Merchant Banker Mandate Letter

Mandate Letter

Date: ____________________

TO,

BOARD OF DIRECTOR,
XYZ Pvt Ltd.

___________________

___________________

Dear Sir,

Sub: Appointment of ABC Private Limited (APL) as the Lead Manager for the proposed Initial Public Offering (IPO) of Equity Shares of XYZ Pvt Ltd. (XPL) on SME Stock Exchange(s).

This has reference to our discussions we had on in the matter of listing of the Equity Shares of your company (hereinafter referred to as "XPL" or "Company") on SME Exchange(s) ("SE") through Initial Public Offer (IPO) of its Equity Shares and advising us to Issue the Mandate Letter in this regard.

We, ABC Private Limited (hereinafter referred to as "APL") are SEBI registered Category - I Merchant Banker, having registration number: ---------------------- offering various Merchant Banking Services including Issue Management services though SME IPO.

We thank you for providing us the opportunity to offer our services on the aforesaid assignment. In this engagement letter, we have outlined our scope of services, terms and condition and other details relevant to aforesaid assignment.

We are sending herewith two copies of this Mandate Letter and request you to sign both the copies and return us one copy duly signed for our record.

A. Scope of Work

During the term of our engagement, our Scope of work shall broadly include the followings;

1. Restructuring of Pre IPO Capital;
2. Due Diligence & Pre-IPO preparation;
3. Dematerialisation of Shares;
4. Valuation & Issue Pricing;
5. Preparation of Public Issue Offer Document;
6. Appointment of Intermediaries;
7. Filing of Draft Offer Document with SME Exchange;
8. Clearance of Offer Document & getting approval from SME Exchange;
9. Filing of Prospectus with ROC;
10. IPO Launch;
11. IPO Management - Receipt of Application & Others;
12. IPO Closure;
13. Assisting in finalization of Basis of Allotment;
14. Getting Stock Exchange Approval;
15. Refunds/Allotments process;
16. Listing & Market Making;
17. Re-stated financial statement by Peer Review Auditor.

The above scope of work shall be mainly devised into the following phases;

Phase I: Pre IPO Preparatory Assistance

• Under this phase, we shall assist you in preparing for IPO and listing on SME Stock Exchange.
• Our scope of services under this phase shall mainly include assistance in the following:
  • Devising appropriate capital restructuring plan;
  • Setting up minimum corporate governance practices expected by a listed company from the perspective of Companies Act, listing agreement applicable for SMEs, listing norms, SEBI ICDR Regulations etc.;
  • Appointment of market intermediaries and other parties including the Underwriters, Market Makers, Registrars to Issue, Legal Advisor to the Issue, Bankers to Issue, Printer etc.;
  • Devising a complete IPO plan and strategy including the likely post-issue shareholding distribution pattern;
  • Coordinating with Peer-Review Auditors for restatement of financials of the Company as required under SEBI (ICDR) Regulations;
  • Obtaining ISIN from the Depository (ies) and dematerializing pre-IPO shares of the Company.

Phase II: Due Diligence

Under this phase, we shall carry out a due diligence and our scope of services shall mainly include the following:

• Carry out a preliminary background check;
• First-level due diligence based on the preliminary information / documents to be provided by the Company and publicly available information;
• Visit the Company office(s) and factory;
• Hold discussions with the management, auditors and legal advisors to the Issue;
• Finalize the due diligence report.

Phase III: Valuation / Issue Pricing

Under this phase, we shall carry out valuation exercise and our scope of services shall mainly include the following:

• Ratio analysis such as EPS, BVPS, RONW etc., as may be required under SEBI ICDR Regulations;
• Industry analysis from valuation perspective;
• Identification of peer comparable;
• Peer analysis and pricing of peers listed on stock exchange;
• Determining issue pricing and size for discussion with the management.

Phase IV: Prospectus and Other Documents

Under this phase, we shall draft IPO Offer Document and other important agreements, documents and resolutions necessary for an SME IPO process. An indicative list of important documents is as under for easy understanding:

• IPO Offer Document;
• Tripartite Agreement with NSDL, CDSL and Registrar to Issue;
• Underwriting Agreement;
• Market Making Agreement;
• Agreement with Bankers to Issue;
• Agreement with Registrar to Issue;
• Board / Shareholders' Resolutions;
• Certificates, Letters of Representations etc.;
• Draft of public advertisements, notices etc.;
• Forms / Applications to be filed with Stock Exchange, RoC and other regulatory office(s).

