UNIT 1: UNDER WRITING OF SHARES

Meaning of Underwriting

Underwriting is an agreement between the underwriters and the company where the
underwriters ensure the company that in case the shares and debentures offered to the
public are not subscribed by the public then such shares and debentures will be taken
up by the underwriters.

Meaning of Underwriters.

The person or institutions underwriting a public issue of shares and debentures are
called underwriters.

The underwriters may be individuals, partnership firms, joint stock companies, banks
and financial institutions.

Ex : ICICI, SFC’s, LIC etc.,

Meaning of underwriting Commission.

The underwriters are entitled to some consideration for the risk they undertake in
underwriting the shares or debentures of a public company.

In the words the consideration payable to the underwriters for underwriting the shares
and debentures is called underwriting commission.

Maximum Limit for underwriting commission.

For the services rendered by the underwriters : they are entitled to a maximum
commission of 5% of the issue price of the shares and debentures at 2.5% on the issue
price according to company’s act of 1956.

According to SEBI the maximum commission payable to underwriters for underwriting

the shares and debentures is 2.5% of the issued price.

Advantages of Underwriting.

1. As underwriters guarantee the sale of shares and debentures, subscription of

capital of the company becomes certain.
2. When there is an underwriting arrangement, a company is relieved from the
trouble of raising the required capital.
3. When there is an underwriting arrangement, a company can be sure of getting
the required capital within a specified period of time.
4. With an underwriting arrangement, a company need not bother about money
market conditions.

Types of Underwriting
 1. On the basis of number of shares or debentures underwritten:
According to this basis underwriting contracts are classified in t 2 type they are,
a) Complete underwriting : It is one under which the whole of the issue of
shares or debentures of a company is underwritten by one or more
underwriters.
b) Partial Underwriting : It is one under which a part of the issue of shares
or debentures of a company is underwritten by one or more
underwriters.

2. On the basis of liability of underwriters:

According to this basis underwriting contracts are classified into 2 types they
are,
a) Pure / Open Underwriting : it is an arrangement under which and
underwriters or underwriters agree to take up the shares or debentures
of a company only when the shares or debentures underwritten by him or
them is not fully subscribed by the public.
b) Firm Underwriting : It is an arrangement where underwriters agrees to
buy a definite number of shares and debentures irrespective o f the
number of shares or debentures subscribed by the public.
In case of firm underwriting, the underwriters gets priority over general
public if shares / debentures are over subscribed.

Calculation of underwriters liability

Liability of underwriters refer to the number of shares, the underwriters must

subscribed on account of underwriting agreement.

Statement showing underwriter’s liability

Particulars No.of
Shares
Gross liability XXX
(-) Unmarked application XXX
XXX
(-) marked application XXX
Net liability XXX
(+) Firm Underwriting XXX
Total Liability XXX

Marked and unmarked applications.

The applications received by the company bearing the officials stamp of the individual
underwriter or the respective underwriters are called Marked application.

Applications received by the company directly from the public which do not bear the
official stamp of the underwriter or underwriters are called unmarked applications.
PROBLEMS :

1. A Ltd issued 100000 equity shares the whole of the issue was underwritten as
follows.
X – 40%, Y-30% , Z-30%
Applications for 80,000 shares were received in all out of which application for
20,000 shares had the stamp of X those for 10,000 shares that of Y and 20,000
shares that of Z.
Your required to determine the net liability of each underwriter.
i. Calculation of unmarked applications

Total applications received 80,000

(-)Marked applications 50,000
(X-20,000, Y-10,000, Z-20,000)
Unmarked application 30,000

ii. Statement showing Net Liability of underwriter

Particulars X Y Z Total
Gross Liability 40,000 30,000 30,000 1,00,000
(-)unmarked application 12,000 9,000 9,000 30,000
(30,000*4:3:3) 28,000 21,000 21,000 70,000
(-) marked application 20,000 10,000 20,000 50,000
8,000 11,000 1,000 20,000
Net Liability

2. Super India Ltd., issued 75,000 equity shares the whole of the issue was
underwritten as follows.
A-50%, B-25%, C-25%
Applications for 60,000 shares were received in all out of which applications for
15,000 shares had stamp of A, those for 7500 shares had stamp of B and 15,000
of C
Determine the net liability of the underwriters.
i. Calculation of unmarked applications
Total application received 60,000
(-) marked application 37,500
(A-15,000, B-7,500, C-15,000)
Unmarked application 22,500

ii. Statement showing net liability of underwriters

Particulars A B C Total
Gross Liability 37,500 18,750 18,750 75,000
(-)unmarked application 11,250 5,625 5,625 22,500
 26,250 13,125 13,125 52500
(-) marked application 15,000 7,500 15,000 37,500
Liability 11,250 5,625 1,875 15,000
(-) Excess of ‘C’ 1,250 625 - --
(1875*2:1)
Net Liability 10,000 5,000 15,000

3. Adithya Co. Ltd was incorporated on 1.01.2014, issued a prospectus inviting

applications for 5 lakhs equity shares of Rs.10 each. The whole issue was fully
underwritten by A, B, C & D as follows A-2,00,000. B – 1,50,000 C-1,00,000 & D-
50,000 shares.
Applications were received for 4,50,000 shares of which marked applications
were as follows: A-2,20,000 , B – 1,10,000 , C – 90,000 , D-10,000 you are
required to find out the Net liability of each underwriter and also calculate the
commission received by each underwriters as per company’s Act of 1956.
i. Calculation of unmarked applications
Total application received 4,50,000
(-) marked application 4,30,000
(2,20,000+1,10,000+90,000+10,000)
Unmarked application 20,000

