Merchant bankers are registered financial institutions that play a critical role in the SME IPO issue process. They perform various functions including the following;
Educating the applicant company and assisting in pre-IPO preparation
Appointment of intermediaries and assessing their capabilities
Conducting due diligence to ensure compliance with regulations
Preparing DRHP and RHP, and submitting the final prospectus to the stock exchange
Fixing the IPO issue price using either fixed pricing or book-building methods
100% Underwriting the issue to mitigate the risk of under-subscription
Advertising and marketing the IPO to create demand for the securities
Providing market-making arrangements post-listing for a minimum of 3 years to combat liquidity concerns.