Underwriting Agreements

-Including Guidelines By SEBI

Submitted To
Mr. Shyamtanu Pal.
[Faculty of Law]
Submitted By
Aunnesha Dey
Semester V Sec C
Roll No- 38
Sociology Majors
Submitted On- 10th October, 2014
Hidayatullah National Law University
Uparwara, Post Abhanpur, Raipur (C.G.)
Table of Contents
1. Acknowledgment.III
2. Research MethodologyIV
3. Review of Literature.IV
4. Sources of DataIV
5. Scope.IV

6. Nature of Study.IV
7. Objectives of StudyIV
8. Research QuestionsIV
9. Introduction.V
10. Underwriting .VI
What is underwriting
How it works/Example:
Why it Matters:
Types of Underwriting
Types of underwriters
Advantages of Underwriting
Disadvantages of Underwriting
Securities underwriting
11. Risk, exclusivity, and reward...XV
Marked and Unmarked Applications
12. Role of SEBI Registered Intermediaries UnderwritersXVI
Conditions for Registration (Rule 4)
Consideration of Application/Eligibility Criteria (Regulation 6)
Capital Adequacy Requirement (Regulation 7)
General Obligations and Responsibilities
General Responsibilities of an Underwriter (Regulation 15 to 17)
13. Conclusion...XX
14. BibliographyXXI

Acknowledgement

I feel highly elated to work on the topic Underwriting Agreements. The practical realization of this project has
obligated the assistance of many persons. I express my deepest regard and gratitude to my teacher Mr. Shyamtanu
Pal for his unstinted support. His consistent supervision, constant inspiration and invaluable guidance have been of
immense help in understanding and carrying out the nuances of the project report.
I would like to thank my family and friends without whose support and encouragement, this project would not have
been a reality. I take this opportunity to also thank the University and the Vice Chancellor for providing extensive
database resources in the Library and through Internet.
My gratitude also goes out to the staff and administration of HNLU for the infrastructure in the form of our library
and IT Lab that was a source of great help for the completion of this project

Some printing errors might have crept in, which are deeply regretted. I would be grateful to receive comments and
suggestions to further improve this project report.

Aunnesha Dey
Semester V
Roll no 38

Section CResearch Methodology

This research project is largely based on secondary & electronic sources of data. Books, case laws, journals & other
reference as guided by faculty of Jurisprudence are primarily helpful for the completion of this project.

Research Questions

Who are underwriters?

What is the role of underwriters?
Why and when do Corporations need underwriters?

Objectives of Study

To study the concept of underwriters

To discuss the work undertaken by the underwriters

To discuss as to why underwriting agreements are entered upon by the Corporations

Nature of Study
This research project is Theoretical in nature since it is largely based on secondary & electronic sources of data and
also since there is no field work involved while producing this research and it largely involves study of various
articles and comparison from different books, journal and other online sources thus not being empirical in nature.

Sources of Data
Data that were used for the completion of this research project are all secondary sources of data ranging from books,
journal, articles and other online sources and as far as case laws are concerned these cannot be said to be primary
sources since they are not first-hand information or judgment reports but a modified form found in books or journals.

Review of Literature

 The New Company Law by Dr. N.V. Paranjape, 6th Edition, 2014
This book dealt with providing an insight to the concept of underwriters.
Underwriting - Abdul Nasser
http://easyaccountingandfinance.blogspot.in/2013/02/underwriting-of-shares-and-debentures.html
The technical concept of underwriting has been provided by the author
The Free MBA resource- http://www.freemba.in/articlesread.php?artcode=463&substcode=28&stcode=10
Provided the advantages of underwriting
Underwriting of shares by Ruby Sharma on Jun 26, 2013
http://www.slideshare.net/rubysharma5667/underwriting-ofshares
Provided the disadvantages of underwriting.
Underwriting by Avkris on Jan 29, 2013
http://www.slideshare.net/Avkris/underwriting-16245384
Discussed the concept of Securities underwriting
Scope
The research topic about the Underwriting Agreements and Regulatory Guidelines by SEBI is an informative &
enlightening topic and it is important as well because it deals with such a profound concept which is often used by
the Corporations for raising Capital. The research paper also deals with the topics relevance in the Corporate World.

