What is Share Underwriting?

Share Underwriting is a contractual agreement where and underwriter, typically an investment bank, merchant banker, or financial institution guarantees the purchase of a specified number of shares in case they are not fully subscribed by the public during an IPO or FPO.

The services of an underwriter are typically used during a public offering. There will be an agreement between the issuing company & the financial intermediary, whereby sale of certain quantity of securities is guaranteed for the issuing company.

Underwriting Type:

• Firm Underwriting: Underwriters agree to take up a specified number of securities.
• Sub-Underwriting: Underwriting of securities is contracted out by the main underwriter to other underwriting intermediaries for a commission.
• Joint Underwriting: Securities underwritten by two or more underwriting intermediaries jointly.

Factors to be taken into consideration while selecting the company for underwriting:

• Company's standing and record
• Competence of the management
• Objectives of the issue
• Project detail
• Offer Price
• Other terms of the issue