Issue Management – Process and Underwriting
25 questions. Each answer is explained.
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Learn these topics
More units in NISM Series IX
- Introduction to Capital Market15
- Introduction to the Merchant Banking20
- Registration, Code of Conduct & General Obligations of Merchant Bankers in India20
- Issue Management – Important Terms15
- Issue Management – General Obligations of Merchant Bankers and Due Diligence20
- Other Merchant Banking Activities-Mergers, Acquisitions & Takeovers20
- Other Merchant Banking Activities – Disinvestment, Buyback of Equity Shares15
Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 60% · 60 of 100 marks |
| Negative marking | 25% · 0.25 marks off per wrong answer |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | Not published by NISM |
NISM Series IX Merchant Banking
Exam rules read on NISM's site on 17 October 2026. Check the current rules on NISM's site (opens in a new tab)
What these answers assume, and when it was last checked
Each question uses the rules listed below. We last checked them on 5 September 2026. A Budget or SEBI circular can change a rate, lot size or expiry day. If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.
- NSE uses Tuesday expiry and BSE uses Thursday expiry. This applies from 1 September 2025.
- The January 2026 index lot sizes are NIFTY 65, BANKNIFTY 30, FINNIFTY 60, MIDCPNIFTY 120 and NIFTYNXT50 25.
- The October 2024 SEBI framework sets a minimum index contract value of Rs 15–20 lakh. Each exchange may list one weekly benchmark index.
- Option buyers pay the premium upfront from 1 February 2025. A short index option has an extra 2% Extreme Loss Margin on expiry day from 20 November 2024.
- Equity short-term capital gains are taxed at 20%. Long-term gains are taxed at 12.5% above Rs 1.25 lakh. Both rates apply from 23 July 2024.
- F&O income is non-speculative business income in ITR-3. NSE equity derivatives trade from 9:15 a.m. to 3:40 p.m.
- The final ten-minute session began on 3 August 2026. It aligns with the cash market Closing Auction Session.
- Most Securities Transaction Tax questions test the base and who pays. On an option sale, it is the premium and the seller pays. On a futures sale, it is the traded value and the seller pays.
- On exercise, Securities Transaction Tax uses intrinsic value: settlement price minus strike price. The buyer pays it.
- Two questions test the current rate. From 1 April 2026, option sales carry 0.15% on the premium and futures sales carry 0.05% on traded price. The earlier rates were 0.10% and 0.02% from 1 October 2024.
- This section uses the T+1 rolling settlement cycle. Obligations are fixed on T+1. A short delivery goes to buy-in auction on T+1 and settles on T+2.
- The trade-for-trade surveillance segment uses direct close-out. Funds pay in by 10:30 a.m. and pay out on or after 1:30 p.m. on settlement day.
- Securities pay in to the settlement pool by 10:30 a.m. They pay out directly to the client’s demat account by 3:30 p.m.
- The 3:30 p.m. deadline replaced 1:30 p.m. under SEBI’s 10 October 2024 circular. Direct client credit was required by SEBI’s 5 June 2024 circular.
- The optional T+0 cycle trades until 1:30 p.m. Obligations are fixed by 2:30 p.m. on the trade day. An early pay-in shortage is closed out directly.
- Cash-market Value at Risk margin is six times exponentially weighted moving-average volatility. It has a 9% floor for Group I, a 21.5% floor for Group II, and a fixed 50% or 75% level for Group III.
- Extreme Loss Margin is 3.5% for a share and 2% for a broad-market-index exchange traded fund. Mark-to-market margin is collected before the next day’s trading. The trade-for-trade segment has 100% upfront margin.
- Close-out uses the higher of the highest price from trade day to auction day and 20% above the auction day’s official close.
- A funds shortage costs 0.07% a day. The trading facility is withdrawn at a shortage of Rs 5 lakh or more.
- SCORES allows 21 calendar days, then two 15-day review levels. Online Dispute Resolution moves from conciliation to arbitration after the market participant and SCORES steps.
- At NSE, the Investor Protection Fund limit is Rs 35 lakh per investor for each defaulting or expelled member. This applies to claims arising after 13 August 2024.
- A Basic Services Demat Account has no annual maintenance charge up to Rs 4 lakh of holdings. It costs up to Rs 100 above that, until the Rs 10 lakh eligibility ceiling. These slabs apply from 1 September 2024.
- The rupee pairs are USD-INR, EUR-INR, GBP-INR and JPY-INR. The cross-currency pairs are EUR-USD, GBP-USD and USD-JPY.
- Each contract covers 1,000 units of the foreign currency, except JPY-INR. JPY-INR covers 100,000 yen and is quoted in rupees per 100 yen.