ii. Statement showing net liability of underwriters

Particulars A B C D Total
Gross Liability 2,00,000 1,50,000 1,00,000 50,000 5,00,000
(-)unmarked application 8,000 6,000 4,000 2,000 20,000
1,92,000 1,44,000 96,000 48,000 4,80,000
(-) marked application 2,20,000 1,10,000 90,000 10,000 4,30,000
Liability -28,000 34,000 6,000 38,000 50,000
(-) Excess of ‘A’ -- 14,000 9,333 4,667 --
(3:2:1*28,000) -- 20,000 -3,333 33,333 --
(-) Excess of ‘C’ shared -- --
among ‘B’&’D’ 2,500 833 --
(3,333*3:1)
Net Liability - 17,500 - 32,500 50,000
iii. Calculation of underwriters Commission
A- 2,00,000* 10*5%= Rs.1,00,000
B- 1,50,000*10*5%=Rs.75,000
C- 1,00,000*10*5%=Rs.50,000
D- 50,000*10*5%Rs.25,000

4. A Company issued 1, 00,000 shares of Rs.10 each. The whole issue was fully
underwritten by A, B, C & D as follows: A-40,000, B-30,000 C – 10,000 & D –
20,000 the company received applications for 90,000 shares of which marked
applications were as follows. A-44,000, B-22,000, C-2,000 and D-18,000 shares.
Determine the liability of each underwriter.
i. Calculation of unmarked applications
 Total application received 90,000
(-) marked application 86,000
(44,000+22,000+2,000+18,000)
Unmarked application 4,000

ii. Statement showing net liability of underwriters

Particulars A B C D Total
Gross Liability 40,000 30,000 10,000 20,000 1,00,000
(-)unmarked application 1,600 1,200 400 800 4,000
(4,000*4:3:1:2) 38,400 28,800 9,600 19,200 96,000
(-) marked application 44,000 22,000 2,000 18,000 86,000
Liability -5,600 6,800 7,600 1,200
(-) Excess of ‘A’ 2,800 933 1,867
(5,600*3:1:2) 4,000 6,667 -667
(-)Excess of‘ C’ - 500 167
(667*3:1)
Net Liability - 3,500 6,500 - 10,000

5. A company issued prospectus inviting applications for 3,50,000 equity shares of

Rs.10 each the whole issue was fully underwritten by A, B, C & D as follows A-
1,40,000 , B-1,05,000, C-70,000 & D-35,000 applications were received for
3,15,000 shares of which marked applications were as follows: A-1,54,000 B –
77,000 C – 63,000 & D-7,000 Determine the Net liability of each underwriter.
i. Calculation of unmarked applications
Total application received 3,15,000
(-) marked application 3,01,000
(1,54,000+77)
Unmarked application 14,000

ii. Statement showing net liability of underwriters

Particulars A B C D Total
Gross Liability 1,14,000 1,05,000 70,000 35,000 3,50,000
(-)unmarked application 5,600 4,2000 2,800 1,400 14,000
(14,000*4:3:2:1) 1,34,400 1,00,800 67,200 33,600 3,36,000
(-) marked application 1,54,000 77,000 63,000 7,000 3,01,000

-19,600 23,800 4,200 26,600

(-) Excess of ‘A’ 9,800 6,533 3,267
(19,600*3:2:1) 14,000 -2333 23,333
(-) Excess of ‘C’ (2333*3:1) 1,750 583
Net Liability 12,250 22,750 35,000
 6. ABC company issued 1,00,000 equity shares of Rs.10each. The whole issue was
fully underwriter by the following underwriters. A -35,000 B-30,000 C-20,000
D-10,000 E-3,000 F-2,000. The application forms marked by the underwriters
were A-10,000 B-22,500 C-20,000 D-7,500 E-5,000 F-Nil.
Application for 20,000 shares were received as unmarked. You are required to
find out Net liability of underwriters.
 Statement showing net liability of underwriters
Particular A B C D E F Total

Gross Liability 35,000 30,000 20,000 10,000 3,000 2,000 1,00,000

(-)unmarked application 7,000 6,000 4,000 2,000 600 400 20,000
(20,000*35:30:20:10:3:2)
28,000 24,000 16,000 8,000 2,400 1,600 80,000
(-) marked application 10,000 22,500 20,000 7,500 5,000 65,000
18,000 1,500 -4,000 500 -2,600 1,600 15,000
(-) Excess of (C+E)
(6,600*35:30:10:2) 3,000 2,571 - 857 - 172 -
15,000 -1,071 - -357 - 1,428
(-)Excess of (B+D)
(1428-35:2) 1,351 - - - - 77
Net Liability 13,649 - - - - 1,351 15,000

7. A Public limited company with a capital of Rs.10,00,000 divided into equity share
of Rs.10 each, places its entire issue in the market. The whole issue has been
underwritten as follows: A-30,000 B-35,000 C-10,000, D-15,000 E-2,000 F-8,000.
The application received on the forms marked by the underwriters are: A-25,000
B-23,500 C-6,500, D-1,000 E-2,000 F-7,000.
20,000 equity shares were received as unmarked applications calculate the
liability of each underwriters.
 Statement showing net liability of underwriters
Particular A B C D E F Total

Gross Liability 30,000 35,000 10,000 15,000 2,000 8,000 1,00,000

(-)unmarked application 6,000 7,000 2,000 3,000 400 1,600 20,000
(20,000*30:35:10:15:2:8)
24,000 28,000 8,000 12,000 1,600 6,400 80,000
(-) marked application 25,000 23,500 6,500 1,000 2,000 7,000 65,000
-1,000 4,500 1,500 11,000 -400 -600 15,000

