Appointment of Sponsor

A Sponsor is a financial intermediary duly registered on OTC as a Sponsor and is normally a SEBI registered Merchant Banker. He helps a company, desirous of coming out with a Public Issue, to raise funds while complying with all the regulatory requirements. The sponsor guides the company through the various legal requirements and accounting processes. Appointment of a sponsor by a prospective issuer is mandatory for all OTCEI IPOs. Currently there are 117 sponsors registered with OTC Exchange of whom more than 75 continue to hold SEBI registration as Merchant Bankers. The services of the sponsor would complement the advice and consultation that the companies would receive from their professional investment bankers, law and accounting firm.

Choosing a Sponsor

    While choosing a sponsor the company would have to bear the following points in mind

    Lasting interest in the company

    The sponsor should demonstrate long term interest in the company

    Public Issue Expenses

    The issue expenses should be kept within reasonable limits

    Knowledge of the industry in which the company operates

    The sponsor should have adequate knowledge and understanding of the industry in which the company operates.

    Distribution and marketing capability

    The sponsor should have the ability to target the desired investor /institutions

    Country wide Network and Tie up with other intermediaries

    Market research

    The sponsor should be able to create visibility of your company through market research and analysis.

    Market making ability

    The sponsor should have adequate stocks to make market in your company

    Public relations and liaisoning ability

    Reputation and credibility in the market

Role of the Sponsor

    A prospective issuer approaches a sponsor along with the project report for sponsoring the issue on OTCEI. On selection of a sponsor the company enters into a Sponsorship Agreement in the prescribed format

    A Sponsor:

    Appoints auditors from a list of empanelled auditors to conduct a due diligence study on the company as per the OTCEI requirements.

    Files Registration Application with the Exchange on behalf of the company.

    Acts as a Lead Manager or arranges for a Lead Manager to the issue.

    In consultation with the company compulsorily appoints Market Makers, Registrar and Transfer Agent, Banker to the Issue and Collection Centers

    In consultation with the company may voluntarily appoint a Trustee Banker and / or an Insurance Agency

    Interacts with SEBI, ROC, OTCEI and other intermediaries

    Prepares and files Draft Prospectus with OTCEI and SEBI

    Submits printed copies of prospectus and application form to OTCEI

    Ensures that the company deposits with the Exchange an amount equivalent to 1% of the issue size as Security Deposit prior to the opening of the issue.

    Arranges for advertisements 21 day prior to the opening of the issue.

    Ensures details of collection figures are provided on a daily basis after the opening of the issue to the Exchange.

    Provides the issue closing date to the Exchange.

    Submits the basis of allotment to the Exchange

    Ensures that the listing application is filed on time.

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