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IPO Intermediaries

IPO intermediaries are the parties (companies/individuals) that assist an issuer in completing an IPO and a successful listing. Major IPO intermediaries include merchant bankers, registrars, bankers, underwriters, and market makers.

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IPO intermediaries provide services to help a company initiate and complete the IPO process and get listed. IPO prospectus documents detail the involvement of all parties in the IPO.

These intermediaries act as a bridge between the company and investors and coordinate with other intermediaries and parties to ensure a smooth IPO process.

1. Issuer Company

The issuer of an IPO is a private company that wishes to go public and issue new shares or sell existing shares to the general public for the first time through an IPO. Generally, an issuer is a company that offers securities to raise capital.

Three categories of issuers can conduct an initial public offering:

  1. Large-scale companies (Mainboard)
  2. Small and medium enterprises (SME)
  3. Startups

2. Stock Exchanges

A stock exchange is a company that provides a trading platform where investors can buy and sell equity shares, bonds, ETFs and other listed securities. Exchanges match buy and sell orders and provide a legal guarantee for transactions.

The Securities and Exchange Board of India (SEBI) regulates the exchanges. SEBI sets the rules and regulations for the exchanges and ensures that the exchanges follow them. BSE and NSE are the two most prominent stock exchanges in India. Check out the list of stock exchanges in India.

Exchanges appoint stock brokers who work as intermediaries between investors and the exchange. An investor (individual or institutional) must have an account with a stock broker to trade on a stock exchange. 

3. SEBI, The Market Regulator

SEBI (Securities and Exchange Board of India) is a regulatory body for the capital market in India. It is a government organization established by Government of India

" protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected there with or incidental there to".

SEBI's role in IPO

Any company seeking to raise more than Rs 50 lakhs through an IPO has to submit a draft offering document to SEBI for approval. The company must submit its offer within a window of 12 months from the date of SEBI's approval.

Below are some clarifications issued by SEBI on public issues for investors and issuers:

  • Merchant Bankers are responsible for conducting due diligence* and certifying that the information provided in the offering documents is in compliance with SEBI's Investor Protection Guidelines.
  • SEBI does not take any responsibility for the financial soundness of any project for which funds are raised through the Issue.
  • SEBI makes no representation regarding investments in securities..
  • Investors should review the material contents and disclosures in an offering document before making an investment decision.
  • SEBI does not propose or recommend any issues.
  • Issuers have the freedom to choose or set the issue price of their securities without interference from regulators.

*IPO Due Diligence is the gathering and reviewing of information about a company or business. It is obtained from all parties assisting the company in the IPO process.

4. Merchant Banker (Lead manager)

Merchant bankers are independent financial institutions registered with SEBI. They assist companies in their IPO from start to end. They are also called Lead Managers or Book-running Lead Managers(BRLM). An IPO can have one or more lead managers.

A merchant banker assists a company throughout the IPO process, from due diligence and determining if the company is eligible for an IPO, to applying for an IPO with the exchanges, to preparing a prospectus, IPO advertising, road shows, marketing, and the post-listing process.

Merchant Banker Role in IPO

A lead manager's role in an IPO can be segregated into two categories as Pre-Issue and Post-Issue.

Pre-Issue Responsibilities of a Merchant Banker as lead manager

  • Due diligence (gathering and verifying the issuer's details).
  • Checking the eligibility criteria of the company as per stock exchanges and SEBI.
  • Underwriting agreement (If acting as a manager or underwriter).
  • Determining the fees for an IPO.
  • Structuring the issue/offering details.
  • Preparing the draft prospectus (DRHP).
  • Completing the IPO application form.
  • Submission of IPO Application and DRHP to SEBI and BSE.
  • Roadshow and Advertisement of Issue.
  • Red herring prospectus (RHP) drafting and submission.
  • Resolving observations received from SEBI.