(-)Excess of (A+E+F) - 1,167 333 500 - -

(2000*35:10:15)
Net Liability - 3,333 1,167 10,500 - - 15,000
8. A public issue of 10,000 shares of Rs.10 each were offered by a company. These
shares were underwritten as follows: A-7,000 B-3,000 the public applied for
8,000 Shares which include marked applications of A-5,000 B-2,000 determine
the liability of A & B if unmarked shares were apptioned to underwriters on the
basis of (a) Gross Liability (b) Remaining Liability.
i. Calculation of unmarked applications

Total applications received 8,000

(-)Marked applications 7,000
(5,000+2,000)
Unmarked application 1,000

a. Statement showing Net Liability of underwriter

Particulars A B Total
Gross Liability 7,000 3,000 10,000
(-)unmarked application 700 300 1,000
(1,000*7:3)
6,300 2,700 9,000
(-) marked application 5,000 2,000 7,000

Net Liability 1,300 700 2,000

b. Statement showing Net Liability of underwriter (remaining liability)
Particulars A B Total
Gross Liability 7,000 3,000 10,000
(-)marked application 5,000 2,000 7,000
2,000 1,000 3,000
(-) unmarked application 667 333 1,000
(1,000*2:1)
Net Liability 1,333 667 2,000

9. X company Ltd. Was incorporate with a capital of Rs.10,00,000 divided into

shares of Rs.10 each. The whole issue was underwritten by the underwriters as
follows : M-35,000 N-30,000 O-20,000 P-10,000 Q-3,000 R-2000.
All the marked application forms were to go in relief of the underwriters whose
names choose. The following application forms were marked by the
underwriters : M-10,000 N-22,500 O-20,000 P-7,500 Q-5,000 R-Nil.
Application for 20,000 shares were received as unmarked applications. prepare a
statement showing the number of shares each underwriter had to take up.
  Statement showing underwriters liability
Particular M N O P Q R Total

Gross Liability 35,000 30,000 20,000 10,000 3,000 2,000 1,00,000

(-)marked application 10,000 22,500 20,000 7,500 5,000 - 65,000
25,000 7,500 - 2,500 -2000 2,000 35,000
Excess of Q is diotr.
Among (M,N,P,R) 909 779 - 260 - 52
(2,000*35:30:10:2)
24,091 6,721 - 2,240 - 1,948 35,000
(-) unmarked application 9,091 7,792 - 2,597 - 520 25,000
(20,000*35:30:10:2) 15,000 -1,071 - -357 - 1,428 15,000

(-)Excess of (N+P) 1,351 - - - - 77

(1,428*35:2 )
Net Liability 13,649 1,351 15,000

10. A company issued 80,000 shares of Rs.10each at a premium of 20% ‘A’

underwriter underwriters 80% of the issue. The company receives applications
for 75% of the issue of which 40,000 application had the rubber stamp of Mr.A
Underwriters commission in 4% of the issue price. Determine the liability of
Mr.A and calculate the Underwriting commission.
i. Calculation of Co’s share
Co’s share=Total issue- underwriters share
= 80,000-(80,000*80%)
= 80,000-64,000
= 16,000
ii. Calculation of unmarked applications

Total applications received (75% of 80,000) 60,000

(-)Marked applications of ‘A’ 40,000
Unmarked application 20,000

iii. Statement showing Net Liability of underwriter

Particulars A Company Total
Gross Liability 64,000 16,000 80,000
(-)unmarked application - 20,000 20,000
64,000 -4,000 60,000
(-) surplus of company
distributed to underwriter ‘A’ 4,000 - -
60,000 - 60,000
(-) marked application 40,000 - 60,000
- 40,000
Net Liability 20,000 20,000
 iv. Calculation of underwriters commission.
Gross liability of ‘A’ * issue price*Roc issue price=Rs.10+20% of premium
=10+2=12
64,000*12-4%=30,720
11. ‘H’ Ltd issued 20,000 equity shares of Rs.100 each 80% of the issue was
underwritten star brother’s. Applications for 15,000 shares were received in all
out of which 10,000 shares were marked. Determine the liability of Tsar
Brother’s and also the commission as per law (Act of 1956)
 i. Calculation of Co’s share
Co’s share= Total issue-underwriters share
=20,000-(20,000*80%)
=20,000-16,000
= 4,000
ii. Calculation of unmarked application
Total application received 15,000
(-) Marked application 10,000
Unmarked shares 5,000

iii. Calculation of star brothers commission

Issue price= 100 share
Gross liability *issue price*Roc(as per Co’s act 1950)
= 16,000*100*5%
= Rs. 80,000
iv. Statement showing Net liability
Particulars Star brother Company Total
Gross Liability 16,000 4,000 20,000
(-)unmarked application - 5,000 5,000
16,000 -1,000 15,000
(-) surplus of company
distributed to star brothers 1,000 - -
15,000 - 15,000
(-) marked application 10,000 - 10,000

Net Liability 5,000 5,000

12. X company Ltd. Issued 1,00,000 shares of Rs.10 each. 60% of the issue was
underwritten by A & B in the ration of 3:2 application for 80,000 shares were
received in all out of which marked applications were A-25,000 B-12,000
determine the liability of underwriters and also commission payable as per SEBI
(25%)
 i. Calculation of Co’s share
Co’s share = Total- underwriters share
= 1,00,000-(60%*1,00,000)
= 1,00,000-60,000
= 40,000/-
 ii. Calculation of unmarked application
Total application received 80,000
(-) Marked application (25,000+12,000) 37,000
Unmarked shares 43,000

iii. Statement showing Net liability

Particulars A B Company Total

Gross Liability 36,000 24,000 40,000 1,00,000
(-)unmarked application - - 43,000 43,000
36,000 24,000 -3,000 57,000
(-) surplus of company 1,800 1,200 -
distributed to underwriters
(3,000*3:2) 34,200 22,800 - 57,000
(-) marked application 25,000 12,000 - 37,000

