Who are intermediaries in Initial Public Offer?

When a company decides to go public, and raise funds through Initial Public Offering (IPO), the IPO process needs professional services of various key intermediaries known as IPO intermediaries. Intermediaries such as IPO consultants advise the company, act as advisors to IPO and assist in complying with regulatory filings like DRHP, RHP, dematerialization of shares, creating ISIN, choosing the best merchant banker in India. 

These IPO intermediaries ensure smooth processing of applications, and facilitate the entire IPO process from documentation to listing. Each intermediary plays an important role that ensures transparency, accuracy, and efficiency throughout the IPO journey of the company.

What is the role of intermediaries in an IPO?

Intermediaries are very essential in an IPO because they act as a bridge between the company issuing the shares and the investors applying for them. Intermediaries bring professional expertise, assist in various regulatory compliances, and handle IPO processes such as underwriting, investor verification, application processing, share allotment, and stock exchange listing.

As part of the IPO procedure, various Intermediaries serve important functions to facilitate the orderly and efficient process from being IPO ready to listing its shares on recognized stock exchanges of NSE, BSE for mainboard IPO and on NSE Emerge or BSE SME for SME listings. 

List of IPO Intermediaries

• Issuer Company
• IPO Advisors
• Merchant Banker or Book Running Lead manager (Lead Manager)
• SEBI, The Market Regulator
• Stock Exchanges
• Registrar to the Issue (RTA)
• Bankers to an Issue
• Self-Certified Syndicate Banks (SCSB)
• IPO Underwriter
• Market Maker
• Depositories

Now, each of the above-mentioned IPO intermediaries is explained in detail below to help you understand their individual roles and responsibilities in the IPO process:

• Issuer Company

An IPO issuer is usually a private company that decides to sell its shares to the public for the first time. By doing this, the company can raise money for business growth, paying off debts, or other needs. The Issuer plays a key role in the IPO process and works closely with different intermediaries for successful Listing.

There are three categories of the companies that can bring an IPO after meeting the eligibility criteria prescribed by SEBI and Recognized Stock exchanges:

• Large companies can bring their IPO on Mainboard 
• Small and medium Enterprises can bring their IPO on SME Stock exchanges
• Start-ups that can list their shares on Innovators growth platform

Responsibilities of Issuer company in IPO Process are:

• Prepare accurate and up-to-date financial statements as per regulatory standards.
• Ensure all required documents are ready to initiate and support the IPO process.
• Provide timely, true, and complete information to regulators, intermediaries, and the public.
• Avoid any misleading disclosures or attempts to misguide investors.
• Offer full cooperation and support to all intermediaries like merchant bankers, registrars, and legal advisors.
• Assist and comply with all processes and duties handled by intermediaries during the IPO.

• IPO Advisors 

When a company decides to bring an IPO, it opts for appointing the IPO advisors who would help the Issuer company to understand the full IPO process and guide them from start to finish. One of their important jobs is to suggest the best merchant banker for the company based on its industry. They make the entire IPO process easier, faster, and more successful by offering expert advice and support. A promoter can focus on improving their business scalability while IPO Advisors take care of the listing and regulations.

Here are some key services provided by IPO advisors:(in picture format)

• Check if the company is ready to go for an IPO and make them IPO ready.
• Help choose the best merchant banker for the company.
• Guide in preparing financial and legal documents.
• Advises on various aspects of fundraising through IPO.
• Helps in complying with SEBI rules and filing required forms.
• Coordinate with other intermediaries involved in the IPO process.
• Support in Peer Review Audits, preparation of Restated Financials, IPO valuation, and due diligence.
• Assist in marketing the IPO through roadshows and presentations.
• Manage the Listing process until the company gets listed.