Post-Issue responsibilities of a Merchant banker as lead manager

  • Submission of post-issue monitoring reports.
  • Assist in the allotment process.
  • Publish post-issue advertisements related to over subscriptions, the basis of allotment, details of applications received, date of completion of despatch of refund orders, and date of filing of listing application.
  • Certificates, true copies of refunds, orders, underwriting commissions, and dispatch reports are submitted.
  • Post-issue promotion of securities.
  • Management of escrow accounts.
  • Ensure share allocation and refund to unsuccessful applicants.

5. Bankers to an Issue

The issuer company appoints banker/s to help them manage the funds collected in the IPO process and transfer them to the Escrow Account, Allotment Account or Refund account as the case may be. A company can appoint one or more bankers to the issue that are registered with SEBI. Check out for the list of SEBI registered Bankers to an Issue.

The responsibilities of the bankers to an Issue include the below:

  • Transfer all the funds collected in the Escrow account.
  • Transfer funds to Allotment account and thereafter to Company account on receipt of instructions from Lead Manager.
  • Transfer surplus funds to Refund account.
  • Transfer funds to investor account from refund account in case of non-allotment on receipt of instructions from Registrar and Lead Manager.
  • Provide updated bank statement for each of the above accounts to Registrar, Lead Manager and Company at regular frequency or as demanded.
  • Closure of all accounts once there is Nil balance in all the above accounts.
  • Address investor complaints relating to refunds.

6. Self-Certified Syndicate Banks (SCSB)

Self-Certified Syndicate Banks commonly referred to as SCSBs are the SEBI registered banks that provide ASBA services to the investors. With ASBA mandatory for IPO application, investors can apply for an IPO provided they have an account with any of the bank that offers the facility of ASBA.

The investors can apply online by using the Netbanking services of the SCSB or offline by submitting the form to the nearest branch. The main responsibilities of the SCSB include the following:

  • Accepting the applications.
  • Blocking the funds.
  • Co-ordinating with brokers to confirm the fund blocking that allows broker to upload bid to exchange.
  • Co-ordinating with the banker of issue for required transfer of funds.
  • Co-ordinating with depositories and refund and ensure smooth execution of allotment and refund process.

7. Registrar to the Issue (RTI)

The IPO registrar is an entity that assists the issuer in the allotment of IPO shares and maintains records of the company's shareholding.

Registrar of IPO

The IPO Registrar is responsible for the final allotment of shares in consultation with the issuer company and the stock exchanges after preparing a list of valid and invalid IPO applications. Here you can find the list of IPO registrars in India.

Registrar's roles and responsibilities

  • Collecting IPO application data from stock exchanges and banks.
  • Preparing a list of valid applications in cooperation with depositories and banks.
  • Preparing the basis of allotment in consultation with stock exchange/s.
  • Processing the allotment of shares.
  • Processing and dispatching allotment letters.
  • Initiation of the refund procedure for non-allotment recipients.

Registrar as a Transfer Agent

Once the shares are listed, the Registrar also maintains a list of registered shareholders for the listed companies. For this task, they are called 'Share Transfer Agents'. They maintain information such as the shareholder's name, contact information, and dividend information (if any).

The RTA's job is to keep proper records of the shares and make changes as needed to reflect true ownership of the securities by making name changes, endorsements, etc.

8. IPO Underwriter

An IPO underwriter is an intermediary that undertakes the risk of purchasing the shares in case of the IPO under subscription.

IPO underwriting is a process wherein the underwriter and the issuer company get into an agreement wherein the underwriter agrees to purchase the unsold shares of an IPO in return for an underwriting commission.

The underwriting commission is a fee charged by the merchant banker in its capacity as underwriter for entering into the underwriting agreement. It is the fee charged by an investment banker for underwriting an issue of securities.

For example, if it was agreed between the underwriter and the issuer that the underwriter would be responsible for selling 3% of the shares offered, and the underwriter is unable to sell all of the shares, the underwriter would be responsible for the unsold shares and would have to purchase them from the issuer.