Net Liability 9,200 10,800 20,000

iv. Calculation of underwriters commission as per SEBI

A- 36,000*10*2.5%=9,000
B- 24,000*10*2.5%=6,000

13. A company issued 40,000 shares of Rs.10 each for public subscription.
Underwriters % of Shares Marked application
underwritten
P 25% of issue 5,000
Q 30% of issue 6,000
R 40% of Issue 4,000
The company received application for 30,000 shares ascertain the net liability of
each underwriters.
 P- 40,000*25%= 10,000
Q- 40,000*30%= 12,000
R-40,000*40% = 16,000
38,000

i. Calculation of Co’s share

Co’s share= Total share-underwriters share
= 40,000-38,000
= 2,000

ii. Calculation of unmarked applications:

Total application received 30,000

(-) Marked application (5,000+6,000+4,000) 15,000
Unmarked shares 15,000
iii. Statement showing Net liability

Particulars P Q R Company Total

Gross Liability 10,000 12,000 16,000 2,000 40,000
(-)unmarked application - - - 15,000 15,000
10,000 12,000 16,000 -13,000 25,000
(-) surplus is distributed among
P,Q & R (13,000*5:6:8) 3,421 4,105 5,474 -
6,579 7,895 10,526 - 25,000
(-) marked application 5,000 6,000 4,000 15,000
Net Liability 1,579 1,895 6,526 10,000

14. A company issued 1,00,000 shares of Rs.10 each. These shares were
underwriters as follows X-30,000 Y-50,00 the public applied for 70,000 shares
Determine the liability of X & Y .
 i. Calculation of Co’s share
Co’s share =Total issue- underwriters share
= 1,00,000-(30,000+50,000)
= 1,00,000-80,000
= 20,000
ii. Calculation of marked & unmarked applications.
Marked application of X = 70,000*3/10
= 21,000

Marked application of Y = 70,000*5/10

= 35,000

(-) unmarked application Co=70,000*2/10

= 14,000
Note: in the absence of marked application the total subscription is divided among
the underwriters & the Co’s in their gross liability ration. The co’s share is treated
as unmarked applications.

iii. Statement showing underwriters liability

Particulars X Y Company Total

Gross Liability 30,000 50,000 20,000 1,00,000
(-)unmarked application - - 14,000 14,000
30,000 50,000 6,000 86,000
(-) marked application 21,000 35,000 - 56,000
Net Liability 7,000 15,000 6,000 30,000

15. Popular Ltd issued 40,000 shares of Rs.10each for Public Subscription. The issue
was underwritten as follows: Sriram – 25%, Raghu-30%, Tilak-25% the company
received a total of 28,000 application of which marked application are follows :
Sriram -8,000, Raghu-6,000 and Tilak-8,000. Determine the net liability of each
underwriter.
 i. Calculation of Co’s share

Co’s share =Total issue- underwriters share

= 40,000-(10,000+12,000+10,000)
= 40,000-32,000
= 8,000
ii. Calculation of unmarked application
Total application received 28,000
(-) marked application (8,000+6,000+8,000) 22,000
6,000

iii. Statement showing Net liability

Particulars S R T Company Total

Gross Liability 10,000 12,000 10,000 8,000 40,000
(-)unmarked application - - - 6,000 6,000
10,000 12,000 10,000 2,000 34,000
(-) marked application 8,000 6,000 8,000 - 22,000
Net Liability 2,000 6,000 2,000 2,000 12,000

16. Neeraj Ltd issued 10,000 shares of rs.10each at a premium of 10% these shares
were underwritten by the underwriters as follows: J-5000 K-3000. The
applications received by the company were 8000 shares of which the marked
applications were J-3600 K-900 shares calculate underwriters commission as
per law and also prepare statement of underwriters Net liability.
 i. Calculation of Co’s share
Co’s share= Total issue – underwriters share
= 10,000-(5,000+3,000)
= 10,000-8,000
= 2,000
ii. Calculation of unmarked applications:
Total application received 8,000
(-) marked application (3,600+900) 4,500
3,500

iii. Statement showing Net liability

Particulars J K Company Total

Gross Liability 5,000 3,000 2,000 10,000
(-)unmarked application - - 3,500 3,500
5,000 3,000 -1,500 6,500
(-) surplus is distributed to J&K
(1,500*5:3) 937 563 -
4,063 2,437 - 6,500
(-) marked application 3,600 900 - 4,500
Net Liability 463 1,537 2,000
 iv. Calculation of commission of underwriters as per law:-
J=5,000*5%*11 K=3,000*5%*11
= 2,750 = 1,650

FIRM UNDERWRITING.

a) When a firm underwriting (included in total subscription) is treated on part with

unmarked applications. The format for calculating total liability for each
underwriter will be as follows.

Particulars A B Total
Gross Liability XXX XXX XXX
(-) unmarked applications XXX XXX XXX
(Total application received –marked application)
Balance XXX XXX XXX
(-) Marked applications XXX XXX XXX
Net Liability XXX XXX XXX
(+) Firm Underwriting XXX XXX XXX
Total Liability XXX XXX XXX

b) When Firm underwriting (included in total subscription) is treated on part with

marked application the format for calculating total liability will be as follows.

