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Underwriting Of Shares

Published in: Accountancy
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  • Mahesh S

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Preforma of Underwriting of shares. This notes assists the students for easy to understand about this topic and help them to grasp this chapter without any teacher support.

  • 1
    Underwriting is an agreement, with or without conditions, to subscribe to the securities of a body corpc or the public do not subscribe to the securities offered to them. Important terms in Underwriting Under.Comission Sole Underwriter,Joint-Underwriters and Sub-Underwriters Under.Agreement-Firm and Conditional Underwriting Marked & Unmarked Applications Full and Partial Underwriting Sole Underwriter-I Underwriter. Marked Appln Mked Applns are those applns which bear the stamp of an underwriter. UnderWriting of shares & debentures Tvpes of Underwriting 1) Pure Underwriting a) Complete underwriting :- Single underwriter :-More than one underwriter-Joint underwriters b) Partial underwriting :- Single underwriter :-More than one underwriter-Joint underwriters Preforma of Calculating Net Liability of Underwriters Joint Underwriters= Agreed % of shares underwritten No:-of
  • 2
    Particulars Gross Liability Less:-Marked Appln Balance Left Less:-UnMarked Appln (Shared in between underwriters in GL Ratio) xxx (xxx) xxx (xxx) xxx (xxx) xxx Net Liability Less:-Transfer any surplus of one- Underwriter to Others (Shared in the GL Ratio) Complete Underwriting One Underwriter Net Liablity of Underwriters an-I Qn-2 G/w Ltd issued 10000 ES of Rs 100 each at par and 10000 debentures of Rs 100 each. The w underwritten by John & Co. The Com. Received applns only for 5000 shares 5000 debenture were accepted. Commission payable to underwriter is the max.amount permissible. Determ of Underwriter? Ans:- Particulars Less:-App Received from public Net Liability of J&Co Value per share Amt to be Received from J&Co (Before deducting Com.Payble by Co) Shares Com.% on shares Com. On shares Debentures Com.% on Debenutres Upto 5 Lakh Com. On Debentures Total Comission payable Amt Complete Underwriting More than one Underwriter Statement showing the Net liabilitv of Underwriter J ES 10000 -5000 5000 100 500000 DNS 10000 -5000 5000 100 500000 Amt devolving by Underwriter 500000 2,500/0 12500,oo 500000 2,500/0 12500,oo On shares On Debentures 25000,oo 20000,oo Goodwill Ltd issued 10000 ES of Rs.10 each at par. The Whole issue was fully underwritten c Applns were received for 8000 shares of which marked appns were as follows:- 2000 1000 2000 shares c Find out the liability of underwriters?
  • 3
    Ans:- an-3 Ans:- When the whole issue is underwritten by 2 or more underwriters in an agreed ratio. Statement showing liabilitv of the underwriters Particulars % of GL Gross Liability Less:-Marked Appln Balance Left Less:-UnMarked Appln (Shared in between underwriters in GL Ratio) Net Liability Partial Underwriting One Underwriter 4000 -2000 2000 -1200 800 (No;-of shares) c 3000 -1000 2000 -900 1100 3000 -2000 1000 -900 100 GW ltd issued 60000 shares of Rs.10 each. 75% of the issue was underwritten by John. Appr all by the Company. Determine the liability of John? Ans:- When a part of the issue is underwritten by one underwriter Statement showing liability of the underwriters Particulars Less:- Appln Received from public Net Liablity of John Partial Underwriting More than One Underwriters No:- of ES 45000 -31500 13500 GW ltd issued 20000 shares of Rs.10 each. These shares were underwritten as follows:- 10000 shares 6000 The public applied for 17000shares which included Mked applns as follows:- A-3000 shares; B-2000 shares Determine the liablity of underwriters When a part of the issue is underwritten by more than one underwriters Particulars Less:-Unmked Applns Surplus (GL Ratio) Less:-Surplus 8000 shares 10000 10000 -5000 5000 -3000 2000 Company 6000 6000 -3000 3000 -2000 1000 4000 -12000 -8000 8000 Adjusted in the Ratio of 5:3 Less:-Mked Appln Net Liability Firm Underwriting One Underwriter Qn-5 Ans:- GW ltd issued 30000 shares of Rs.10 each. The whole issue was undertaken by John. In addi Applns for 25000 shares were received by the company in all. Cal.the liability of John. Statement showing net liability of underwriter Particulars NOES 30000