Introduction
In case of public limited companies the minimum subscription must be received to get the certificate of
commencement of business. There is always a risk of under subscription so, to overcome this risk the companies
resort to underwriting. Underwriting is a sort of contract whereby some individuals, firms or companies give
guarantee to the company, that in case the issue of shares or debentures is undersubscribed, they will take up that
unsubscribed portion on the same terms as applicable to the public. Thus the underwriting is like a guarantee or
insurance given by the underwriters to the company that the shares or debentures offered to the public will be fully
subscribed, being they also charge some commission mostly calculated on the issue price of shares and debentures.
In India, the business of the underwriting is usually done by some specialized institutions, the most important of
which are Industrial Development Bank Of India(IDBI), Industrial Credit And Investment Corporation Of
India(ICICI), Industrial Finance Corporation Of India(IFBI), Life Insurance Corporation Of India(LIC).
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. Underwriters get their commission irrespective of whether they have to buy a single security or not.

Underwriting
In order to get certificate to commence business, public limited companies have to get minimum subscription. For
ensuring minimum subscription, public companies enter into underwriting agreement.
According to section 76 of the Companies Act underwriting is an agreement whereby the underwriter ensures the
company that in case the shares and debentures offered to the public are not subscribed by the public to the
extent, the balance of shares and debentures will be taken up by the underwriter.
For guaranteeing the sale of shares and debentures, the underwriter charges an agreed commission usually calculated
on the issue price of shares or debentures.
According to section 76 of the Companies Act underwriting commission can be paid only subject to the following
conditions.
1. The payment of commission must be authorized by the Articles of Association.
2. The rate of commission should not exceed 5% if the price at which the shares are issued or any lesser amount
prescribed by the Articles. In case of debentures, it should not exceed 2.5%
3. The rate of commission and number of shares/debentures which persons have agreed to subscribe absolutely or
conditionally should be disclosed in the prospectus or statement in lieu of prospectus.
4. A copy of the underwriting contract should be delivered to the Register along with the prospectus.1

1 UNDERWRITING-ABDUL NASER KODAMPUZHA http://easyaccountingandfinance.blogspot.in/2013/02/underwriting-of-sharesand-debentures.html

What is underwriting
In the securities industry an underwriter is a company, usually an investment bank, which helps companies introduce
their new securities to the market. Underwriting is an agreement whereby the underwriters ensure the company that
in case the shares and debentures offered to the public are not subscribed by the public to the extent, the balance of
shares and debentures will be taken up by the underwriters. The firms or persons who are engaged in underwriting
are called underwriters. The commission payable to underwriters for underwriting is known as underwriting
commission.

How it works/Example:
When a company wants to issue stock, bonds, or other publicly traded securities, it hires an underwriter to manage
what is often a long and complex process.
To begin the offering process, the underwriter and the issuer first determine the kind of offering the issuer needs.
Sometimes the issuer wants to sell shares via an initial public offering (IPO) cash proceeds return to the issuing
company as capital to fund its projects. Other offerings, such as secondary offerings, funnel the proceeds to a
shareholder who is selling some or all of his or her shares. Split offerings occur when a portion of the offering go to
the company while the rest of the proceeds goes to an existing shareholder. Shelf offerings allow the issuer to sell
shares over a two-year period.
After determining the offering structure, the underwriter usually assembles what is called a syndicate to get help
manage the minutiae (and risk) of large offerings. A syndicate is a group of investment banks and brokerage firms
that commit to sell a certain percentage of the offering. (This is called a guaranteed offering because the underwriters
agree to pay the issuer for 100% of the shares, even if all the shares can't be sold). With riskier issues, underwriters
often act on a "best efforts" basis, in which case they sell as many shares as they can and return the unsold shares
back to the issuing firm.
After the syndicate is assembled, the issuer files a prospectus. The Securities Act of 1933 requires the prospectus to
fully disclose all material information about the issuer, including a description of the issuer's business, the name and
addresses of key company officers, the salaries and business histories of each officer, the ownership positions of each
officer, the company's capitalization, an explanation of how it will use the proceeds from the offering, and
descriptions of any legal proceedings the company is involved in.
With prospectus in hand, the underwriter then proceeds to market the securities. This usually involves aroad show,

