NISM Series IIA Short Notes – Part 5: Roles in a Public Issue & Depository Services

This is Part 5 of our 7-part NISM Series IIA short notes series on PassNISM.in. In this part, we cover two critical chapters:

Chapter X – Roles and Responsibilities of each party in a Public Issue (R&T Agent, Bankers, Brokers)
Chapter XI – Depository Services (Dematerialisation, Depository Participants, Investor Interface)

Series Navigation: ← Part 4: Public Offer of Securities | Part 6: Depository Processes & Investor Interface → Chapter IX – Public Offering of Shares: Pre-Issue & Post-Issue Work

A company making a public issue must complete a series of steps before, during, and after the issue. The Lead Manager (BRLM – Book Running Lead Manager) is responsible for all activities until the issue is listed.

Pre-Issue Activities of the Lead Manager

Appoint R&T agents, bankers, syndicate brokers, brokers, and underwriters
Obtain in-principle approval from recognised stock exchanges where shares will be listed
Ensure mandatory number of bidding centres is covered by syndicate brokers
For unlisted companies: Get the IPO graded by an approved credit rating agency
Enter into agreements with depositories for admission of securities in both NSDL and CDSL
File DRHP (Draft Red Herring Prospectus) with SEBI
File the Prospectus with the Registrar of Companies
Sign the due diligence certificate confirming all regulatory requirements are met
Issue advertisements in national newspapers as required
Arrange printing and dispatch of prospectus, application forms, and issue material
Ensure every application form is accompanied by an abridged prospectus

Issue Period

An issue must be kept open for a minimum of 3 days and a maximum of 10 working days.

Post-Issue Activities of the Lead Manager

Ensure SCSBs, syndicate brokers, and designated intermediaries process applications and block funds
Ensure the R&T agent collects bid data from stock exchanges and reconciles it with SCSB data
Finalise the Basis of Allotment in consultation with the stock exchange

Basis of Allotment

The Basis of Allotment is the process of deciding how many shares each investor will receive after an issue closes.

Bids are categorised: Retail (RII), HNI/NII, QIB, and Reserved categories
The oversubscription ratio for each category is calculated
Must be approved by the Board of Directors and published in national newspapers

Chapter X – Roles and Responsibilities in a Public Issue Registrar and Transfer (R&T) Agents – Their Role

R&T Agents are appointed by the issuer in consultation with the Lead Manager. They enter into a formal agreement defining their responsibilities. Their work spans pre-issue, during issue, and post-issue.

Pre-Issue Responsibilities of the R&T Agent

Enter into an Escrow Agreement with the company, selling shareholders, BRLMs, and bankers
Enter into a Share Escrow Agreement with the company and selling shareholders (if applicable) — selling shareholders open a share escrow account before filing the RHP
Enter into the Syndicate Agreement and Underwriting Agreement
Liaise with Depositories to obtain the ISIN (International Securities Identification Number) and finalise the tripartite agreement with both NSDL and CDSL
Liaise with the company for dematerialisation of existing physical shares including promoter holdings
Provide instructions to SCSBs (Self Certified Syndicate Banks)
Specify the format for ASBA-related information to designated intermediaries
Communicate processing fees for SCSBs and brokerage/selling commission to syndicate members, registered brokers, RTAs, and CDPs

Post-Issue Responsibilities of the R&T Agent

Sole responsibility to collect final certificates from all SCSBs (including syndicate SCSBs) within 2 working days of issue closure
While collecting, verify the accuracy of dates on certificates
Obtain Demographic Details of Bidders from the depositories
Instruct depositories to carry out lock-in on pre-offer share capital per SEBI ICDR Regulations

Bankers to the Issue

Appointed by the issuer for Anchor Investors, to manage collection of funds into the escrow account opened for that purpose.

Brokers to the Issue / Syndicate Members / Designated Intermediaries

Appointed to facilitate collection of bid/application forms
Must be members of a stock exchange
Responsible for collecting bid forms and ensuring payment instruments accompany them
Paid a commission based on collections

Chapter XI – Depository Services What is a Depository?

A depository is an institution that holds investors' securities in electronic (dematerialised) form. It functions like a bank — but instead of holding money, it holds securities.

India has two depositories: NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited)
SEBI ICDR Regulations require all issues made through the book building route to be issued only as dematerialised securities

Dematerialisation (Demat)

Dematerialisation is the process of converting physical share certificates into electronic form.

