) A copy of draft prospectus is annexed (Annexure 5 )
(b) Auditors report and tax benefits certificate is obtained.
(c) Permission from RBI is sought for allotment to NRIs, if any
(d) Other documents and permission are applied for, as required.
(e) Finalization of the registrar
(f) Legal advisor clear the issue
(g) Filing of draft prospectus with the SEBI and the stock exchanges where the listing is sought.
(8) Terms loans/working capital limits/inter-corporate deposits are arranged. Float firm allotments for NRIs, MFs, FIIs and FIs.
(9) Consent from directors and power of attorney to sign/correct the prospectus is obtained. Corrections are made as per the queries sent by the SEBI and the stock exchanges where the draft prospectus was sent and again file it with the SEBI as per the required suggestions.
(10) The form of getting the securities listed are filled for various stock exchanges and filed along with the demand draft of Rs 7,500 the copy of initial listing application form and the necessary documents.