• Merchant Bankers (Book running Lead Managers)

Merchant bankers are professional financial experts registered with SEBI who help companies bring their IPO to the market. Also known as Lead Managers or Book Running Lead Managers (BRLMs). A company can appoint one or more lead managers depending on the size and nature of the company. Typically, a Mainboard IPO has more than one merchant banker whereas SME IPO usually has one Lead Manager. Role of merchant bankers is crucial in the entire IPO journey — from planning to listing.

They play an important role at two main stages: before the IPO opens (pre-issue) and after it closes (post-issue).

Pre Issue responsibilities of Merchant Bankers are: (in picture also)

• They check all company details and documents carefully for an overall view on the business of the company.
• Make sure the company meets SEBI and IPO eligibility criteria.
• Helps in deciding the Issue structure, size of the Issue and pricing of the Issue.
• Helps in Draft and prepare the key documents like the Draft Red Herring Prospectus (DRHP). 
• File the DRHP , UDRHP and RHP with SEBI or stock exchanges as required.
• Help plan marketing, advertisements, and roadshows to attract investors.
• Help companies in resolving any queries received from SEBI or Stock exchanges after filing the DRHP.

Post IPO Responsibilities of the Merchant Bankers are:

• File post-Issue reports and updates with SEBI.
• Assist in the IPO allotment of shares and IPO refund process.
• Publish updates about oversubscription, allotment basis, refund status, and listing date.
• Submit necessary certificates and documents like refund orders, dispatch reports, etc.
• Manage and monitor the Escrow account used during the IPO.
• Ensure smooth listing and trading of the shares on the exchange.

• SEBI – Market Regulator in India (what is SEBI)

SEBI (Securities and Exchange Board of India) is the regulatory body that controls and monitors the Mainboard IPO and SME IPO process in India. SEBI protects the investors and ensure that companies that want to go public, must follow the rules to raise money from the public. 

SEBI checks whether the company is eligible to bring an IPO and reviews all the documents submitted by the Issuer. It also ensures that the public gets clear, complete, and accurate information of the Issue before making any investment decisions. SEBI plays a key role in making the IPO process fair, transparent, and safe.

Key Responsibilities of SEBI includes the following: (Picture of these) 

• Reviews Draft Red Herring Prospectus (DRHP) and ensures proper disclosures and provide observation on the same to the Issuer companies if required.
• Ensures companies follow all the regulations and eligibility criteria set by the SEBI and Recognized stock exchanges before bringing an IPO.
• Protects investors from fraud and misleading information.
• SEBI also monitors merchant bankers, registrars, and other intermediaries involved in the IPO process.
• Takes strict action against companies or intermediaries for violating IPO norms.
• Provides a safe and transparent framework for IPO and SME IPO listings.

Stock Exchanges in India

In India there are two main stock exchanges which regulate the Mainboard IPO and SME IPO in India. For Mainboard IPOs there are the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). For SME IPO, there are NSE Emerge and BSE SME.

During the Mainboard IPO or SME IPO process, stock exchanges play a major role because they offer the platform where companies can list their shares. They make sure the company meets all eligibility criteria, works with SEBI and other intermediaries, and ensures that the IPO process is transparent and smooth for investors.

• Registrar to the Issue

The Registrar to an Issue (Registrar and transfer agent) plays an important role in the IPO Process. These are appointed by the Issuer company which is going public to manage the funds and handle the IPO applications, allotment of shares and investors record.

After the IPO closes, the registrar work with stock exchanges, banks, and depositories to sort and process all the applications received from the investors, ensure that allotment is done fairly and refund all the monies who don’t get the shares allotted.

Once the IPO shares are listed, the registrar continues to serve as share transfer agent to the Issuer company. It maintains all the shareholder records of the company and helps in update like, name changes, address changes and other correction in data of shareholders from time to time.

Responsibilities of Registrar to the Issue: (Picture)

• Collect the IPO application received for IPO
• Check and validate all the applications received from the investors.
• Ensure the allotment is being made properly and fairly.
• After allotment of shares make refunds to those applicants who didn’t get the allotment.
• Maintain shareholder’s records post listing.