which is a series of presentations made by the underwriter and the issuer's key executives to institutions (pension
plans, mutual fund managers, etc.) across the country. The presentation gives potential buyers the chance to ask
questions from the management team. If the buyers like the offering, they make a non-binding commitment to
purchase, called a subscription. Because there may not be a firm offering price at the time, purchasers usually
subscribe for a certain number of shares. These processes let the underwriter gauge the demand for the offering
(called indications of interest) and determine whether the contemplated price is fair.
Determining the final offering price is one of the underwriter's most important responsibilities. First, the price
determines the size of the capital proceeds. Second, an accurate price estimate makes it easier for the underwriter to
sell the securities. Thus, the issuer and the underwriter work closely together to determine the price. Once an
agreement is reached on price and the SEC has made the registration statement effective, the underwriter calls the
subscribers to confirm their orders. If the demand is particularly high, the underwriter and issuer might raise the price
and reconfirm this with all the subscribers.
Once the underwriter is sure it will sell all of the shares in the offering, it closes the offering. Then it purchases all
the shares from the company (if the offering is a guaranteed offering), and the issuer receives the proceeds minus
the underwriting fees. The underwriters then sell the shares to the subscribers at the offering price. If any subscribers
have withdrawn their bids, then the underwriters simply sell the shares to someone else or own the shares
themselves. It is important to note that the underwriters credit the shares into all subscriber accounts (and withdraw
the cash) simultaneously so that no subscriber gets a head start.
Although the underwriter influences the initial price of the securities, once the subscribers begin selling, the freemarket forces of supply and demand dictate the price. Underwriters usually maintain a secondary market in the
securities they issue, which means they agree to purchase or sell securities out of their own inventories in order to
keep the price of the securities from swinging wildly.

Why it Matters:
Underwriters bring a company's securities to market. In so doing, investors become more aware about the company.
Issuers compensate underwriters by paying a spread, which is the difference between what the issuer receives per
share and what the underwriter sells the shares for. For example, if Company XYZ shares had a public offering price
of $10 per share, XYZ Company might only receive $9 per share if the underwriter takes a $1 per share fee. The $1
spread compensates the underwriter and syndicate for three things: negotiating and managing the offering,
assuming the risk of buying the securities if nobody else will, and managing the sale of the shares. Making a market
in the securities also generates commission revenue for underwriters.

Underwriters take on considerable risk. Not only must they advise a client about matters large and small throughout
the process, they relieve the issuer of the risk of trying to sell all the shares at the offer price. Underwriters often
mitigate this risk by forming a syndicate whose members each share a portion of the shares in return for a portion of
the fee.
Underwriters work hard to determine the "right" price for an offering, but sometimes they leave money on the
table. For example, if Company XYZ prices its 10 million shares IPO at $15 per share but the shares trade at $30 two
days after the IPO, this suggests that the underwriter probably underestimated the demand for the issue. As a result,
Company XYZ received $150 million (less underwriting fees) when it could have possibly fetched $300 million.
Thus, the issuing company must also follow a robust due diligence process on their end in order to optimize
their capital raising efforts.

Types of Underwriting
On the basis of the number of shares or debentures underwritten by the underwriters, underwriting contracts may be
divided into two types. They are:
1. Complete Underwriting: Complete underwriting is an arrangement under which the whole of the issue of shares
or debentures of a company is underwritten by the underwriters. The whole of the issue of shares or debentures of the
company may be underwritten either by a single underwriter or by two or more underwriters.
2. Partial Underwriting: Partial underwriting is an arrangement under which only a part of the issue of shares or
debentures of a company is underwritten by the underwriters. The part of the issue of shares or debentures of the
company may be underwritten either by a single underwriter or by two or more underwriters.
On the basis of the liability undertaken by the underwriters in respect of the shares and debentures underwritten by
them, underwriting agreements may be classified into two types.
1. Open or Pure Underwriting: Open underwriting is an arrangement under which an underwriter or
underwriters agree to take up the shares or debentures of a company only when the whole or a part of the
issue of shares of debentures of the company underwritten by him or them is not fully subscribed for by the
public . In the case of open underwriting, the liability of the underwriter or underwriters is conditional, i.e.,
his or their liability arises only when the whole or a part of the issue underwritten by them is not subscribed
for in fully by the public

2. Firm Underwriting: Firm underwriting is an arrangement under which an under writer makes a firm
commitment to take up a specified number of shares or debentures of a company, irrespective of the number
of shares or debentures subscribed for by the public. Even if the issue of shares or debentures is fully or oversubscribed, the underwriter is required to take up the shares or debentures which he has agreed to take up
under the firm underwriting agreement.