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    Qn-6 Less:-Total NOES subscribed by the pub Net Liability Add:-Firm Underwriting Total net liability Firm Underwriting Two or more Underwriters Case-I Marked Particulars Less:-Mked Appln Balance Left Less:-Firm Underwriting Balance Left Less:-UnMked Appln NL Add:-Firm Underwriting Total NL -25000 5000 2000 7000 Preforma for Firm Underwriting xxx (xxx) xxx (xxx) xxx (xxx) xxx xxx xxx The following underwriting took place:- c In addition there was firm underwriting: c c xxx (xxx) xxx (xxx) xxx (xxx) xxx xxx xxx 10000 6000 4000 2000 1000 3000 Particulars Less:-Mked Appln Balance Left Less:-UnMked Appln( NL Add:-Firm Underwriti Total NL shares shares Total sub. Including firm underwriting was 17000 shares and the forms included the followir 4000 2000 2000 Show the allocation of liability of the underwriters:- a) If the firm underwriting is treated as "Marked Forms" b) If the firm underwriting is treated as "Unmarked Forms" Case-I Marked Particulars Less:-Mked Appln Balance Left Less:-Firm Underwriting Balance Left Less:-Surplus Adjusted in GL Ratio Less:-UnMked Appln(GLR) Balance Left Less:-Surplus Adjusted in GL Ratio 10000 -4000 6000 -2000 4000 -625 3375 -1500 1875 -375 shares c 6000 -2000 4000 -1000 3000 -375 2625 -900 1725 -225 4000 -2000 2000 -3000 -1000 1000 -600 -600 600
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    NL Add:-Firm Underwriting Total NL WN-I Caln of Unmarked Applns Total NOES sub.by the public Less:-MA Less:-FU UMA 1500 2000 3500 17000 -8000 -6000 3000 1500 1000 2500 3000 3000
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    Underwriting of shares )rate when existing shareholders of the corporate- nore than 1 person underwrites the shares-7 Banks Underwrites the Tata Steel's Shares UnMarked Appln UnMked Applns are those applns which do not bear the stamp of an underwriter. 2) Firm Underwriting Underwriter underwrites shares for the public+ Compulsorily aquired specific numb by the underwriter and balance will be taken care by Company for the issue of shares for public subscri Underwriting Commission ;hares Particulars (A) ES (B) PS/Deb:- i) Upto 5 Lakh ii)Exceed 5 Lakh Liabity to the comp UC 10000 On Amt devolving on the Underwriters 2,500/0 2,500/0 2,000/0 2000 100 200000 2,500/0 On Amt subsribed by the public 2,500/0 1,500/0 1,000/0 8000 100 800000 2,500/0 1000000 2,500/0
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    xxx (xxx) xxx (xxx) xxx (xxx) xxx hole issue has been All the applns ine the liability Amt subscribed by 10000 600000 2,000/0 25000 400000 1,500/0 (if Net Liability of one underwriter shows a negative figure, it represents surplus anc public Total 500000 2,500/0 12500,oo 500000 1,500/0 7500,oo 1000000 25000 OO j 1000000 20000,oo Grand Total 45000,oo A,B and C as follows:- Marked Applns
  • 8
    Total 10000 -5000 (given) 5000 -3000 (8000-5000) 2000 for 42000 shares were received in Calcn of Unmarked Appln Total Appln Received Less:-Mked Appln Unmked Appln Surplus shared between A &B 17000 -5000 12000 10:6 or tion, there is a firm underwriting of 2000 shares by John.
  • 9
    Case-2 Unmarked xxx (xxx) xxx (xxx) xxx xxx xxx 'lg marked forms:- (10:6) xxx (xxx) xxx (xxx) xxx xxx xxx Particulars Less:-Mked Appln Balance Left Less:-UnMked Appln(incl.o NL Add:-Firm Underwriting Total NL Case-2 Unmarked 10000 -4000 6000 -4500 1500 2000 3500 c 6000 -2000 4000 -2700 1300 1000 2300 4000 -2000 2000 -1800 200 3000 3200
  • 10
    WN-I Caln of Unmarked Applns Total NOES sub.by the pub Less:-MA UMA(inc of FU) 17000 -8000 9000
  • 11
    Tata Steel 1 lakh shares SBI Capital Mkts Ltd 50000 shares HSBC 50000 shares JUW with equal underwriting of shares as mentioned in Underwriting Agreement.

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