The mandate letter is an agreement between the merchant banker (lead manager) and the issuing company for their proposed SME IPO.
Title: Merchant Banker Mandate Letter for SME IPO
Date: 2023-07-20
Dear Sir,
Sub: Appointment of ABC Private Limited (APL) as the Lead Manager for the proposed Initial Public Offering (IPO) of Equity Shares of XYZ Pvt Ltd. (XPL) on SME Stock Exchange(s).
This letter serves as a formal agreement between ABC Private Limited (APL), a SEBI registered Category – I Merchant Banker, and the Board of Directors of XYZ Pvt Ltd. (XPL). With reference to our discussions regarding the listing of Equity Shares of XPL on SME Exchange(s) through an Initial Public Offering (IPO), we are pleased to present the Mandate Letter for your consideration.
A. Scope of Work #
During the term of our engagement, our scope of work shall encompass the following key areas:
- Restructuring of Pre IPO Capital: We will assist in devising an appropriate capital restructuring plan to ensure the company’s financial position aligns with the IPO requirements.
- Due Diligence & Pre-IPO Preparation: Conducting a thorough due diligence process, including preliminary background checks, visiting the Company’s office(s) and factory, and finalizing the due diligence report.
- Dematerialization of Shares: Facilitating the dematerialization of pre-IPO shares of the Company and obtaining ISIN from the Depository(ies).
- Valuation & Issue Pricing: Carrying out a comprehensive valuation exercise, including ratio analysis and industry comparisons, to determine the issue pricing and size.
- Preparation of Public Issue Offer Document: Drafting the IPO Offer Document and other necessary documents in compliance with SEBI regulations.
- Appointment of Intermediaries: Assisting in the appointment of market intermediaries, including Underwriters, Market Makers, Registrars to the Issue, Legal Advisor to the Issue, Bankers to the Issue, and Printer.
- Filing and Approval Process: Filing the Draft Offer Document with the SME Exchange, obtaining clearance for the Offer Document, and seeking approval from SME Exchange.
- Filing of Prospectus with ROC: Completing the necessary formalities for filing the Prospectus with the Registrar of Companies (ROC).
- IPO Launch & Management: Managing the entire IPO process, including the receipt of applications, IPO closure, and coordinating with various stakeholders.
- Allotments and Listing: Assisting in the finalization of Basis of Allotment, obtaining Stock Exchange Approval, and managing the allotment process. Additionally, facilitating the listing and market making process.
- Re-stated Financial Statements: Coordinating with Peer-Review Auditors for restatement of financials of the Company as required under SEBI (ICDR) Regulations.
B. Timeline and Phases #
The above scope of work shall be divided into the following phases:
Phase I: Pre IPO Preparatory Assistance #
Under this phase, we will work closely with the Company to prepare for the IPO and ensure compliance with corporate governance practices and listing regulations. This includes setting up minimum corporate governance practices, appointing market intermediaries, and devising a comprehensive IPO plan.
Phase II: Due Diligence #
During this phase, we will conduct a thorough due diligence process, including discussions with the management, auditors, and legal advisors, to prepare a due diligence report.
Phase III: Valuation / Issue Pricing #
This phase involves carrying out a valuation exercise, analyzing industry peers, and determining the issue pricing and size for discussion with the management.
Phase IV: Prospectus and Other Documents #
Under this phase, we will draft the IPO Offer Document and other necessary documents essential for the IPO process.
We thank you for the opportunity to offer our services on this assignment. Enclosed herewith are two copies of this Mandate Letter, and we kindly request you to sign both copies and return one copy duly signed for our records.
Thank you for your attention, and we look forward to a successful collaboration.
Sincerely,
[Your Name] [Designation/Position] ABC Private Limited (APL)
Frequently Asked Questions #
What is a Merchant Banker Mandate Letter? #
Answer: A Merchant Banker Mandate Letter is a legally binding contract between a merchant banker (lead manager) and the issuing company for their proposed Initial Public Offering (IPO) or bond issue.
What is the purpose of a Mandate Letter? #
Answer: The Mandate Letter documents the relationship between the merchant banker and the issuing company, outlining the scope of work and services to be provided during the IPO or bond issue process.
What are the key elements included in a Mandate Letter? #
Answer: The Mandate Letter typically includes details about the scope of work, responsibilities, timelines, fee structure, and other relevant terms and conditions.
Can a Mandate Letter be modified or negotiated? #
Answer: Yes, a Mandate Letter can be subject to negotiation between the issuing company and the merchant banker to ensure both parties are in agreement with the terms and conditions.
Is a Mandate Letter a private and confidential agreement? #
Answer: Yes, the Mandate Letter is a private and confidential agreement between the issuing company and the merchant banker, outlining the specific details of their engagement.
What services does the merchant banker provide during the IPO process? #
Answer: The merchant banker’s services during the IPO process may include restructuring pre-IPO capital, due diligence, valuation, preparation of the public issue offer document, appointment of intermediaries, and assistance with stock exchange approvals, among others.
Is it necessary to have a Mandate Letter for an IPO or bond issue? #
Answer: Yes, a Mandate Letter is essential as it formalizes the relationship between the issuing company and the merchant banker, clarifying the roles and responsibilities of each party during the IPO or bond issue.
Can the issuing company engage multiple merchant bankers with separate Mandate Letters? #
Answer: Yes, the issuing company can engage multiple merchant bankers for different aspects of the IPO or bond issue process, with each merchant banker having a separate Mandate Letter outlining their specific scope of work.
How does a Mandate Letter protect the interests of both parties? #
Answer: The Mandate Letter serves as a legal document that outlines the rights, obligations, and protections of both the issuing company and the merchant banker, ensuring clarity and transparency throughout the engagement.
Who prepares the Mandate Letter for an IPO or bond issue? #
Answer: Typically, the merchant banker drafts the Mandate Letter based on discussions and negotiations with the issuing company. The final Mandate Letter is then signed by both parties to formalize the agreement.