Phase V: Issue Management

We shall assist in complete end-to-end IPO process including the following activities:

• Filing of IPO Offer Document with SME Exchange(s) and other regulatory offices like SEBI and RoC;
• Coordinating and assistance in interview with SME Exchange Listing Advisory Committee;
• Follow-up with SME Exchange(s) and RoC for their approvals;
• Execution of agreements with other market intermediaries;
• Assistance in launch of IPO and coordinate with other parties including PR Agency, Printers for adequate public advertisement, distribution of application forms as required statutorily;
• Monitoring the flow of applications and timely updation with the management of the Company; and
• Coordinating with bankers and registrars for deposit of application moneys and finalization of allotment list in consultation with the stock exchange.

Phase VI: Post IPO Closure Assistance

Finally, post IPO closure and finalization of allotment, we shall initiate the activities for listing of equity shares of the Company on SME Exchange. We shall assist in the following activities under this phase:

• Completing allotment of shares to the successful allottees;
• Preparing & submission of listing application with SME Exchange;
• Follow - up with SME Exchange and obtain listing approval;
• Trading formalities and obtain Exchange trading approval;
• Making required statutory public disclosure

Phase VII: Post Issue Market Making

• Coordinating for continuous market making post listing for 1 year which can be extended further.

B. Scope of Limitations

• Our scope of services under this letter is restricted to the services specified in Phase I to Phase VII as mentioned hereinabove and does not cover any other services including and specifically the followings;
  • Regulatory & secretarial activities in relation to IPO;
  • Legal advice, opinion and representation in any form;
  • Accounting and taxation Matters, opinion and representation in any form;
  • Any certification service
• Ourscope of work including any advice / assistance will be limited to the scope of services specifically defined in this letter;
• Reliance would be placed on the information that may be provided by the Company. We will not independently verify the accuracy of data / details / information provided to us for review. The Company shall be primarily responsible for accuracy & validity of data/details/information provided to APL;
• We will act on your specific instructions to carry out the activities covered in our scope;
• We will not perform any management functions or take decisions on your behalf.

In addition to the above, the Company shall pay the following, as discussed:

• The above-mentioned fees are purely Merchant Banker's Fees and all other issue related fees and expenses except mentioned specifically shall have to be paid by the Company directly;
• Fees for increase in authorized capital, Bonus issue, Split of shares to be paid to ROC is not considered here;
• Annual Listing Fee Rs 25,000 or 0.01% of full market capitalization (Post Issue Shares Multiply with Issue Price), whichever is higher;
• Bank IPO Charges of 0.10% will be extra;
• Sponsor bank Charges of Rs 10 per retail application to be paid directly to the Bank;
• Exchange Refundable Deposit of 1% of the Issue Size is additional;
• Company has to issue 5% equity shares of the Issue Size to the Market Maker and for Market Making Services Cost will be additional;
• Market Making fees will be charged per annum as per mutual discussion;
• Fee / charges payable to Auditors, Company Secretary or any professional for any past record updation and also fee / charges payable towards MCA / RoC compliances / approvals for pre IPO and Prospectus approval;
• ROC prospectus & Other Forms Clearance Fees, depending on the Company negotiation;
• Further applicable GST and other statutory levies, if any, shall be payable at the applicable rates, by the Company;
• In the course of providing services under this arrangement, we may have to incur certain out of pocket expenses on your behalf (generally out-of-pocket expenses represent travel, conveyance, communication, duplication, document procurement and delivery and related matters). Any such out-of-pocket expenses relating to outstation travel will be incurred in consultation with the management of the Company and such out of pocket expenses would be reimbursed at actual;
• The fees shall be paid within ten (10) days from the date of raising of the bill/Invoice. For any further services required by your esteemed organization, we may review the fees in consultation with you. At any time if the assignment is withdrawn at the behest of the Company/Group, we shall be entitled to 50% of the fees due at immediate subsequent stage.

D. Time Frame

We will use our best endeavors so that the engagement team is ready to commence work at earliest once upon a receipt of a copy of this letter, duly signed by you.

We envisage a timeframe of 3 to 4 months for listing of the Company's equity shares on SME Stock Exchange. However, this is highly unpredictable and will finally depend on the external and internal agencies concerned, receipt of timely inputs / information / data / details / document from Company / its professional advisors / consultants etc, changes in Regulations and Government policies, information needs, circumstances beyond control, resources and priority given by the Company to the assignment etc.

E. Other Terms and Conditions

1. Compliance

   The Company agrees to comply with all applicable legal & regulatory requirements. The Company also warrants that its execution of this Mandate Letter has been duly authorized and approved by the Board of Directors or such other authorization, such that it is not subject to any further approval or ratification in order to become a binding obligation for it.