• Bankers to the Issue

Bankers to the Issue are SEBI registered banks appointed by the Issuer company to handle all the money related work during the IPO process. Their job is to manage the funds collected from the investors and make sure the money is safely moved to the right bank accounts. They help companies to handle the funds smoothly.

Responsibilities of the Bankers to the Issue:

• Collect all the money from investors and deposit it into the Escrow account.
• Refund all the money to the investors in case shares are not allotted to hem as per the instructions from the registrar.
• Share updated bank account statements regularly to the Registrar and the Issuer company.
• Help in resolving the investors' complaints related to refunds.
• Close all the IPO related accounts after clearing all the balances from them.

• Self-Certified Syndicate Banks (SCSB)

Self-Certified Syndicate Banks (SCSBs) are SEBI approved banks that helps investors apply for IPOs through the ASBA Process. ASBA (Application Supported by Blocked Amount) is the way to apply for an IPO.

Investors can apply for IPOs either using their online banking services or offline by submitting a ASBA form after filling with all the required information at a branch of an SCSB. The key duties of the SCSBs are as follows:

• Receive and Process IPO applications from the Investors.
• Block the required amount from investor’s Bank account.
• Confirms the successful blocking of the funds with brokers and enables them to submit the investor’s bid to the Exchange.
• Works with the Banker to the Issue to transfer the funds when needed.
• Support smooth coordination with depositaries and help in manage refunds and allotment properly.

• IPO Underwriters

Underwriters plays an important role in Process of IPO. As per SEBI ICDR Regulations, 100% underwriting is mandatory in SME IPO. If IPO doesn’t get fully subscribed, then the underwriter agrees to buy the remaining unsold shares. This is made on agreement by the Issuer company and Underwriters and it is called Underwriting Agreement.

Responsibilities of Underwriter in IPO:

• Underwriter must enter into Formal Agreement between Issuer company and it self for underwriting the unsold shares.
• Assisting Issuer company in determining the value of shares.
• Underwriter helps Issuer company to promote the IPO through roadshows, advertisements.
• Ensuring compliance with all the rules and regulations prescribed by SEBI and recognized stock exchanges.

Difference between Mainboard IPO Underwriting and SME IPO underwriting

In SME IPO: Underwriting is mandatary as SME IPO Shall be 100 percent underwritten. Merchant bankers can also act as Underwriters.

In Mainboard IPO: Underwriting is optional, company can decide whether to appoint an Underwriter or not.

• Market Maker in IPO Process 

Market making is an essential part of an IPO in India. It helps in maintaining liquidity after the Issuer company’s shares are listed on stock exchanges, especially in SME IPO.

Market making is mandatory in SME IPO while it is optional in Mainboard IPO. They help companies to ensure smooth trading of shares in market. This helps in building investors trust and confidence.

Duties of Market Maker:

• Facilitate liquidity by continuously putting up buy and sell orders for the stock.
• Sustain smooth trade of shares when listed, particularly when there are fewer buyers.
• Avoid sudden change in price through balancing demand and supply.
• Make the market even by preventing stock manipulation or lack of liquidity.
• Keep a predetermined number of shares to facilitate easy buying and selling.
• Remain listed for a specified duration (typically 3 years in SME IPOs) to provide support to the stock once listed.

Depositories in India

Depositories are financial institutions that keep the shares in digital (electronic) form. In India, there are two depositories: NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited).

When a company plans to launch an IPO, it signs an agreement with both depositories and the Registrar to make sure everything runs smoothly. Depositories help manage the shares once they are issued in the IPO.

Key Responsibilities of Depositories in IPO:

• Convert the company's physical shares into electronic form (dematerialization).
• Credit the allotted IPO shares directly to investors’ demat accounts.
• Support trading and settlement of shares once the stock is listed.
• Keep track of shareholders for any future company actions like dividends or bonuses.

• • Make sure the shares held electronically are safe and secure from theft or loss.