Q.Explain the procedure followed by a company for a public issue of shares.

A public issue moves through a fixed sequence of stages designed to protect the investing public, with SEBI vetting the process at nearly every step.

A public issue is the most tightly sequenced of all the methods of issuing shares, precisely because it must satisfy SEBI's disclosure and investor-protection requirements at every stage before it can genuinely reach the investing public.

The process begins with a Board resolution: the company's Board of Directors formally decides to raise capital through a public issue and authorises the steps needed to carry it out. The company then appoints the professionals the issue requires — one or more merchant bankers to act as lead manager and steer the whole exercise, underwriters (optionally) to guarantee subscription of any unsubscribed portion for a commission, a registrar to the issue to handle applications and allotment, and bankers to the issue to collect application money. The company next obtains in-principle approval for listing from the recognised stock exchange(s) on which it intends its shares to trade. …

Students often omit SEBI's role in vetting the draft prospectus before the issue opens, jumping straight from 'Board decides to issue shares' to 'public applies' — the SEBI review and in-principle listing approval stages are a frequently tested, frequently mis …