FIN – 319

Investment Banking and Financial Services

 Learning Outcomes
• To understand the concept of Issue
Management
• To discuss the perspectives relating to issue
management
Latest News
 Link for news
• https://economictimes.indiatimes.com/mar
kets/ipos/fpos/lic-ipo-to-happen-after-octob
er-dipam-secy/articleshow/80650945.cms
 Introduction
• Existing as well as new companies raise
funds through various sources for
implementing their projects. One of the
sources of raising funds is mobilising
capital by issuing securities. This can be
done in the following three ways:
• l Public Issue
• l Right Issue
• l Private Placement
 Public Issue
• The most common method of raising funds
from public at large is called public issue.

• The prospectus has to disclose all material

and essential factors about the company
to the intending purchasers of shares.
 Right Issue
• Right issues are issues of new shares in
which existing shareholders are given
preemptive rights to subscribe to new
issue of shares. Such additional shares
are offered in proportion to the capital
paid-up on the shares held by them at the
date of such offer
 Private Placement
• The direct sale of securities by a company
to institutional or choosen investors is
called private placement.

• In private placement no prospectus is

issued.
 ISSUE MANAGEMENT
• Issue management refers to managing
issues of corporate securities like equity
shares, preference shares and debentures
or bonds.
• It involves marketing of capital issues, of existing
companies including rights issues and dilution of
shares by letter of offer. Management of issue
also involves other issues.

• The decisions concerning size and timing of the

public issue in the light of the market conditions
are advised by the merchant bankers
• In addition to these, the merchant bankers
also assist the corporate units on the
designing of a sound capital structure
acceptable to the financial institutions and
determining the quantum and terms of the
public issues of different forms of
securities
 ISSUE MANAGER AND SEBI
• Issue Managers are required to be
registered with SEBI to carry on their Issue
Management activities, since setting up of
SEBI
• SEBI has formulated Rules and
Regulations for merchant bankers which
bring out the requirements for Registration
of issue managers apart from prescribing
the conduct rules for them. I
Regulations
• Under SEBI guidelines, a public/rights
issue cannot be floated without the
association of a Merchant Banker.

• Merchant banker, like pilots of air-crafts

are repositories of special skills required to
execute the management of issues. Thus,
Issue manager is an indispensable pilot
• Marketing of an Issue is an essential and
perhaps the most important component of
issue Management.

• Merchant banker makes number of

promises and commitments to the
prospective investors which puts him in
the shoes of a dream merchant
Lead managers
Latest News
 Link for news
• https://www.businessinsider.in/finance/
news/jpmorgans-4th-quarter-earnings-
smash-forecasts-as-trading-revenues-
soar/articleshow/80288140.cms
 Link for news
• https://www.businessinsider.in/finance/ne
ws/boutique-investment-bank-perella-wein
berg-is-reportedly-seeking-to-go-public-via
-a-spac-at-a-valuation-of-more-than-1-billi
on/articleshow/79328699.cms
 SELECTING A PUBLIC ISSUE
PROPOSAL
• Background of the Promoters/Management
• Company Profile
• Project Profile
• Capital Market Position
• Other Important Factors
 Background
• Success of a company is very much
dependent on the background of the
promoters and the management viz., their
education, business/technical expertise,
financial strength capability and reputation,
etc. If a new company is launched from
the platform of an already existing group,
having successful track record, it is well
received in the market.
 Company Profile
• Merchant Banker also has to look at the
track record of the company and the
quality of its management, industry in
which it operates, product mix of the
Company and business prospects of the
product proposed to manufacture.
 Project Profile
• It is also considered whether the project is
appraised by a Financial Institution,
whether there is participation of Institutions
in the financing of project, if any, and the
level of financial participation of the
Institution.
 Capital Market Position
• If the group/associate concerns are
already listed on stock exchanges, the
pattern of their share price movement
should be analysed.
 Other Important Factors
• Other important factors which influence
selection of a project include outlook of
the: investors generally towards other
companies operating in similar industries
which are already listed and towards the
group in particular.
• https://economictimes.indiatimes.com/
markets/stocks/news/deal-street-dazzles-
with-reliance-deals-brighter-days-ahead-
in-2021/articleshow/80023564.cms
 Link for the news
• https://www.moneycontrol.com/news/
business/nomura-launches-fintech-
program-for-innovation-in-cap-markets-
2261195.html
 Registrar to an issue

https://www.youtube.com/watch?
v=uoz4QHpZKqY
 Issue process and stages
• Pre-Issue Activities
• Post Issue Activities
• https://www.youtube.com/watch?v=Kco1c
ZEetLQ
 Pre-Issue Activities
1. Memorandum of Understanding
2. Obtaining Appraisal Note
3. Appointment of Other Intermediaries
4. Inter-se Allocation of Responsibilities
5. Preparing Prospectus
6. Submission of Draft Offer Documents
7. Launching of a Public Issue
Post-issue Obligations
Post-issue Monitoring Reports
General
 MARKETING THE ISSUE
• Necessity for Aggressive Sales Campaign
• Packaging and Marketing the Issue
• Launching Marketing Campaign
• Brokers’ and Investors’ Conferences
• Timing of the Issue
 PRICING OF ISSUES

• Qualitative factors

• Quantitative factors
 Qualitative Factors
• The prospects of the industry, track record
of the promoters, the competitive
advantage the company has in making
best use of the business opportunities,
and growth of the company as compared
to the industry, etc
 Quantitative Factors
• The earnings per share, book value, the
average market price for two or three
years, dividend payment record, the profit
margins, the composite industry price
earnings ratio and future prospects of the
company, etc.
ISSUE MANAGEMENT