When a company decides to go public, it has to follow certain guidelines outlined by the Securities and Exchanges Board of India (SEBI) for offering securities in public issues. The company needs to fulfill the eligibility norms too. Further, there are four intermediaries associated with the issue of separate activities.

These intermediaries need to be registered with SEBI and the company needs to specify their names, addresses, and contact details in the offer document. In this article, let’s understand what these  intermediaries are. Read On!

Merchant Banker 

The merchant banker is a financial intermediary in the IPO issue process. Its functions can be divided into two categories:-

1. Pre-Issue – This includes compliance with the mandatory requirements of SEBI and other regulatory authorities. Completion of formalities for listing the shares on the stock exchange. The merchant banker is also responsible for the appointment of various agencies involved in the issue process.

2. Post-Issue – This includes management of escrow accounts, determining the final price at which the shares will be issued, allotting shares to all applicants, ensuring refund to all unsuccessful applicants, and issuing allotment letters. It also oversees all agencies and ensures that they adhere to the set processes.

Merchant Bankers are also called Book Running Lead Managers or BRLMs in case of public issues that are book built. Examples of the world’s largest merchant banks include J.P. Morgan, Goldman Sachs, and Citigroup.

Registrars to the Issue 

The Registrars are responsible to finalize the basis of the allotment in the IPO. They create a final list of applications that are valid and eligible and delete the invalid ones. 

Further, they ensure that the Demat accounts of the applicants are credited with the allotted shares and rejected applicants receive their refunds.

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The Lead Manager coordinates with them to ensure that the flow of applications from the collecting centers to getting them processed and all other essential steps are followed in time. The Registrar along with the Lead Manager ensures that the process is followed right until the end.

Bankers to the Issue

Bankers to the issue are financial intermediaries who are responsible for banking-related processes like:-

  • Acceptance of application and application amount
  • Transfer of funds to the promoters of the company
  • Managing refunds for rejected applications
  • Payment of dividend

In the IPO process, the bankers play a critical role by enabling the movement of funds and making clear funds status available to the registrars to finalize the basis of allotment.


Underwriters are intermediaries who agree to purchase the shares issued by the company if some shares of the company don’t get sold. They work with the issuing body, determine the price of the securities, purchase them from the issuer, and sell them through their network.

Underwriters earn by taking underwriting fees from the issuers and also by selling the underwritten shares at a profit. Having said that, they also carry the risk of losses if they are unable to sell all the shares at the specified price.

IPO Grading Agencies

SEBI has mandated all IPOs to be graded to provide more information to investors. This can help them make informed decisions and assess equity IPO issues. The Credit Agency that grades these IPOs is registered with SEBI.

Life-cycle of an IPO

Here is a quick look at the life-cycle of an IPO:

1. The issuer company initializes the IPO process by appointing the:

  • Lead manager
  • Registrar of Issue
  • Syndicate members

2. Before the issue, the lead manager prepares a draft offer prospectus for the IPO and files it with SEBI. It also conducts roadshows for the issue.

3. SEBI reviews the draft offer prospectus and reverts to the lead manager for changes if any. Once the draft prospectus is approved, it becomes the Offer Prospectus.

4. The lead manager then:-

  •  Submits the Offer Prospectus to the stock exchanges and Registrar of Issue to get it approved.
  • Decides the issue date and price band with the help of the issuing company.
  •  Enters the date and price band into the prospectus. This is now called the Red Herring Prospectus.
  • Prints the Red Herring Prospectus and IPO Application Forms and sends them to syndicate members for onward distribution to investors.

5. The IPO is launched and investors are invited to submit their bids.

6. The syndicate members receive the bids from the investors and submit the information to the stock exchanges.

7. Once the public issue closes, the lead manager evaluates the final issue price based on the bids received. The lead manager also updates the final price in the Red Herring Prospectus and sends it to SEBI and stock exchanges.

8. The registrar of issue:-

  • Receives the applications and funds from the syndicate members
  •  Checks the completeness and authenticity of the application forms
  •  Finalizes the share allotment pattern based on the valid bids
  • Prepares the Basis of Allotment
  • Transfers the shares to the Demat accounts of investors and ensures that all rejected applicants receive their refunds.

9. Once the registrar completes the process, the lead manager decides the issue listing date with the help of the stock exchange.

10. Finally, the share is listed.

Summing Up

While this information is not important for an investor to make a decision to invest in the IPO, it is good to know the way in which SEBI ensures the regulation of the IPO process. With these intermediaries, SEBI ensures that only applications from genuine companies to go public are approved and the rest are weeded out, thereby creating a safe and regulated environment for investors.

Happy Investing!


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