Experience in market making: The selected merchant banker should have the required skills and experience related to market making, including the process involved in trading, underwriting, buying, selling and marketing stocks.
Merchant bankers in Market making Process
Selection of Merchant Banker
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Engaging the right Merchant Banker who understands the philosophy, business model and wave-length of the SME company and its promoters is the most important step in the IPO process. One of the foremost role of the merchant banker is due diligence and preparation of draft offer document. This assumes increased importance, as SME IPO does not require the offer document to be cleared by SEBI.
Another major role of the merchant banker is to chalk-out the IPO strategy and market the issue. Merchant banker needs to ensure 100% underwriting, including 15% underwriting out of its own account, for any SME IPO.
Thirdly, the merchant banker plays an important role in selecting right market makers for the company's scrip. Choosing and using all the intermediaries is a great challenge for any merchant banker. It is important for the merchant banker to assist the issuer in selecting intermediaries like Registrar & Transfer Agent, Syndicate Members/Sub Syndicate Members, Printers, Bankers, Advertising Agency etc. Understanding of the stock exchange regulations and determining the Designated Stock Exchange are also very important functions
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