"Mastering the Essentials

of Share Underwriting"
Table of Contents

01 Introduction to 02 The Role of

Underwriting Underwriters

03 Understanding 04 Benefits of
Underwriting Underwriting
Commission

05 Types of 06 Calculating
Underwriting Underwriters'
Explained Liabilities
1.Introduction to Underwriting
The Fundamentals of Underwriting

Underwriting is an agreement between

the underwriters and the company
where the underwriters ensure the
company that in case the shares and the
debentures offered to the public are not
subscribed by the public then such
shares and debentures will be taken by
the underwrites.
2.The Role of Underwriters
Who are the
Underwriters?
The persons or institutions underwriting a
public issue of shares and debentures are
called underwriters.
The underwriters may be individuals,
partnership firms, joint stock companies,
banks and financial institutions
3.Understanding Underwriting Commission
The Underwriting Commission Concept

The underwriters are entitled to some

considerations for the risk they undertake in
underwriting shares or debentures of a public
company.
In other words, considerations payable to the
underwriters for underwriting the shares and
debentures are called the underwriting
commission
 Maximum Commission Limits
For the services rendered by the underwriters: they are
entitled to a maximum commission of 5% of the issue
price of the shares and debentures at 2.5% on the issue
price as per The Companies Act, 2013.
According to SEBI, the maximum commission
payable to underwriters for underwriting the shares
and debentures is 2.5% of the issued price.
4.Benefits of Underwriting
When there is an When there is an With an underwriting
underwriting underwriting arrangement, arrangement, a company
arrangement, a company a company can be sure of need not bother about
is relieved from the getting the required capital money market conditions.
trouble of raising the within a specified period
required capital. of time.
5.Types of Underwriting Explained
Based on Shares or Based on the liability of
Debentures Underwriters:
Underwritten:

Complete vs Partial Undertaking Pure Open to Firm Commitment

Learn about the elasticity between pure/open
Discover the intricate differences between the whole-
underwriting and the resolute stance of firm
hearted commitment of complete underwriting and
underwriting, and their implications on the
the focused support of partial underwriting.
financial market’s choreography.
6.Calculating Underwriters' Liabilities
Ledger of Liability: A
Statement
Particulars No. Of Shares
Gross Liability X.X.X.X
- Unmarked Application (X.X.X.X)
X.X.X.X
- Marked Application (X.X.X.X)
Net Liability X.X.X.X
+ Firm Underwriting X.X.X.X
Total Liability X.X.X.X
Marked Unmarked
Applications: Applications:

The application The application

received by the received by the
company bearing the company directly from
official stamps of the the public which does
individual underwriter not bear the official
or the respective stamp of
underwriters is called underwriter(s) is
a marked application. called a unmarked
application.
Today's discourse illuminates the critical architecture of share
underwriting, a cornerstone of our financial markets. As
guardians of enterprise growth, underwriters not only reinforce
the fabric of public shareholding but also embody the spirit of
trust in our capital mechanisms. We stride forward, fortified by
the knowledge that underwriting is more than a financial tool
—it's a pledge of support to the innovation and progress of our
economy.