Types of underwriters
Underwriting of capital issues has become very popular due to the development of the capital market and special
financial institutions. The lead taken by public financial institutions has encouraged banks, insurance companies and
stock brokers to underwrite on a regular basis. The various types of underwriters differ in their approach and attitude
towards underwriting:

Development banks like IFCI, ICICI and IDBI: - they follow an entirely objective approach. They stress upon
the long-term viability of the enterprise rather than immediate profitability of the capital issue. They attempt
to encourage public response to new issues of securities.

Institutional investors like LIC and AXIS: - their underwriting policy is governed by their investment policy.

Financial and development corporations: - they also follow an objective policy while underwriting capital
issues.

Investment and insurance companies and stock-brokers: - they put primary emphasis on the short term
prospects of the issuing company as they cannot afford to block large amount of money for long periods of
time.

To act as an underwriter, a certificate of registration must be obtained from Securities 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 the Securities and Exchange
Board of India (Underwriters) (Amendment) Regulations, 2006.

Advantages of Underwriting
1. Assurance of Adequate Finance.
Underwriting is a guarantee given buy the underwriters to take up the whole issue or remaining shares, not
subscribed by public. In the absence an underwriting agreement, a company may face a situation where even
minimum subscription is not received and, it will have to go, into liquidation. In case of an existing company,
it may have to postpone its projects for which the issue was meant. As a result of an underwriting contract, a
company has not to wait till the shares have been subscribed before entering into the required contracts for
purchase of fixed assets etc. it can go ahead with its plan confidently. Thus, underwriting agreement assures
of the required funds within a reasonable or agreed time.
2. Benefit of Expert Advice.
An incidental advantage of underwriting is that the issuing company gets the benefit of expert advice. An
underwriter of repute would go into the soundness of the plan put forward by the company before entering
into an agreement and suggest changes wherever necessary, enabling the company to avid certain pitfalls.
3. Increase in Goodwill of the Company.
The good underwriters being men or firms of financial integrity an established reputation. As we have already
explained that underwriters satisfy themselves with the financial integrity of the company and viability of the
plan, the investors therefore, run much less risk when they buy shares or debentures which have been
underwritten by them. They assure of the soundness of eh company. Thus, good underwriters increase the
goodwill of the company.
4. Geographical Dispersion of Securities.
Generally, underwriters maintain working arrangement with other underwriters and brokers throughout the
country and in other countries too and as such, they are able to tap the financial resources for the company
not only in on particular area but also in other areas as well. In this way marketability of securities increases
and geographical dispersion of shares and debentures in promoted.2

Disadvantages of Underwriting
1. Underwriting is very costly method of marketing of securities.
2. Issuing company has to provide secret information about its affairs to the underwriters and misuse of such
information is possible.
3. Underwriter may secure control on the company by virtue of purchasing large number of shares not
purchased by the investing class.3

2 The Free MBA resource- http://www.freemba.in/articlesread.php?artcode=463&substcode=28&stcode=10

Securities underwriting
Securities underwriting refers to the process by which investment banks raise investment capital from investors on
behalf of corporations and governments that are issuing securities (both equity and debt capital). The services of an
underwriter are typically used during a public offering. This is a way of selling a newly issued security, such as
stocks or bonds, to investors. A syndicate of banks (the lead managers) underwrites the transaction, which means
they have taken on the risk of distributing the securities. Should they not be able to find enough investors, they will
have to hold some securities themselves. Underwriters make their income from the price difference (the
"underwriting spread") between the price they pay the issuer and what they collect from investors or from brokerdealers who buy portions of the offering.4

