Who is eligible to be a merchant banker in an IPO?

A merchant banker possessing a valid Sebi registration in accordance with the Sebi (Merchant Bankers) Regulations, 1992 is eligible to act as a Book Running Lead Manager (BRLM) to an issue.

The issuer company engages the Sebi registered merchant banker to prepare the offer document. Besides due diligence in preparing the offer document, the merchant banker is also responsible for ensuring legal compliance. The merchant banker facilitates the issue in reaching the prospective investors (marketing the issue).

To be a merchant banker, an applicant is required to pay a non-refundable application fee of Rs 50,000 by way of demand draft drawn in favour of ‘Securities and Exchange Board of India’, payable at Mumbai.

Such an applicant is required to have a minimum net worth of not less than Rs 5 crore. He is required to pay Rs 20 lakh as registration fees as per Sebi (Payment of Fees) (Amendment) Regulations, 2014 at the time of grant of certificate of initial registration by Sebi.

The certificate of initial registration remains valid for five years.

The merchant banker has to apply for a grant of certificate of permanent registration to Sebi, three months before the expiry of the validity of the certificate of initial registration, if it wishes to continue as a registered merchant banker.

The merchant banker is required to pay a fee of Rs 9 lakh for the first block of three years towards permanent registration, payable in terms of Schedule II of the Sebi (Merchant Bankers) Regulations, 1992. The Certificate of Permanent Registration shall be permanent unless suspended or cancelled by the Sebi board.