2. Information

   The Company agrees to provide APL all financial & other information requested for the purpose of this assignment (or as may be required by any competent governmental, judicial or regulatory authority). In performing the services hereunder, APL shall be entitled to rely upon and assume, without independent verification, the accuracy and completeness of all information that is publicly available and of all information that has been furnished to APL by the Company or their other advisors or otherwise reviewed by them and APL shall have no obligation to verify the accuracy or completeness of any such information or to conduct any appraisal or valuation of any assets or liabilities and shall not assume any responsibility nor have any liability therefore.

3. Exclusivity

   APL shall be appointed as the Lead Manager for advising on the Consultancy/ Services specifically related to an IPO and listing of shares/ securities of the Company on SME platform of recognized stock exchange(s) in India, from the date of Mandate/Appointment/Engagement letter up to one year or completion of IPO, whichever is earlier. The Company shall not appoint any other intermediary including Consultants and/or advisors or otherwise for any of the services stated hereinabove, except with our prior written approval.

4. Confidentiality

   APL agrees to treat this Agreement confidential till the close of issue and any information relating to this assignment during the term of the assignment, that is (a) disclosed to APL in accordance with the Agreement by an employee, officer, director, auditor or counsel of the Company or (b) developed by APL in the execution of the assignment, except that the foregoing shall not apply to:

   1. Any disclosure made for the purpose of the execution of the assignment with prior approval from the Company;
   2. Any information which is or come into the public domain, or comes into the possession of APL or to its affiliates other than in breach of any confidentiality obligation of which APL is a party;
   3. Any disclosures pursuant to any law or order of any court or pursuant to any direction, request or retirement (whether or not having the force of law) of any central bank or any governmental, regulatory, supervisory, judiciary or authority (including without limitation, of any official examiners or regulators);
   4. The extent that APL needs to disclose the same with respect to any proceedings for the protection or enforcement of any of their rights arising out of the Agreement;
   5. Any disclosure to auditors or professional advisors of APL who will themselves be bound by the same confidentiality obligation; or
   6. Information which is already in possession of APL prior to the date thereof.
5. Termination/ Force Majure

   This offer and the acceptance thereof may be terminated by us on breach of any or all of the terms and conditions stated herein without prejudice to our right to claim any damage expenses, which may arise on account of such termination. The contract can be mutually terminated by either party by giving a 15 days written notice.

   Notwithstanding anything contained herein, we shall have the right to terminate this Mandate letter and acceptance thereof under any or all of the following circumstances:

   1. A major break down or dislocation of the business in the major financial markets affecting global and / or Indian financial markets;
   2. Declaration of war or occurrence of insurrection or civil commotion or natural calamity like earthquake, cyclone / hurricane, flooding, Pandemic or other serious or sustained financial or political or industrial emergency or disturbance affecting global and Indian financial markets.
6. Liability

   In no event, APL or any of its Directors, Officers, Employees, affiliates or professional advisors shall be liable for consequential, special, incidental or punitive loss, damages or expenses (including without limitation, lost profits, opportunity costs, etc.). This provision shall survive till and after the completion of this assignment.

   We shall be entitled, to include a general description of work performed hereunder and logo of the Company, for the purpose of demonstrating our experience to other potential clients, league tables, etc. and in our business development communications / activities.

7. Arbitration/ Jurisdiction

   In the event of any dispute or difference or claim arising between the Firm / Merchant Banker / Consultant or anyone claiming through or under them, at any time hereafter, in respect of the construction or interpretation of any term or provision hereof and / or as regards the responsibility and / or obligation and / or otherwise in any way arising out of, relating inter alia to offer document, the same shall be referred to a mutually acceptable arbitrator under the provisions of Indian Law and any modifications or statutory re- enactments.

   The Arbitrator shall be resident Indian national only. The venue of arbitration shall be -------------------------------------, India. All cost and expenses in relation to such arbitration, if any, shall be borne equally by both parties.

   Our assignment will be on a best effort basis and we do not guarantee any results / success / enquiries by this Mandate Letter. We will appreciate if you would confirm your agreement to the terms of our engagement by countersigning the enclosed copy of this letter and returning it to us. If there is anything with which you do not agree or wish to amend, please do not hesitate to contact us and we shall be pleased to discuss the matter with you.

We look forward to having a mutually rewarding relationship.

For, ABC Private Limited

Designation:

DIN:

For, XYZ Pvt Ltd.

Designation:

DIN: