Introduction to Underwriting

Introduction to Underwriting INTRODUCTION TO UNDERWRITING Underwriting is an agreement, entered into by a company with a financial agency, in order to ensure that the public will subscribe for the entire issue of shares or debentures made by the company. The financial agency is known as the underwriter and it agrees to buy that part of the company issues which are not subscribed to by the public in consideration of a specified underwriting commission. The underwriting agreement, among others, must provide for the period during which the agreement is in force, the amount of underwriting obligations, the period within which the underwriter has to subscribe to the issue after being intimated by the issuer, the amount of commission and details of arrangements, if any, made by the underwriter for fulfilling the underwriting obligations. The underwriting commission may not exceed 5 percent on shares and 2.5 percent in case of debentures. Underwriting has become very important in recent years with the growth of the corporate sector. It provides several BENEFITS to a company:- It relieves the company of the risk and uncertainty of marketing the securities. Underwriters have an intimate and specialized knowledge of the capital market. They offer valuable advice to the issuing company in the preparation of the prospectus, time of floatation and the price of securities, etc. They also provide publicity service to the companies which have entered into underwriting agreements with them. It helps in financing of new enterprises and in the expansion of the existing projects. It builds up investors confidence in the issue of securities. The issuing company is assured of the availability of funds. Important projects are not delayed for want of funds. It facilitates the geographical dispersal of securities because generally, the underwriters maintain contacts with investors throughout the country. TYPES OF UNDERWRITING Syndicate Underwriting: is one in which, two or more agencies or underwriters jointly underwrite an issue of securities. Such an arrangement is entered into when the total issue is beyond the resources of one underwriter or when he does not want to block up large amount of funds in one issue. Sub-Underwriting:- is one in which an underwriter gets a part of the issue further underwritten by another agency. This is done to diffuse the risk involved in underwriting. Firm Underwriting: is one in which the underwriters applyfor a block of securities. Under it, the underwriters agree to take up and pay for this block of securities as ordinary subscribers in addition to their commitment as underwriters. UNDERWRITERS To act as an underwriter, a certificate of registration must be obtained fromSecurities and Exchange Board of India (SEBI). The certificate is granted by SEBI under the Securities and Exchanges Board of India (Underwriters) Regulations, 1993. These regulations deal primarily with issues such as registration, capital adequacy, obligation and responsibilities of the underwriters. Under it, an underwriter is required to enter into a valid agreement with the issuer entity and the said agreement among other things should define the allocation of duties and responsibilities between him and the issuer entity. These regulations have been further amended by theSecurities and Exchange Board of India (Underwriters) (Amendment) Regulations, 2006. ROLE OF UNDERWRITERS The primary role of the underwriter is to purchase securities from the issuer and resell them to investors. Underwriters act as intermediaries between issuers and investors, providing for an efficient of capital. The underwriters take the risk that it will be able to resell the securities at a profit. Perhaps the most visible and familiar element of the initial public offering process is the underwriter. The underwriter is the organization that is actually responsible for pricing, selling, and organizing the issue, and it may or may not provide additional services. With direct public offerings, there is no need for an underwriter. Selection of a good underwriter is of the utmost importance, but its important to understand that many underwriters are equally selective of their clients. Because an underwriters reputation depends on successful issues, few firms will be willing to stake their reputation on questionable companies. When selecting an underwriter, its important to seek out an established company with a good reputation and quality research coverage in your field. The decision may also depend on the kind of agreement the underwriter is willing to make regarding the sale of shares. For profitable and established private companies, it shouldnt be difficult to locate an underwriter willing to make a firm commitment arrangement. Under such an agreement, the underwriter agrees to buy all issues shares, regardless of ability to sell them at a particular price. For riskier or less established companies, an underwriter may offer best efforts arrangement for the initial public offering. A best efforts contract requires the underwriter to buy only enough shares to fill investor demand. Under this arrangement, the underwriter accepts no responsibility for unsold shares. Aside from fees and sales arrangements, most underwriters are fairly similar in their roles. An underwriter will assist in the preparation and submission of all appropriate SEC filings, helping potential investors make informed decisions about your offering. All underwriters are required to exercise due diligence in verifying the information they submit, so a certain amount of investigation should be expected from any responsible underwriter. In addition to SEC registration filings, the underwriter will create a preliminary prospectus that will become a major part of the issues marketing campaign. This document is also referred to as the red herring, after a small red passage in the document that states that the company is not attempting to sell shares prior to SEC approval. Once SEC approval is obtained, the underwriter and the corporation will embark on a road show to gauge and attract interest from investors. While the road show does not involve getting binding commitments from investors, it helps the underwriter determine the best strategies for pricing and issuance. After the initial public offering, the underwriter continues to provide services for the newly public corporation. For months or even years after the offering, the underwriter may continue to make a market for the stock, ensuring liquidity for investors and making the shares more desirable. Twenty-five days after the issue, the underwriter is also permitted to make statements or projections regarding the company and its prospects. ANALYSIS OF RESEARCH ARTICLES ARTICLE 1 ROLE OF UNDERWRITER IN INITIAL PUBLIC OFFERING (IPO) When a company wants to raise funds throughinitial public offering (IPO)it appoints aninvestment bank for underwritingthe issue. AnInvestment bankis also called asmerchant bank. There is no regulatory restriction to use the services of amerchant bankfor IPO. Since in an IPO a company participates for the first time, it doesnt have complete understanding of the rules and documentation, required to be submitted, to get a clearance from the regulator. Famous merchant bankers world over are Goldman Sachs, Credit Suisse and Morgan Stanley. Banks like Deutsche, Citi, UBS etc have investment banking wings. Underwriters assess and analyze firms current performance, firms future earnings potential, industry scenario, competition in the same sector, current local