Risk, exclusivity, and reward

Once the underwriting agreement is struck, the underwriter bears the risk of being unable to sell the underlying
securities, and the cost of holding them on its books until such time in the future that they may be favorably sold. If
the instrument is desirable, the underwriter and the securities issuer may choose to enter into an exclusivity
agreement. In exchange for a higher price paid upfront to the issuer, or other favorable terms, the issuer may agree to
make the underwriter the exclusive agent for the initial sale of the securities instrument. That is, even though thirdparty buyers might approach the issuer directly to buy, the issuer agrees to sell exclusively through the underwriter.
In summary, the securities issuer gets cash up front, access to the contacts and sales channels of the underwriter, and
is insulated from the market risk of being unable to sell the securities at a good price. Also, if the securities are priced
significantly below market price (as is often the custom), the underwriter also curries favor with powerful end
customers by granting them an immediate profit perhaps in a quid pro quo.5

Marked and Unmarked Applications

When the issue of shares or debentures of a company is underwritten in part or when the issue of shares or
debentures of a company is underwritten by two or more underwriters, either in full or in part, to determine the
3 Underwriting of shares by Ruby Sharma on Jun 26, 2013
http://www.slideshare.net/rubysharma5667/underwriting-ofshares
4 Underwriting by Avkris on Jan 29, 2013http://www.slideshare.net/Avkris/underwriting-16245384

5 Underwriting by Avkris on Jan 29, 2013http://www.slideshare.net/Avkris/underwriting-16245384

liability of the single underwriter of the liability of each of the several underwriters, it becomes necessary to know as
to how many applications have been received through the single underwriter or through each of the several
underwriters. To make it easy to know as to how many applications have been received through the single
underwriter or each of the several underwriters, it becomes necessary that the applications for shares or debentures
sent through the single underwriter or through the several underwriters should bear the official stamp of the single
underwriter or the official stamp of the respective underwriters. Application bearing the official stamp of the single
underwriter or of the respective underwriters are called marked applications, and the applications received by a
company directly from the public, which do not bear the official stamp of the under writer or underwriters, are called
unmarked applications.

Role of SEBI Registered Intermediaries - Underwriters

Eligibility criteria, Procedure for registration and operational guidelines are covered under SEBI (Underwriters)
Rules, 1993 and SEBI (Underwriters) Regulations 1993. The words "underwriting" and "Underwriter" are defined in
the aforesaid Rules as under.

"Underwriting" means an agreement with or without conditions to subscribe to the securities of a body
corporate when the existing shareholders of such body corporate or the public do not subscribe to the
securities offered to them.

"underwriter" means a person, who engages in the business of underwriting of an issue of securities of a body
corporate;

Rule 3(1) of the aforesaid Rules makes Registration with the SEBI compulsory. To quote the said Rule- "No person
shall act as underwriter unless he holds a certificate granted by the Board under the regulations".

Conditions for Registration (Rule 4)

The Board may grant or renew a certificate to an underwriter subject to the following conditions namely;
a. in case of any change in the status and constitution, the underwriter shall obtain prior permission of the Board
to continue to act as underwriter;
b. without prejudice to the obligations under any other, the underwriter shall enter into a valid agreement with
the body corporate on whose behalf he is acting as underwriter and the said agreement amongst other things
may define the allocation of duties and responsibilities between him and such body corporate and;
c. he shall pay the amount of fees of registration in the manner provided in the regulations;

d. He shall abide by the rules and regulations made under the Act in respect of the activities carried on by him
as an underwriter.

Consideration of Application/Eligibility Criteria (Regulation 6)

The Board shall take into account for considering the grant of a certificate, all matters which are relevant to or
relating to underwriting and in particular the following, namely, whether the applicant
For the purposes of this clause the Board shall take into account whether a previous application for a certificate of
any person directly or indirectly connected with the applicant has been rejected by the Board or any disciplinary
action has been taken against such person under the Act or any of the Rules or any of the Regulations made under the
Act fulfils the capital adequacy requirements specified in regulation or any of its director, partner or principal officer
is or has at any time been convicted for any offence involving moral turpitude or has been found guilty of any
economic offence. Is a fit and proper person."