Underwriter roles and responsibilities in an IPO

  • Compliance with Underwriting Agreement clauses.
  • In charge of selling the predetermined number of shares.
  • Responsible for purchasing the remaining shares or unsold shares.
  • IPO Roadshow, promotion and marketing.
  • Help the issuer in determining share valuation**, whether the shares are overvalued or undervalued.
  • Consulting and advising the issuer for the IPO process.

**Share valuation means determining the value of a company's shares in an IPO by the issuer company. IPO shares can be overvalued or undervalued. Overvalued securities are those that are trading above their market value. Undervalued securities are those that are traded below their market value.

IPO Underwriting Process

In SME IPOs, underwriting is mandatory. In most cases, the merchant banker acts as an underwriter for SME IPOs. At least 15% of the shares offered in an SME IPO should be underwritten by the underwriter.

In the case of a mainboard IPO, underwriting is optional.

IPO Underwriting Process Steps

  • Issuer appoints an underwriter.
  • The underwriter and the issuer enter into an underwriting agreement, which includes details of the underwriting percentage, fees, etc.
  • In the case of under subscription, the underwriter purchases the shares from the issuer for the agreed percentage and at the agreed price.

9. Market Maker

Market makers are licensed stockbrokers (NSE list | BSE list) who buy or sell stocks in the stock market at specific prices to improve liquidity and price discovery. They provide liquidity in thinly traded stocks. They also monitor the trading in the script and report to the exchange when irregularities occur.

Market-making is mandatory for SME IPOs and voluntary for main board IPOs. Most SME stocks face liquidity issues that could make it difficult for investors to exit. Market makers are here to help.The market makers helps with this.

Market makers are paid by the issuing company for the risk they take. The risk includes a market maker buying shares from a seller in the market and the share price begins to fall and the market maker not being able to find another buyer because of the price fluctuation, so the market maker takes a loss on the unsold shares.

Market makers are also allowed to place 2-way orders (buy and sell) simultaneously. For example, they can place an order in the range of Rs.98-100. They will buy shares at 98 and sell them at 100.

The lead manager introduces the market makers to the issuing company. They provide the market makers' details in the DRHP document. The issuer company pays a fee to the market makers.

Market Maker Role

As per exchange (NSE and BSE) guidelines, a market maker:

  • Should provide a 2-way quote for 75% of the time in a day.
  • Guarantee the execution of the order at the quoted price and quantity for the quotes they provide.
  • Shall provide quotes from the date of listing of the particular security and shall be subject to the market-making guidelines set by the Exchange.

Points to Note

  • A market maker should have sufficient inventory on the date of allotment.
  • A market maker should not buy shares from promoters during the market making period.
  • An issue cannot have more than five market makers.
  • A market maker must serve in this capacity for three years.
  • Market makers must decide the time period with a merchant banker.
  • A market maker can deregister by giving one month's notice to the exchange.
  • Market makers can compete with other market makers for better price discovery.

10. Depositories

Depositories are the financial institutions that hold the shares in electronic form. In India, there are two depositories, NSDL and CDSL.

The issuer company enters into a tripartite agreement with both the depositories individually and Registrar. Depositories play an important role in smooth execution of managing of IPO shares. The main responsibilities of the depositories include the below :

  • Dematerialization of physical shares held by the issuer company.
  • Credit the IPO shares to the beneficiary account of the allottee once allotment is finalized.
  • Trading and settlement of IPO shares on listing.
  • Maintain records of shareholders to account for any corporate action benefits post listing.
  • Ensure security of the shares held in the electronic form with no fear of theft.

Frequently Asked Questions

  1. In an IPO, a merchant banker is responsible for determining the eligibility of the issuer to file an IPO and appointing intermediaries such as bankers, legal counsel, auditors, registrars, compliance offices, etc. The Merchant Banker is also responsible for preparing the IPO prospectus and advertising the IPO.