and global market situations etc. to decidethe issueprice/price band. They also work on the activities like completion of the mandatory documentation as required by the regulatory body. Underwriters charge a fee for this activity, which is generally a percentage ofthe issuesize. If the issue size is very large a syndicate of merchant banks takes up the task of underwritingthe issue. However onemerchant bankleads the other. MERCHANT BANKERS The merchant bankers are those financial intermediaries involved with the activity of transferring capital funds to those borrowers who interested in borrowing. They guarantee the success of issues by underwriting them. Merchant banks are popularly known as issuing and accepting houses. Unlike in the past, their activities are now primarily non-fund based (fee based). They offer a package of financial services. The basic function of merchant banks is marketing corporate and other services that are guaranteeing sales and distribution of securities and also other activities such as management of customer services, portfolio management of customer services, portfolio management, credit syndication, acceptance credit, counseling, insurance, etc. As per SEBI (Merchant bankers) Rules, 1992: Merchant bankers means any person who is engaged in the business of issue management either by making arrangements regarding selling, buying or subscribing to securities or acting as manager, consultant, advise or rendering corporate advisory service in relation to such issue management. MERCHANT BANKING Merchant banking activity was formally initiated into the Indian capital markets when grind lays bank received the license from reserve bank in 1967.grindlays started with management of capital issues ,recognized the needs of emerging class of entrepreneurs for diverse financial services ranging from production planning and system design to market research .even it provides management consulting services to meet the requirements of small and medium sector rather than large sector. Citibank setup its merchant banking division in1970.the various tasks performed by this divisions namely assisting new entrepreneur ,evaluating new projects ,raising funds through borrowing and issuing equity. Indians banks started banking services as a part multiple services they offer to their clients from 1972.state bank of India started the merchant banking division in 1972.in the initial years the SBIS objective was to render corporate advice and assistance to small and medium entrepreneurs. REGISTRATION OF MERCHANT BANKERS WITH SEBI It is mandatory for a merchant banker to register with the sebi. Without holding a certificate of registration granted by the securities and exchange board of India, no person can act as a merchant banker in India. Only a body corporate other then a non-banking financial company shall be eligible to get registration as merchant banker. The applicant should not carry on any business other than those connected with the securities market. All applicants for merchant bankers should have qualifications in finance, law or business management. The applicant should have infrastructure like office space, equipment, manpower etc. The applicant must have at least two employees with prior experience in merchant banking. MERCHANT BANKERS IN INDIA There are 135 merchant bankers who are registered with sebi now in India. There are public sector, private sector and foreign players registered with sebi. The below are the examples of few of the merchant bankers in each of the public, private and foreign players. PUBLIC SECTOR MERCHANT BANKERS SEBI CAPITAL MERKETS LTD. PUNJAB NATIONAL BANK. IFCI FINANCIAL SERVICES LTD. KARUR VYSYA BANK LTD. STATE BANK OF BIKANER AND JAIPUR. PRIVATE SECTORS MERCHANT BANKERS: ICICI SECURITIES LTD. AXIS BANK LTD(FORMERLY UTI BANK LTD.) BAJAJ CAPITAL MARKETS LTD TATA CAPITAL MARKETS LTD. ICICI BANK LTD. RELIANCE SECURITIES LIMITED. KOTA MAHINDRA CAPITAL COMPANY LTD. YES BANK LTD. FOREGN PLAYERS IN MERCHNT BANKING. GOLDMAN SACHS(INDIA)SECURITIES PVT.LTD. BARCLAYS SECURITIES(INDIA)PVT.LTD. BANK OF AMERICA.N.A. DEUTSCHE BANK. DEUTCHE EQUITIES INDIA PRIVATE LIMITED. SERVICES OF MERCHANT BANKS PROJECT COUNSELLING: Project counseling includes preparation of project reports,deciding upon the financing pattern to finance the cost of the project and appraising the project report with the financial institutions or banks.it also includes filling up of application forms with relevant information for obtaining funds from financial institutions and obtaining government approval. MANAGEMENT OF DEBT AND EQUITY OFFERINGS This forms the main function of the merchant banker.he assists the companies in raising funds from the market.the main areas of work in this regard include: instrument designing, pricing the issue, registration of the offer document, underwriting support and marketing of the issue, allotment and refund, listing on stock exchanges. ISSUE MANAGEMENT Management of issue involves marketing of corporate securities viz. equity shares, preference shares and debentures or bonds by offering them to public. Merchant banks act as per SEBI guidelines, the merchant banker arranges a meeting with company representatives and advertising agents to finalize arrangements relating to date of opening and closing of issue, registration of prospectus, launching publicity campaign and fixing date of board meeting to approve and sign prospectus and pass the necessary resolutions. Pricing of issues is done by the companies in consultant with the merchant bankers. MANAGERS, CONSULTANATS AND ADVISERS OF THE ISSUE: The managers of the issue assist in the drafting of prospectus, application forms and completion of formalities under the companies act, appointment of registrar for dealing with share applications and transfer and listing of shares of the company on the stock exchange. Companies can appoint one or more agencies as managers to the issue. UNDERWRITING OF PUBLIC ISSUE: Underwriting is a guarantee given by the underwriter that in the event of under subscription, the amount underwritten would be subscribed by him. Merchant banking subsidiaries cannot underwrite more than 15% of any issue. PORTFOLIO MANAGEMENT: Portfolio refers to investment in different kinds of securities such as shares, debentures or bonds issued by different companies and government securities. Portfolio management refers to maintaining proper combinations of securities in a manner that they give maximum return with minimum risk. RESTRUCTURING STRATEGIES: AA merger is a combination of two companies into a single company where one survives and other losses its corporate existence. A takeover is the purchase by one company acquiring controlling interest in the share capital of another existing company. Merchant bankers are the middlemen in setting negotiation between the companies. Merchant bankers assist the management of the client company to successfully restructure various activities, which include mergers and acquisitions, management buyouts, joint ventures among others. OFFSHORE FINANCE: The merchant bankers help their clients in the following areas involving foreign currency: Long term foreign currency loans Joint ventures abroad Financing exports and imports Foreign collaboration arrangements ROLE OF MERCHANT BANKER IN A PRIMARY MARKET ISSUE MANAGEMENT: Merchant banker is the intermediary appointed by companies in the primary market issue. It has to look at the entire issue management and work as the manager to the public issue. References: http://lastbull.com/iporole-of-underwriter/