Particulars A B Total
Gross Liability XXX XXX XXX
(-) unmarked applications XXX XXX XXX
(Total application received –marked application + Firm
Underwriting)
Balance XXX XXX XXX
(-) Marked applications XXX XXX XXX
(Marked application + Firm Underwriting)
Net Liability XXX XXX XXX
(+) Firm Underwriting XXX XXX XXX
Total Liability XXX XXX XXX

17. A company issued 1,00,000 shares these shares were underwritten as follows:
X-60,000 , Y-25,000 , Z-15,000. In additional their is firm underwriting X-8,000,
Y-3,000, Z-10,000 shares. The total subscription including the firm underwriting
was 71,000 shares and the firms included the following marked application:X-
10,000 , Y-20,000 , Z-5,000. Determine the liability of underwriters.
 i. Calculation of unmarked application:
Total application received 71,000
(-) marked application (10,000+20,000+5,000) 35,000
36,000
 ii. Calculation showing underwriters liability
Particulars X Y Z Total
Gross Liability 60,000 25,000 15,000 1,00,000
(-)unmarked application 21,600 9,000 5,400 36,000
38,400 16,000 9,600 64,000
(-) marked application 10,000 20,000 5,000 35,000
28,400 -4,000 4,600 29,000
(-) surplus of Y’s distributer to X
& Z (4,000*12:3) 3,200 - 800 -
Net Liability 25,200 - 3,800 29,000
(+) Firm underwriting 8,000 3,000 10,000 21,000
Total liability 33,200 3,000 13,800 50,000

18. Meena Ltd has authorised company of Rs.50,00,000 divided into 1,00,000 equity
shares of Rs.50 each. The Company issued for subscription 50,000 shares at a
premium of Rs.10 each. The entire issue was underwritten as follows : A-30,000
(firm underwriting 5,000), B-15,000 (firm Underwriting 2,000), C-5,000(Firm
Underwriting 500).
Out of the total issue 45,000 shares including firm underwriting wee subscribed.
The following were the marked applications: A-16,000 , B-10,000 , C-4,000.
Calculate the liability of each underwriters.
 i. Calculation of unmarked application:
Total subscription received 45,000
(-) marked application (16,000+10,000+4,000) 30,000
15,000

ii. Calculation showing underwriters liability

Particulars A B C Total
Gross Liability 30,000 15,000 5,000 50,000
(-)unmarked application 9,000 4,500 1,500 15,000
(15,000*6:3:1) 21,000 10,500 3,500 35,000
(-) marked application 16,000 10,000 4,000 30,000
5,000 500 -500 5,000
(-) surplus of ‘C’ distributer to A
&B (500*6:3 ) 333 167 - -
Net Liability 4,667 333 - 5,000
(+) Firm underwriting 5,000 2,000 500 7,500
Total liability 9,667 2,333 500 12,500

19. ABC company issued 20,000 shares which were underwritten by X,Y & Z as
follows : X-10,000 , Y-6,000 , Z-4,000. In additional there was firm underwriting
by X-1,000 , Y-500 , Z-1,500. A company received applications for 15,200 shares
including firm underwriting and the Number of marked applications were as
follows: X-3,000 , Y-4,500 , Z-1,700. Calculate the liability of each underwriters.
 i. Calculation of unmarked application:
Total share received 15,200
(-) marked application (3,000+4,500+1,700) 9,200
6,000

ii. Calculation showing underwriters liability

Particulars X Y Z Total
Gross Liability 10,000 6,000 4,000 20,000
(-)unmarked application 3,000 1,800 1,200 6,000
(6,000*5:3:2) 7,000 4,200 2,800 14,000
(-) marked application 3,000 4,500 1,700 9,200
4,000 -300 1,100 4,800
(-) surplus of Y’s distributer to X
& Z (300*5:2) 214 - 86 -
Net Liability 3,786 - 1,014 4,800
(+) Firm underwriting 1,000 500 1,500 3,000
Total liability 4,786 500 2,514 7,800

20. X ltd issued 4,00,000 shares of Rs.10 each the entire issue was underwritten as
follows. A-2,00,000(firm underwriting 40,000), B – 1,20,000 (Firm Underwriting
20,000), C-80,000 (firm underwriting 20,000).Shares applied for were 3,60,000.
The following being the marked forms including Firm underwriting A-1,40,000 ,
B-56,000 , C-64,000. Calculate the liability of each Underwriter.

i. Calculation of unmarked application:

Total share received 3,60,000

(-) marked application (1, 40,000+56,000+64,000) 2,60,000
1,00,000

ii. Calculation showing underwriters liability

Particulars A B C Total
Gross Liability 2,00,000 1,20,000 80,000 4,00,000
(-)unmarked application 50,000 30,000 20,000 1,00,000
(1,00,000*5:3:2) 1,50,000 90,000 60,000 3,00,000
(-) marked application 1,40,000 56,000 69,000 2,60,000
10,000 34,000 -4,000 40,000
(-) surplus of ‘C’ distributer to
A&B (4,000*5:3) 2,500 1,500 -
Net Liability 7,500 32500 - 40,000
(+) Firm underwriting 40,000 20,000 20,000 80,000
Total liability 47,500 52,500 20,000 1,20,000
21. Embassy Ltd issued 10,000 Shares of Rs.100 each a premium of Rs.20 per share.
The entire issue was underwritten by A, B & C as follows. A-5,000 (firm
Underwriting-1000),B-3,000(firmUnderwriting-500),C-2,000(firmUnderwriting-
500). Public have applied for 9,000 shares. The following are the marked forms
including Firm Underwriting A-3,500, B-1,400 , C-1,600.

i. Calculation of unmarked application:

Total subscription received 9,000
(-) marked application including u/w 6,500
(3,500+1,400+1,600) 2,500

ii. Calculation showing underwriters liability

Particulars X Y Z Total
Gross Liability 5,000 3,000 2,000 10,000
(-)unmarked application 1,250 750 500 2,500
(2,500*5:3:2) 3,750 2,250 1,500 1,500
(-) marked application 3,500 1,400 1,600 6,500
250 850 -100 1,000
(-) surplus of ‘C’ distributer to A
& B (100*5:3) 63 37 - -
Net Liability 187 813 - 1,000
(+) Firm underwriting 1,000 500 500 21,000
Total liability 1,187 1,313 500 3,000