Capital Adequacy Requirement (Regulation 7)

1. The capital adequacy requirement referred to in sub- regulation (d) of regulation 6 shall not be less than the
net worth of rupees twenty lakhs;
2. Notwithstanding anything contained in sub-regulation (1),a. every stock broker, who acts as an underwriter shall fulfil the capital adequacy requirements specified
by the stock exchange of which he is a member;
b. Every merchant banker, who acts as an underwriter shall fulfill the capital adequacy requirements
specified in regulation 7 of the Securities and Exchange Board of India (Merchant Banker)
Regulations 1992.

General Obligations and Responsibilities

Every underwriter shall at all times abide by the Code of Conduct as specified in Schedule III. (Regulation 13)
Every underwriter shall enter into an agreement with each body corporate on whose behalf he is acting as
underwriter and the said agreement shall, amongst other things, provide for the following, namely :- (Regulation 14)

i.

the period for which the agreement shall be in force;

ii.

the amount of underwriting obligations;

iii.

the period, within which the underwriter has to subscribe to the issue after being intimated by or on behalf of
such body corporate;

iv.

the amount of commission or brokerage payable to the underwriter;

v.

Details of arrangements, if any, made by the underwriter for fulfilling the underwriting obligations.

General Responsibilities of an Underwriter (Regulation 15 to 17)

vi.

1. The underwriter shall not derive any direct or indirect benefit from underwriting the issue other than the
commission or brokerage payable under an agreement for underwriting.
2. The total underwriting obligations under all the agreements referred to in clause (b) of rule 4 shall not exceed
twenty times the net worth referred to in regulation 7.
3. Every underwriter, in the event of being called upon to subscribe for securities of a body corporate pursuant
to an agreement referred to in clause (b) of rule 4 shall subscribe to such securities within 45 days of the
receipt of such intimation from such body corporate.
To Maintain Proper Books of Accounts and Records, etc. (Regulation 16)
1. In relation to underwriter being a body corporate i.

A copy of the balance sheet and profit and loss account a copy of the auditor's report.

in relation to an underwriter not being a body corporate ii.

records in respect of all sums of money received and expended by them and the matters in
respect of which the receipt and expenditure take place; and

iii.

Their assets and liabilities.

2. Every underwriter shall, after the close of each financial year as soon as possible but not later than six months
from the close of the said period furnish to the Board if so required copies of the balance sheet, profit and loss
account, statement of capital adequacy requirement and such other documents as may be required by the
Board under regulation 16.

3. Every underwriter shall also maintain the following records with respect to i.

Details of all agreements.

ii.

Total amount of securities of each body corporate subscribed to in pursuance of an agreement.

iii.

statement of capital adequacy requirements ;

iv.

Such other records as may be specified by the Board for underwriting.

Every underwriter shall intimate to the Board the place where the books of accounts, records and documents are
maintained.
Every underwriter shall preserve the books of account and other records and documents mentioned under this chapter
for a minimum period of five years. (Regulation 17)
Appointment of Compliance Officer (Regulation 17A)
1. Every underwriter shall appoint a compliance officer who shall be responsible for monitoring the compliance
of the Act, rules and regulations, notifications, guidelines, instructions, etc. issued by the Board or the Central
Government and for redressal of investors' grievances.
2. The compliance officer shall immediately and independently report to the Board any non-compliance
observed by him
Power to Call for Information (Regulation 18)
1. The Board may at any time call for any information from an underwriter with respect to any matter relating to
underwriting business.
2. Where any information is called for, it shall be the duty of the underwriter to furnish such information.6

Conclusion
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.

6Capital Market Functioning- http://easyaccountingandfinance.blogspot.in/2013/02/underwriting-of-shares-and-

debentures.html

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 association of well-known underwriters lends prestige to the company and the investors feel that the issue is
sound enough for profitable investment. Also, the securities underwritten by reputed underwriters receive better
response from the public. 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.

Bibliography
The New Company Law by Dr. N.V. Paranjape, 6th Edition, 2014
Underwriting - Abdul Naser
http://easyaccountingandfinance.blogspot.in/2013/02/underwriting-of-shares-and-debentures.html
The Free MBA resource- http://www.freemba.in/articlesread.php?artcode=463&substcode=28&stcode=10

Underwriting of shares by Ruby Sharma on Jun 26, 2013

http://www.slideshare.net/rubysharma5667/underwriting-ofshares
.
Underwriting by Avkris on Jan 29, 2013
http://www.slideshare.net/Avkris/underwriting-16245384