Second Continental Congress Essay -- Essays Papers

Second Continental Congress â€Å"Give me liberty or give me death† were the famous words spoken by Patrick Henry in the struggle for independence (Burnett 62). He addressed the first continental congress in 1774 and started the process of American political revolt. This revolt eventually climaxed in the rebelling of Britain's American colonies and the establishment of what would become the United States of America. The Second Continental Congress accomplished independence through organization, rebellion, and finally declaring independence. This was the beginning of the American Revolution. Britain established a series of acts to control the colonies and this became the main cause of the revolution. These acts enabled Britain to increase the colony's taxes and pay for the costs of the seven years war. In addition, Britain angered the colonies by maintaining a large army in North America after peace was restored in 1773. The British also enforced a Stamp Act, which placed taxes on commercial and legal products. To further add to the frustration, the British controlled the shipping of goods and re-routed shipments to avoid going through London middlemen, who sold to independent merchants in the colonies. The final cause of the American Revolution was the addition of the Coercive Acts, which closed the port of Boston and cut back the local elections and town meetings. Thomas Paine summarized the colony's emotions towards the British and published a pamphlet, â€Å"Common Sense.† In this pamphlet he mocks Great Britain, a small island thousands of miles a way, that controls a large country that should have independence. In September 1774, the first Continental Congress met in Philadelphia where they agreed upo... ...of Independence listed the tyrannical acts committed by George III, proclaiming the natural rights of man, and sovereignty of the American States. The Second Continental Congress was the backbone to the Revolution as well as being the key to freedom. It proved that, â€Å"All men are created equal† and possess the freedom of rights. Works Cited - Buckler, McKay H. The History of Western Society. Boston: Houghton Mifflin Company, 1995. - Burnett, Edmond C. The Continental Congress. New York: The Macmillan Company, 1941. - Fiske, John. The American Revolution. New York: Houghton Mifflin Company, 1891. - Schlesinger, Arthur M. The Colonial Merchants and the American Revolution. New York: Frederick Ungar Publishing Company, 1957. - Trevelyan, George O. The American Revolution. New York: Longmans, Green and Company, 1928.

