Issue Manager

Any financial institution / intermediary which can carry out the activities connected with issue management is registered with SEBI and follow its regulations and guidelines is capable of venturing into issue management. Issue management is an important activity for merchant bankers.


The issue manager needs to satisfy the following requirements before being allowed by the SEBI to carry out various issue management activities:

1) Adequate and necessary infrastructure such as adequate office space, equipments and manpower to various issue management activities.
2) Minimum number of two persons needed, who are professionally qualified in Law, Finance or Business Management and have the experience to conduct the business of the merchant banker.
3) Fulfilling the capital adequacy requirements i.e. a minimum net worth of Rs 5 crores.

Categories of Issue Managers:

SEBI has classified Issue Managers into four categories:

1) Category I: Merchant banker who is authorized to act as issue manager, advisor, consultant, underwriter and portfolio manager.
2) Category II: Merchant banker who is authorized to act only as advisor, consultant, underwriter and portfolio manager.
3) Category III: Merchant banker who is authorized to act as underwriter, advisor and consultant to an issue
4) Category IV: Merchant banker who is authorized to act only as advisor or consultant to an issue.

The registration requirements for the respective categories are progressively less stringent. However, with a view to facilitating only high net worth companies to operate as merchant, so as to ensure the provision of quality service and to have a screening effect, merchant bankers of categories II, III and IV were abolished through an amendment, dated December 9, 1997 to the SEBI Merchant Bankers Regulations, 1992. Similarly, only corporates, and not proprietorship firms will be registered with SEBI as merchant bankers. The objective was to enhance corporate discipline and professionalism in the sphere of issue management.

Restrictions on Issue Managers:

SEBI regulations have prescribed restrictions on the number of issue managers who can be associated with an issue. This is presented below:
Issue Size Permissible Number of
Lead Managers

Less than Rs 50 crores 2
Rs 50 crores but less than than Rs 100 crores 3
Rs 100 crores but less than the Rs 200 crores 4
Rs 200 crores but less than Rs 400 crores 5
Rs 400 crores & above 5 or more

Role of Issue Manager

The merchant banker as an issue manager is helpful in the following ways:

1) Easy floatation: An issue manager acts as an indispensable pilot facilitating a public / rights issue. This is made possible with the help of a repository of special skills possessed by him to execute the management of issue.
2) Financial consultant: An issue manager essentially acts a financial architect, by providing advice relating to capital structuring, capital gearing and financial planning for the company.
3) Underwriting: An issue manager allows for underwriting the issues of securities made by corporate enterprises. This ensures due subscription of the issue.
4) Market makers: Merchant bankers, as issue managers often act as the market makers for the issues lead managed by them. They invest, continue to old and provide, buy and sell quotes for the listed scrips of the company.
5) Due diligence: The issue manager has to comply with SEBI guidelines. The merchant banker will carry out activities with due diligence and furnish a Due Diligence Certificate to SEBI. The detailed diligence guidelines that are prescribed by the Association of Merchant Bankers of India (AMBI) have to be strictly observed. SEBI has also prescribed a code of conduct for merchant bankers.
6) Coordination: The issue manager is required to co-ordinate with a large number of institutions and agencies while managing an issue in order to make it successful.
7) Liaison with SEBI: The issue manager, as a part of merchant banking activities, should register with SEBI. While managing issues, constant interaction with the SEBI is required by way of filing of offer documents, etc. In addition, they should file a number of reports relating to the issues being managed.