22. Bangalore House building Association Ltd. Issued 1,00,000 equity shares of
Rs.100 each. P, Q, R & S underwriters the entire issue in the proportion of 40% ,
30%, 20% & 10% respectively . In consideration of commission in cash at 4%
they also applied for Firm Underwriting : P-3,000 , Q-2,000 , R-2,000 , S-3,000
exclusive of Firm Underwriting Besides the firm applications from the
underwrite the public apply for 60,000 shares of which marked applications
were as follows: P-10,000 , Q-6,000 , R-8,000 & S-16,000 show the number of
shares to be taken up by each of the underwriting and also the commission
receivable in cash.
 i. Calculation of Total Subscription
Total Subscription =No. of application received +Firm underwriting
= 60,000+(3,000+2,000+2,000+3,000)
= 60,000+10,000
= 70,000
ii. Calculation of unmarked application:
Total subscription received 70,000
(-) marked application Ex 40,000
(10,000+6,000+8,000+16,000) 30,000

Note: Firm underwriting treated as unmarked applications

 iii. Calculation showing underwriters total liability
Particulars P Q R S Total
Gross Liability 40,000 30,000 20,000 10,000 1,00,000
(-)unmarked application 12,000 9,000 6,000 3,000 30,000
(30,000*4:3:2:1)
28,000 21,000 14,000 7,000 70,000
(-) marked application 10,000 6,000 8,000 16,000 30,000
18,000 15,000 6,000 -9,000 40,000
(-) surplus of ‘S’ distributer to 4,000 3,000 2,000 9,000
P,Q & R (9,000*4:3:2)
Net Liability 14,000 12,000 4,000 - 30,000
(+) Firm underwriting 3,000 2,000 2,000 3,000 10,000
Total liability 17,000 14,000 6,000 3,000 40,000
iv. Calculation of underwriters commission
P= 40,000*100*4%=Rs.1,60,000
Q=30,000*100*4%=Rs.1,20,000
R=20,000*100*4%=Rs.80,000
S=10,000*100*4%=Rs.40,000

23. A company issued 30,000 shares of Rs.10 each. These shares were underwritten
as follows. X-18,000 , Y-7,500 , Z-4,500 I addition there was Firm
Underwriting:X-2,400 , Y- 900 , Z-3,000 . Total applications received by the
company (excluding firm underwriting & marked applications) were 4,500
shares.
Marked applications were X-3,000 Y-6,000 , Z-1,500. Determine the liability of
the underwriter.
 i. Calculation of Total Subscription
Total Subscription =No. of application received +Firm underwriting +marked
application = 4,500+6,300+10,500
= 21,300
ii. Calculation of unmarked application:
Total subscription received 21,300
(-) marked application Ex 10,500
(3,000+6,000+1,500) 10,800

Firm underwriting =2,400+900+3,000

= 6,300
 iii. Statement showing total liability
Particulars X Y Z Total
Gross Liability 18,000 7,500 4,500 30,000
(-)unmarked application 6,480 2,700 1,620 10,800
(10,800*12:5:3)
11,520 4,800 2,880 19,200
(-) marked application 3,000 6,000 1,500 10,500
8,520 -1,200 1,380 8,700
(-) surplus of ‘Y’ distributer to X 900 - 240
& Z (1,200*12:3)
Net Liability 7,560 - 1,140 8,700
(+) Firm underwriting 2,400 900 3,000 6,300
Total liability 9,960 -900 4,140 15,000

24. A company a public issue of 1,25,000 equity shares of Rs.100 each the entire
issue was underwritten by A, B , C & D in a proportion of 30% , 25% , 25% & 20%
respectively. Under the terms agreed upon a commission of 2% was payable to
the underwriters.
A, B, C & D also agreed upon firm Underwriting of 4,000 ; 6,000; Nil ; 15,000
shares respectively. The total subscription excluding firm underwriting but
including marked applications 90,000 shares marked applications received were
; A-24,000 ; B-20,000; C-12,000 & D-24,0001 shares . determine the liability of
the underwriters.

 i. Calculation of Total Subscription

Total Subscription =No. of application received +Firm underwriting
= 90,000+(4,000+6,000+0+15,000)
= 90,000+25,000
= 1,15,000

ii. Calculation of unmarked application:

Total subscription received 1,15,000
(-) marked application 80,000
(24,000+20,000+12,000+24,000) 35,000
 iii. Calculation showing underwriters total liability
Particulars A B C D Total
Gross Liability 37,500 31,250 31,250 25,000 1,25,000
(-)unmarked application 10,500 8,750 8,750 7,000 35,000
(35,000*6:5:5:4)
27,000 22,500 22,500 18,000 90,000
(-) marked application 24,000 20,000 12,000 24,000 80,000
3,000 12,500 10,500 -6,000 10,000
(-) surplus of ‘D’ distributer to 2,250 1,875 1,875 -
A,B & C (6,000*6:5:5)
Net Liability 750 125 8,625 10,000
(+) Firm underwriting 4,000 6,000 - 15,000 25,000
Total liability 4,750 6,125 8,625 15,000 35,000

iv. Calculation of underwriters commission

P= 37,500*100*2%=Rs.75,000
Q=31,250*100*2%=Rs.62,500
R=31,250*100*2%=Rs.62,500
S=25,000*100*2%=Rs.50,000

25. A company issued 24,000 shares of Rs.10each. these shares were underwritten
as follows : X-14,400 ; Y-6,000 ; Z-3,600 shares. Firm underwriting X-1,920 ; Y-
720 ; Z-2,400. The total subscriptions received except of firm underwriting and
marked application were 3,600 shares. Marked applications were X-2,400; Y-
4,800; X-1,200. Determine the liability of Underwriters.