Under the Depository Act, physical certificates are destroyed/mutilated by the R&T Agent upon dematerialisation
An electronic credit entry is made in the depository records
Dematerialised securities are fungible — they lose their distinct identity (no folio number, certificate number, or distinctive numbers)

How Does Dematerialisation Work?

Investor submits physical certificates + Dematerialisation Request Form (DRF) to the DP
DP sends the request electronically to the R&T Agent via the Depository interface. A Dematerialisation Request Number (DRN) is generated
Physical certificates are sent to the R&T Agent along with the DRN
R&T Agent verifies the request and mutilates the certificates after processing
The investor's demat account is credited with the equivalent number of shares

R&T Agent Verification Checklist for Demat Requests

DRF carries the DP's authorisation
Dematerialisation request received in both electronic and physical form
DRN on physical documents matches the DRN in the electronic request
Certificates carry distinguishing marks such as hologram or watermark
Certificates with "Lock-in Period" remarks must carry the lock-in tag in demat mode if still in force

Key Time Limit: The dematerialisation process must be completed within 15 days from receiving the physical request. Rematerialisation

Rematerialisation is the reverse process — converting electronic securities back into physical certificates.

Must be completed within 30 days from receipt of the physical Rematerialisation Request Form (RRF)
RRF must be stored for at least 5 years

Depository System – Constituents and Their Roles Depository

Assigns a unique identity code (ISIN) to each dematerialised security
Provides the issuer/R&T Agent with a list of beneficial owners periodically
Provides beneficial owner details for corporate actions (bonus, dividend, rights)
Gives information requested by the issuer within a specified period
Resolves complaints from beneficial owners within 21 days

Issuer / R&T Agent

Maintains continuous electronic connectivity with the depository
Gives the depository notice of fresh issues and corporate actions (dividends, bonuses)
Responsible for destruction, cancellation, and mutilation of physical certificates received for dematerialisation
Responsible for any liabilities undertaken by the depository per its bye-laws
Resolves investor complaints within 21 days

Depository Participants (DPs)

DPs are the investor's interface with the depository. They are entities registered with a depository and authorised to open demat accounts for investors.

Who Can Become a DP?

Banks (including foreign banks)
Financial Institutions
Non-Banking Finance Companies (NBFCs)
Stock Brokers
R&T Agents
Custodians
Clearing Corporations

Important: SEBI has prescribed minimum net worth requirements for stock brokers, NBFCs, and R&T Agents to act as DPs. There is no net worth requirement for banks, financial institutions, custodians, and clearing corporations to become DPs. Advantages of Holding Securities in Dematerialised Form

Eliminates risks of loss, mutilation, and forgery of physical certificates
Reduces the time taken to transact in securities
Reduces transaction costs, including stamp duty
Faster processing of corporate benefits: transfer, transmission, nomination, bonus, split, consolidation, mergers
Allows consolidation of holdings across multiple folios and across different types of securities (equity, debt, govt. securities)

Quick Reference – Demat vs Remat Timelines

Process	Timeline	Form	Record Keeping
Dematerialisation	15 days from physical request	DRF	—
Rematerialisation	30 days from physical RRF	RRF	Stored for 5 years
Complaint Resolution	21 days	—	—
SCSB Certificate Collection	2 working days after issue closure	—	—

Internal Links

FAQs What is an ISIN?

ISIN (International Securities Identification Number) is a unique 12-character alphanumeric code assigned to every dematerialised security. It is used to identify securities across depositories and exchanges globally.

What is the difference between a Depository and a Depository Participant?

A Depository (like NSDL or CDSL) is the institution that holds securities in electronic form and maintains the records. A Depository Participant (DP) is an agent of the depository — it acts as the intermediary between the investor and the depository, opening and managing demat accounts for investors.

Within how many days must dematerialisation be completed?

The dematerialisation process must be completed within 15 days from the date of receiving the physical request at the R&T Agent level.

Can R&T Agents become Depository Participants?

Yes. R&T Agents are one of the categories eligible to become DPs under the SEBI (Depositories and Participants) Regulations, 1996. However, SEBI has prescribed minimum net worth requirements for R&T Agents (and also stock brokers and NBFCs) to act as DPs.

Continue to Part 6 – Depository Processes, Corporate Actions & Investor Interface with R&T Agent. All seven parts are available at PassNISM.in.