Know the Intermediaries involved in an IPO

Created on 12 Jan 2021

Wraps up in 4 Min

Read by 4.2k people

Updated on 10 Sep 2022

Do you know the intermediaries involved in an IPO process?
Do you know the intermediary’s role in the IPO process?
As a prudent investor, you should know answers to these questions.
Well, the common dictionary defines an intermediary as an individual who acts as a link between people in order to try to bring about an agreement; whereas a financial intermediary is an institution or individual that serves as a middleman among diverse parties in order to facilitate financial transactions. 

Coming back to the IPO process, it is quite a complex process. Hence, when a company wants to undergo an IPO, it has to appoint several intermediaries who complete the whole IPO process successfully.

These intermediaries have to be registered with SEBI. The issuer company informs about these intermediaries in the IPO prospectus.

Let us understand the intermediaries involved in an IPO process

Merchant Banker

The company issuing the IPO appoints a merchant banker. The job of a merchant banker can be split into two segments: 

  • Pre-Issue -  The Pre-Issue responsibility of the merchant banker includes compliance with the regulations of SEBI and other authorities and finishing the requirements necessary for listing shares on the Stock Exchange
  • Post Issue - The Post Issue role involves handling escrow accounts, confirming that failed applicants get a full refund, issuing share allotments, and making sure that agencies are following the laws created by SEBI for the IPO process. 

Merchant Bankers are also known as Book Running Lead Managers. Some of the world’s leading merchant banks are J.P. Morgan, Goldman Sachs, and Citigroup.

Bankers to the Issue

Bankers to the issue are professionals that are responsible for issues like: 

  • Dividend payments 
  • Transfer of funds 
  • Refunds to unsuccessful applicants.

Their part is vital in the course of moving funds and in settling the basis of allotments. 

Registrars to the Issue 

The Registrars are accountable to conclude the basis of the IPO allotment. They generate a final record of applications that are legitimate and qualified and remove the unacceptable ones.

Furthermore, they confirm that the selected applicants are credited with the allotted shares in their demat accounts, and rejected applicants get their refunds.

The Lead Manager co-ordinates with them to confirm that the movement of applications from the collecting centres to processing them and all other crucial stages are obeyed in time. The Registrar, alongside the Lead Manager, guarantees that the procedure is followed right till the end.


Underwriters are mediators who are in agreement to procure the shares issued by the company if certain shares of the company are unsold. They operate along with the issuing body, decide the price of the securities, obtain them from the issuer, and trade them via their arrangement.

Underwriters get underwriting fees from the issuers and also by trading the underwritten shares at a profit. However, they also bear the risk of losses if they are incapable of selling all the shares at a definite price.


Life-cycle of an IPO

Let’s take a glance at the life-cycle of an IPO:

1. The issuer company starts the IPO procedure by hiring the:

  • Lead manager
  • Registrar of Issue
  • Syndicate members

2. Before the issue, the lead manager makes a draft offer prospectus for the IPO and submits it with SEBI. It also manages campaigns for the issue.

3. SEBI evaluates the draft offer prospectus and returns to the lead manager for any modifications. When the draft prospectus is accepted, it converts into the Offer Prospectus.

4. After that, the lead manager:

  • Gives in the Offer Prospectus to the stock exchanges and Registrar of Issue to get it official.
  • Determines the issue date and price band along with the issuing company.
  • Add the date and price band in the prospectus. This prospectus now becomes the Red Herring Prospectus.
  • Produces the Red Herring Prospectus and IPO Application Forms and delivers them to syndicate members for further circulation to investors.

5. The IPO begins, and investors are asked to present their bids.

6. The syndicate members collect the bids from the investors and surrender the data with the stock exchanges.

7. When the public issue ends, the lead manager assesses the final issue price based on the received bids. The lead manager also apprises the final price in the Red Herring Prospectus and forwards it to SEBI and stock exchanges.

8. The registrar of issue:

  • Obtains the applications and funds from the syndicate members
  • Inspects the totality and legitimacy of the application forms
  • Completes the share allotment outline based on the legitimate bids
  • Makes the Basis of Allotment
  • Allocates the shares to the investors’ Demat account and make sure that all forbidden applicants get their refunds.

9. When the registrar concludes the procedure, the lead manager determines the issue listing date with the aid of the stock exchange.

10. Ultimately, the share gets listed.

Closing words

The procedure of introducing an IPO requires 6 months to 1 year, with various intermediaries functioning for careful accomplishment. IPOs are usually crystal clear and generate a risk-free environment for investors.

Although this is not the sole factor for an investor to come to a decision to invest in the IPO, it is important to understand how SEBI safeguards the regulation of the IPO procedure. Through these intermediaries, SEBI makes sure that only applications from authentic companies are permitted to go public, and the remainder are cleared out, thus generating a harmless and controlled atmosphere for investors.

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Pratiksha Mahawar

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Sugar, spice & everything nice, that's what Pratiksha is made of. This proactive human makes difficult things look easy through her amazing skill of managing everything, be it professional or academic. Let’s not forget how this “Potterhead” makes room for her ‘occasional writing’ hobby while she leads marketing activities at Finology. 

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