i. Calculation of Total Subscription

Total Subscription =No. of application received +Firm underwriting +marked

application = 3,600+8,400+5,040
= 17,040

ii. Calculation of unmarked application:

Total subscription received 17,040
(-) marked application(2,400+4,800+1,200 8,400
8,640

Marked application =2,400+4,800+1,200

= 8,400
Firm underwriting = 1,920+720+2400
= 5040
 iii. Statement showing total liability
Particulars X Y Z Total
Gross Liability 14,400 6,000 3,600 24,000
(-)unmarked application 5,184 2,160 1,296 8,640
(8,640*12:5:3)
9,216 3,840 2,304 15,360
(-) marked application 2,400 4,800 1,200 8,400
6,816 -960 1,104 6,960
(-) surplus of ‘Y’ distributer to X 768 - 912 -
& Z (960*12:3)
Net Liability 6,048 - 912 6,960
(+) Firm underwriting 1,920 720 2,400 5,040

Total liability 7,968 720 3,312 5,040

26. Nischal Ltd 2,50,000 shares of Rs.10each which was underwritten as follows:
Mr. A 75,000 (firm underwriting -8,000) Mr.B – 62,500 (firm underwriting -
12,000) Mr.C – 62,500 (firm underwriting -Nil), Mr.D-50,000 (firm
underwriting -30,000).
The total applications excluding firm underwriting but including marked
applications were for 1,80,000 shares. The marked applications were as follows ;
Mr.A-40,000 ; Mr.B – 36,000 ; Mr.C-24,000 & Mr.D+48,000. Calculate the Net
liability of each underwriter treating (a) Firm underwriter as marked
applications (b) Firm underwriter as unmarked applications.
 i. Calculation of Total Subscription
Total Subscription =No. of application received +Firm underwriting
= 1,80,000+(8,000+12,000+30,000)
= 1,80,000+50,000
= 2,30,000
a) Firm underwriting as marked application
ii. Calculation of unmarked application:
Total subscription received 2,30,000
(-) marked application(including Firm U/w 1,98,000
(48,000+48,000+24,000+78,000) 32,000
 iii. Calculation showing underwriters total liability
Particulars Mr. A Mr. B Mr. C Mr. D Total
Gross Liability 75,000 62,500 62,500 50,000 2,50,000
(-)unmarked application 9,600 8,000 8,000 6,400 32,000
(32,000*6:5:5:4)
65,400 54,500 54,500 43,600 2,18,000
(-) marked application 48,000 48,000 24,000 78,000 1,98,000
17,400 6,500 30,500 -34,400 20,000
(-) surplus of ‘D’ distributer to
A,B & C (34,000*6:5:5) 12,900 10,750 10,750 -
4,500 -4,250 19,750 -
(-) surplus of ‘D’ distributer to
A,B & C (4,250*6:5) 2318 1,932
Net Liability 1,932 17,818 20,000
(+) Firm underwriting 8,000 12,000 - 30,000 50,000
Total liability 10,182 12,000 17,818 30,000 70,000

b) Firm underwriting as unmarked application

ii. Calculation of unmarked application:
Total subscription received 2,30,000
(-) marked application(excluding Firm U/w) 1,48,000
(40,000+36,000+24,000+48,000) 82,000

iii. Calculation showing underwriters total liability

Particulars Mr. A Mr. B Mr. C Mr. D Total
Gross Liability 75,000 62,500 62,500 50,000 2,50,000
(-)unmarked application 24,600 20,500 20,500 16,400 82,000
(82,000*6:5:5:4)
50,400 42,000 42,000 33,600 1,68,000
(-) marked application 40,000 36,000 24,000 48,000 1,48,000
10,400 6,000 18,000 -14,400 20,000
(-) surplus of ‘D’ distributer to
A,B & C (14,400*6:5:5) 5,400 4,500 4,500 -
Net Liability 5,000 1,500 13,500 - 20,000
(+) Firm underwriting 8,000 12,000 - 30,000 50,000
Total liability 13,000 13,500 13,500 30,000 70,000

27. X Ltd invited applications from public for 2,50,000 shares of Rs.10 each at a
premium of Rs.5 per share. The entire issue was underwritten by underwriters
P, Q , R & S to the extent of 30% , 20% , 30% & 20% respectively with the
provision of firm underwriting of 7,500 ; 2,500 ; 5,000 & 2,500 shares
respectively. The underwriters were entitled to the maximum commission as per
law in force and practise lay down by SEBI.
 The co-received applications for 1,75,000 shares excluding firm underwriting.
The marked applications were 47,000 ; 52,500 ; 25,000 & 20,000 respectively
calculate the liability of each of the underwriters treating.
a) Firm underwriting as marked applications
b) Firm Underwriting as unmarked applications .
Also calculate the underwriters commission payable to different
underwriters.
 i. Calculation of Total Subscriptions
Total subscriptions received 1,75,000
(-) firm underwriting (7,500+2,500+5000+2,500) 17,500
1,92,500
a) Firm underwriting as marked application
i. Calculation of unmarked application
Total subscriptions 1,92,500
(-) marked application (including firm U/w) 1,62,000
(54,500+55,000+30,000+22,500) 30,500

ii. Statement of underwriters liability

Particulars P Q R S Total
Gross Liability 75,000 50,000 75,000 50,000 2,50,000
(-)unmarked application 9,150 6,100 9,150 6,100 30,500
(30,500*3:2:3:2)
65,850 43,900 65,850 43,900 2,19,500
(-) marked application 54,500 55,000 30,000 22,500 1,62,000
11,350 -11,100 35,850 21,400 57,500
(-) surplus of ‘Q’ distributer to
P,R & S (11,100*3:3:2) 4,162 4,162 2,776
Net Liability 7,188 31,688 18,624 57,500
(+) Firm underwriting 7,500 2,500 5,000 2,500 17,500