Silent Night

The night was silent. The half moon gazed down benevolently on the city, alone in a starless stretch of black sky. The streets were empty, and all that reached out into the shadowy darkness were the street lamps, placed so methodically and evenly it made them seem more significant than they really were. Near one of these lamps, on a bench, was an ancient man, his hair grey, his face was warped with deep wrinkles, a pair of round rimmed spectacles perched on his nose. His dull eyes, seeming to be staring into nothingness, peered sadly through the lenses.He slowly unlatched the case on his lap and reverently lifted the saxophone from its place, and is it opened, the weak yet mystifying golden glow emerged from it, only visible from the slight glimmer of the street lamps. The man pressed the mouth piece to his lips, and in a moment, music filled the night. The smooth, deep resonating tones of the saxophone echoed through the stillness. Its strong voice sang a melancholic requiem. The in strument was singing of times long past, of memories half forgotten, love once had, life at its peak and decline.The sounds resonated through the empty streets, reaching out in vain. The man stood as the song reached the climax, and as he did, the emotions that were resonating so beautifully seemed only to be amplified, this was pure expression from the soul; unprepared, and unrestrained. The man closed his eyes and arched backwards as the saxophone bellowed its elegy. Untainted emotions, pure and true, resounded from the notes, a defiant dirge amidst the sadness and grief of loss and solitude. Then the night was silent again.His performance was applauded by the silence and the dark, and it was deafening. The elderly man breathed heavily, perspiration dampening his dull grey hair. He fell back on the bench and before long, began absently polishing the saxophone. His audience, the darkness, seemed to evaporate into the night, and he was left more alone than before. He heaved a sigh a nd reached for the case. Suddenly, sound had blessed the night. The rich sound of a saxophone reverberated from the darkness. The man started and rose from the bench, the rich melody wafting towards him like an old friend.He twisted and swivelled, his eyes brightened as he searched for the player. By a street lamp, was a silhouette of a person with a saxophone, the musician sitting by the lamp, not close enough to be illuminated and not far enough to be hidden, but there was no reason for the mysterious figure to be identified. The man immediately recognised the musician’s skill, but there was a sense of incompletion in the tune, and although the tune itself sounded familiar, but he couldn’t recognise it. Read also  Summary : Love Is Never SilentIt was when the piece reached the first chorus that he finally did, and understood. He smiled warmly, his eyes glittered, and he raised his mouthpiece to his lips again. He accepted the invitation, and the music was complete. It was a song of fulfilment, contentment, of joy and harmony, the instruments’ eulogy of shared emotion and elation. The man revelled in the performance, and he knew silence would not meet him at the end of this one. The rich voices of the saxophones intertwined and coalesced. It was a glorious anthem that purged the night of silence.

Essay On Proper Attitude Toward The End Of The World

The proper attitude toward the end of the world Is to be ready like every day is the end of the world. Without the materialistic apocalyptic fear but more an internal peace with Jesus Christ. That if Jesus Christ were to come right now we are ready. Just like Jesus tell us in Luke 12:35-40 â€Å"Be dressed ready for service and keep your lamps burning, like men waiting for their master to return from a wedding banquet, so that when he comes and knocks they can immediately open the door for him. It will be good for those servants whose master finds them watching when he comes. I tell you the truth, he will dress himself to serve, will have them recline at the table and will come and wait on them. It will be good for those servants whose†¦show more content†¦He does not That time catches off guard. In Matthew 24:47-51 Jesus tells us â€Å"Truly I tell you, he will put him in charge of all his possessions. But suppose that servant is wicked and says to himself, ‘My m aster is staying away a long time,’ and he then begins to beat his fellow servants and to eat and drink with drunkards. The master of that servant will come on a day when he does not expect him and at an hour he is not aware of He will cut him to pieces and assign him a place with the hypocrites, where there will be weeping and gnashing of teeth† Therefore he wants us to keep nurturing our faith with the gospel and stay on guard. God has a plan, that is why he sent his, Jesus Christ. He is the way, taught us how to follow the ways and left us the scriptures to remind us how to follow the way. The good news associated with the teaching of the end of the world is so that we are prepare Jesus tells us in Matthew 4:26-29 So if anyone tells you, ‘There he is, out in the wilderness,’ do not go out; or, ‘Here he is, in the inner rooms, do not believe it.’ For as lightning that comes from the east is visible even in the west, so will be the coming of the Son of an. Wherever there is a carcass, there the vultures will gather. â€Å"Immediately after the distress of those daysâ€Å"‘the sun will be darkened, and the moon will not give its light;the stars will fall from the sky, and the heavenly bodies will be shaken.† . It keeps reminding us Christians why JesusShow MoreRelatedReality and Illusion in Tennessee Williams A Streetcar Named Desire1691 Words   |  7 Pagesof its most important themes deals with the contrast between reality and illusion. The aim of this essay is to examine how this contrast is reflected in the way the main char acter constructs her identity. 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