    • Due diligence
    • IPO Application Submission.
    • Helps in structuring the issue/offering details.
    • Preparing the draft prospectus.
    • Advertisement of Issue.
    • RHP - Red herring prospectus drafting and submission.
    • Assists with the allotment process.


  2. Market Makers help listed companies improve liquidity and price discovery of the stock. They are registered members of the stock exchange (usually stockbrokers) who buy or sell securities on the stock market at specified prices at any time.

    Roles of Market Makers

    • Provide buy and sell quotes to create a spread.
    • Ensure liquidity.
    • Provide investors with purchase and sale options.
    • Ensure that the order will be completed at the quoted price.


  3. An issuer can appoint one or more than one merchant banker (lead manager) for the IPO process. The following is the number of merchant bankers an issuer can hire depending on the issue size:

    Maximum Number of Merchant Bankers by Issue Size

    Issue Size

    Maximum number of Merchant Bankers

    Below Rs. 50 crore


    Rs. 50 to Rs. 100


    Rs. 100 to Rs. 200


    Rs. 200 to Rs. 400.


    Rs. 400 and above

    More than 5


  4. A lead manager in an IPO is a SEBI registered merchant banker appointed by the issuer company, to assist the company manage the entire IPO process.

    A lead manager plays a key role in the successful implementation of an IPO from planning, execution to post IPO and trading phases. The responsibilities of the lead manager includes the below:

    • Determine the valuation of the company and offer price.
    • Carry out required due diligence.
    • Preparation of the offer documents.
    • Marketing and Promotion.
    • Coordination with various stakeholders like Underwriters, Registrars, Depositories, Banks for smooth functioning of the process.
    • Advisory role.


  5. The lead manager in an IPO is the merchant banker who is responsible for managing the entire process.

    The services of a lead manager are compensated by the issuer through the payment of IPO lead manager fees. This fee is determined between the issuer and the lead manager and varies from company to company.

    Lead manager role in IPO:

    • Checking the eligibility of the issuer for an IPO
    • Conducting due diligence
    • Assisting in the issue structure
    • Drafting DRHP and RHP
    • Share underwriting
    • IPO roadshow, promotion, and marketing
    • Pre and post-listing assistance.


  6. IPO Book-Runner Vs Underwriter

    IPO Book-Runner


    IPO Book-runner is also known as Merchant Banker, Book-Running Lead Managers, Lead managers, Lead/Main Underwriter.

    An underwriter is also known as Co-manager, manager, broker, agent.

    A book-runner is responsible for assisting the issuer on the entire IPO process

    An underwriter comes into picture in case of under subscription.

    IPO Book-Runner is mandatory for all IPOs

    An underwriter is mandatory only in case of SME IPOs.

    Issuer pays fees to a merchant banker

    Underwriters charge a fee/underwriting commission for the services.


  7. Book running manager vs lead manager

    The terms book-running manager and lead manager are used interchangeably. The roles and responsibilities of a book-running manager and a lead manager are the same. They are both responsible for conducting and assisting the issuer in the IPO process.

    Merchant bankers are generally referred to as Book Running Lead Managers (BRLM) in the case of mainline IPOs and as Lead Managers in the case of SME IPOs.

    If there are multiple lead managers, one of them is a book-running lead manager and the others are lead managers. If an IPO has two book-running lead managers, they are referred to as "joint book-running lead managers".



  1. Red Herring Prospectus (RHP)

    Red Herring Prospectus is SEBI approved IPO prospectus document.
  2. Basis of Allotment (IPO)

    Basis of Allotment is a document containing the basics on which Equity Shares are allotted to successful bidders.
  3. Lead Manager

    A lead manager is the merchant banker appointed by the issuer company to carry out the entire IPO process.
  4. Depository

    A Depository is an institution that holds financial securities in a De-Materialized form and facilitates their trade on various stock exchanges and platforms.
  5. Draft Red Herring Prospectus (DRHP)

    A DRHP it covers a whole host of things - the financials of the company, the risk factors, and industry dynamics.


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