Total liability 14,688 2,500 36,688 21,124 75,000

b) Firm underwriting as unmarked applications

i. calculation of unmarked application
Total subscription 1,92,500
(-) marked application (excluding F U/w) 1,44,500
(47,000+52,500+25,000+20,000) 48,000
 i. Statement of underwriters liability
Particulars P Q R S Total
Gross Liability 75,000 50,000 75,000 50,000 2,50,000
(-)unmarked application 14,400 90,600 14,400 9,600 48,000
(48,000*3:2:3:2)
60,600 40,400 60,600 40,400 1,98,000
(-) marked application 47,000 52,500 25,000 20,000 1,44,500
13,600 -12,100 35,600 20,400 53,500
(-) surplus of ‘Q’ distributer to -
P,R & S (12,100*3:3:2) 4,537 - 4,537 3,026
Net Liability 9,063 31,063 17,374 53,500
(+) Firm underwriting 7,500 2,500 5,000 2,500 17,500

Total liability 14,688 2,500 36,063 19,874 71,000

iv. Calculation of commission underwriters
P= 75,000*100*2.5%=Rs.28,125
Q=50,000*100*2.5%=Rs.18,750
R=75,000*100*2.5%=Rs.28,125
S=50,000*100*2.5%=Rs. 18,750

28. Apporva Ltd issued 5,00,000 equity shares of Rs.10 each at a premium of 20%
the issue was underwritten by 3 persons A, B & C as follows: A-2,50,000 (firm
Underwriting -25,000), B- 1,50,000 (firm Underwriting -15,000) & C-1,00,000
(firm Underwriting -10,000).
The underwriting commission % on the issue price and A Company agreed to
create firm under writing applications as marked forms. The company received
applications for 4,00,000 equity shares (excluding firm underwriting) of which
marked forms were as follows : A-1,15,00 ; B-1,25,000 ; & C-1,30,000 you are
required to show
a) Net liability of underwriters in terms of Number of shares
b) Commission due to each underwriter
c) Net amount due from each underwriter to the company.

 i. Calculation of Total Subscription

Total Subscription =No. of application received +Firm underwriting
= 4,00,000+(25,000+15,000+10,000)
= 4,00,000+50,000
= 4,50,000

ii. Calculation of unmarked application:

Total subscription received 4,50,000
(-) marked application 4,20,000
(1,40,000+1,40,000+1,40,000) 30,000
 iii. Calculation showing underwriters Net liability
Particulars A B C Total
Gross Liability 2,50,000 1,50,000 1,00,000 5,00,000
(-)unmarked application 15,000 9,000 6,000 30,000
(30,000*5:3:2)
2,35,000 1,14,000 94,000 4,70,000
(-) marked application 1,40,000 1,40,000 1,40,000 4,20,000
95,000 1,000 -46,000 50,000
(-) surplus of ‘C’ distributer to A,B
(46,000*5:3) 28,750 17,250 - 50,000
66,250 -16,250 -
(-) surplus of ‘B’ distributer to A &
C (16,250*5) 16,250 - - 50,000
Net Liability 50,000
(+) Firm underwriting 25,000 15,000 10,000 50,000
Total liability 75,000 15,000 10,000 1,00,000

b) iii. Underwriters commission:

A-2,50,000*12*5%=Rs.1,50,000
B-1,50,000*12*5%=Rs.90,000
C-1,00,000-12*5%=Rs.60,000

c) Calculation of Net amount due from each underwriter to the company

A=75,000*12 = Rs.9,00,000
B=15,000*12=Rs.1,80,000
C=10,000*12=Rs. 1,20,000

Net amount due - Net amount – commission

A= 9,00,000-1,50,000=7,50,000
B=1,80,000-90,000= 90,000
C=1,20,000-60,000=60,000

29. Ram Ltd invited applications from public for 1,00,000 shares of Rs.10each at a
premium of Rs.5per share. The entire issue was underwritten by underwriters P,
Q, R & S to the extent of 30%, 30%, 20% & 20% respectively with the provision
of firm underwriters of 3,000 ; 2,000 ; 1,000 ; 1,000 respectively. The
underwriters are entitled to the maximum commission as per the provisions of
the company’s act of 1956. The company received applications for 70,000 shares
(excluding firm Underwriters) out of which applications for 19,000 ; 10,000 ;
21,000 ; 8,000 were marked in favour of P, Q, R & S calculate the liability of each
underwriter by providing relief for firm applications also ascertain the
underwriting commission payable to different underwriters.
  i. Calculation of Total Subscription
Total Subscription =No. of application received +Firm underwriting
= 70,000+(3,000+2,000+1,000+1,000)
= 70,000+7,000
= 77,000

ii. Calculation of unmarked application:

Total subscription received 77,000
(-) marked application 65,000
(22,000+12,000+22,000+9,000) 12,000

iii. Statement of underwriters liability

Particulars P Q R S Total
Gross Liability 30,000 30,000 20,000 20,000 1,00,000
(-)unmarked application 3,600 3,600 2,400 2,400 12,000
(12,000*3:3:2:2)
26,400 26,400 17,600 17,600 88,000
(-) marked application 22,000 12,000 22,000 9,000 65,000
4,400 14,400 -4,400 8,600 23,000
(-) surplus of ‘R’ distributer
(4,400*3:3:2) 1,650 1,650 - 1,100
Net Liability 2,750 12,750 - 7,500 23,000
(+) Firm underwriting 3,000 2,000 1,000 1,000 7,000

Total liability 5,750 14,750 1,000 8,500 30,000

iv. Calculation of underwriters commission

P= 30,000*15*5%=Rs.22,500
Q=30,000*15*5%=Rs.22,500
R=20,000*15*5%=Rs.15,000
S=20,000*15*5%=Rs.15,000