STOCK MARKET

OPERATIONS
UNIT :-II
PRIMERY MARKET
TOPIC : INTERMEDIARIES IN NEW ISSUE MARKET
PPT PRESENTATION
• Prepared by : Gourambika Poojer
Pavitra I Sheelavantar

Guidance by :
Mr. MUSTAQ MULLA
Mcom, NET, KSET,
Teaching Assistant
P. G. Department of
Studies in Commerce
Rani Channamma University Belagavi
Intermediaries :
IPO Intermediaries are the parties (companies /individual ) that assist an
issuer in completeting an IPO and a successful listing.
Major IPO intermediaries include :-
• Merchant Bankers
• Registrars
• Bankers
• Underwriters
• Market makers
These intermediaries act as a bridge between the
company and investor.
Exchange appoint stock brokers who works as intermediaries between investors
and the exchange. An investor must have an account with a stock broker to trade
on a stock exchange.
1) Merchant bankers :-
merchant bankers are independent financial institutions registered
with SEBI. They assist a company in their IPO from start to end. They are also
called lead managers or Book –running lead managers.
A merchant banker assist a company throughout the IPO process from due
diligence and determining if the company is eligible for an IPO, to applying for an
IPO with the exchanges, to preparing a prospects IPO udwritising, road shows
marketing and post listing process.
Role and Responsibilities
• Due deligence (gathering and verifying the issuers details )
• Checking the eligibility criteria of the company as per stock exchanges and SEBI
• Underwriting agreement (if acting as a manager or underwriter)
• Determining the fees for an IPO
• Determining Draft Red Herring Prospectus (DRHP )
A DRHP it couers a whole host of things the financial of the company, the
risk factors, and industry dynamics.
Prospectus means :
It is an invitation to the public offering. It is an invitation to the public to
buy the shares. The IPO prospectus is prepared by the lead manger
The DRHP contains information on the company oue rview IPO structure details of the
offering
• The merchant banker makes the necessary adjustment and submits the final offer to
SEBI
• Completing the IPO application form
Intermediaries need to be registered with SEBI, and the company need to specify
their names, address, and contact details in the offer documents.
The Registar of issue (Registra of IPO )
IPO registrars are independent financial institutions registered with stock exchange and appointed by the
company going public for mainly to keep record of the issue and ownership of company shares.
Responsibility of registrar at the time of IPO, involves, processing of IPO application, allocate shares to applicants
based on SEBI guidelines, process refunds and transfer allocated shares to investors demat accounts.
Investors can contact the registrar to the issue in care of any pre issue or post issue related problems such as
non –receipt of letters of allotment credit of allotted shares in the respective benificialy accounts refund order etc.
Role of registrar in an IPO:-
• Per IPO :- IPO planning and resources alignment
• Informing self certified Syndicate Bank of the IPO process and timelines
• Validate and he IPO application data
• Co-ordinate bankers to ensure that final collection certificate are received.
• Identity invalid application to reject.
• Prepare the basis of allotments with lead manager’s.
• Submit the basis for approval to the stock exchange.
• Process of allotments of shares.
• Resolve the all customers complaints

Registrar roles and responsibility :-

• Collecting IPO application data from stock exchange and banks.
• Preparing a list of valid application in cooperation with depositories and banks
3) Banker’s to an Issue :-
The issuer company appoints bankers to help them manage the funds collected in the
IPO process and transfer them to the account, A company can appoint one or more bankers to the
issue that are registered with SEBI.
The responsibility of the bankers to an issue :-
• Transfer all funds collected in the escrow account
• Transfer funds to allotment account and there after to company
• Bankers are responsible for banking related process
• Acceptance of application and application amount
• Transfer of funds to the promoters of the company
• Managing refunds for rejected application
• Payment of dividend
In the IPO process, the bankers play critical role by enabling the movement of the
funds and making clear funds.
• Transfer of funds to investors account
• Address investors complaints relating to refunds
4) IPO underwriter:-
An IPO underwriter is an intermediaries that under takes the risk of purchasing the shares in case of the IPO under
subscription.
IPO underwriting is a process where in the underwriter and the issuer company get into agreement where in the underwriter
agrees to purchase the unsold shares of an IPO return for an underwriting commission.
The underwriting commission is a fee charged by the merchant banker in its capacity as underwriter for entering in to
the underwriting agreement. It is the fee charged by on investment banker for underwriting an issue of securities.
For ex :- If it was agreed between the underwriter and issuer that the 3%of the shares offered, and the underwriter is unable
to sell all of the shares, the underwriter would be responsible for the unsold shares and would have to purchase them from
the issuer

• Underwriters roles and Responsibility in an IPO :-

• Compliance with underwriting agreement clauses.
• In charge of selling the predetermined number of shares .
• Responsible for purchasing the remaining shares or unsold shares .
• IPO Roadshow, promotion and marketing
• Help the issuer in determining share valuation, whether the shares are over valued or under valued
• Consulting and advising the issuer for the IPO process
Share valuation means :- determining the value of a company. IPO shares can be overvalued or undervalued
Over valued securities are those that are trading above their market value
Undervalued securities are those that are traded below their market value
• IPO underwriting process steps :-
1. Issuer appoints an underwriter.
2. The underwriter and the issuer enter into an underwriting agreement,
which includes details of the underwriting percentage, fees, etc.
3. In the case of under subscription, the underwriter purchases the
shares from the issuer for the agreed percentage and at the agreed
price.
5) Market Maker :-
Market makers are licensed stockbrokers (NSE list and BSE
list)Who buy or sell stock in the stock market at specific prices to
improve liquidity and price discovery. They provide liquidity in thinly
traded stocks. They also monitor the trading in the script and report to the
exchange when irregularities occur.
Market-Making is mandatory for SME IPOs and voluntary for main
board IPOs. Most SME stocks face liquidity issues that could make it
difficult for investors to exist. Market makers are here to help. The market
makers helps with this.
Market markers are paid by the issuing company for the risks they take.
The risk includes a market maker buying shares from a seller in the
market maker not being able to find another buyer because of the price
fluctuation, so the market maker takes a loss on the unsold shares.
5) Market Maker Role :-
As per exchange (NSE and BSE )guidelines, a market maker :
• Should provide a 2-way quote for 75% of the time in a day.
• Guarantee the execution of the order at the quoted Price and quantity for
the quotes they provide.
• Shall provide quotes from the date of listing of the particular security
and shall be subject to the market –making guidelines set by the
exchange.