- The tick is 0.25 paise, or Rs 0.0025. It equals Rs 2.50 a contract.
- Rupee pairs trade from 9:00 a.m. to 5:00 p.m. A monthly contract stops trading at 12:30 p.m. two working days before the expiry month’s last business day.
- Final settlement is in cash at the FBIL reference rate on expiry day. FBIL, Financial Benchmarks India, has published this rate in place of the Reserve Bank since 2018. Premium-style European options are quoted in rupees. The buyer pays the premium in cash on T+1.
- Daily settlement is on T+1 and final settlement is on T+2.
- NSE Clearing circular 026/2020 sets SPAN margin plus Extreme Loss Margin. The futures margin is 0.50% for USD-INR, 0.15% for EUR-INR, 0.25% for GBP-INR and 0.35% for JPY-INR. A short option has 0.75%. These figures apply from 1 June 2020.
- A USD-INR client may hold 6% of total open interest or USD 20 million, whichever is higher. A trading member may hold 15% or USD 100 million.
- A resident user has one USD 100 million equivalent limit across all rupee pairs and exchanges. No document is needed below that limit, but a valid underlying contracted exposure must still exist. This clarification applies from 3 May 2024.
- The currency segment has no Securities Transaction Tax.
The exam figures (questions, time, pass mark, negative marking and certificate validity) come from NISM's own pages, read on 17 October 2026. Timed practice uses the same figures. Study with the official workbook as well.
The written-out answers on this page are hidden while your timed set runs.
All 25 questions on Issue Management – Process and Underwriting, with answers
Q1Which intermediary primarily processes issue applications and supports allotment records?
Option A. The statutory auditor
Why it is wrong: The auditor’s primary role is financial assurance rather than application processing.
Option B. The advertising agency
Why it is wrong: An advertising agency handles communication rather than allotment records.
Option C. The registrar to the issue — Correct answer
Option D. The credit rating agency
Why it is wrong: A rating agency assesses credit risk rather than processes equity issue applications.
Answer: C. The registrar to the issue processes application information and supports the allotment records. Remember: Application processing is a specialist registrar function.
Hint, shown before you answer in practice mode: Common mistake: Confusing an application-processing role with issue marketing or auditing. Think about matching applications, applicants and allotted quantities.
IX-071easyconceptual
Q2Who coordinates the issue-management work in a book-built offer as its lead merchant banker?
Option A. The registrar to the issue
Why it is wrong: The registrar processes applications and allotment records rather than replacing the lead merchant banker.
Option B. The issuer’s statutory auditor
Why it is wrong: The auditor provides financial assurance rather than acts as the lead merchant-banking coordinator.
Option C. The self-certified syndicate bank
Why it is wrong: The bank’s application-money role does not make it the issue’s book running lead manager.
Option D. The book running lead manager — Correct answer
Answer: D. The book running lead manager coordinates the merchant-banking work for the book-built offer. Remember: The lead manager coordinates issue work across participating specialists.
Hint, shown before you answer in practice mode: Common mistake: Assuming an unrelated service provider acts as the issue’s lead manager. Identify the lead intermediary named for the book-building process.
IX-072easyconceptual
Q3In the ASBA process, which participant performs the actual blocking of money in the applicant’s bank account?
Option A. The book running lead manager
Why it is wrong: The lead manager coordinates the offer rather than directly operates the applicant’s bank-account block.
Option B. The investor’s depository participant
Why it is wrong: The depository participant handles securities accounts rather than the applicant’s bank balance.
Option C. The account-holding bank — Correct answer
Option D. The registrar to the issue
Why it is wrong: The registrar works with issue information rather than directly blocks the account balance.
Answer: C. The account-holding bank performs the actual blocking of application funds in the applicant’s account. Remember: Issue instructions and bank-account execution are distinct operational functions.
Hint, shown before you answer in practice mode: Common mistake: Assuming the issue registrar directly holds every applicant’s blocked bank balance. Consider who controls the balance in the account containing the money.
IX-073easyconceptual
Q4What does underwriting of an issue commit the underwriter to arrange under the regulatory definition?
Option A. Purchase of every security already allotted
Why it is wrong: Underwriting concerns unsubscribed securities rather than repurchasing all allotted securities.
Option B. Repayment of every investor’s later trading loss
Why it is wrong: Underwriting concerns unsubscribed securities rather than secondary-market loss reimbursement.
Option C. Payment of every future dividend declared
Why it is wrong: Future dividends are not the subscription obligation defined as underwriting.
Option D. Subscription for securities remaining unsubscribed — Correct answer
Answer: D. Underwriting is an agreement to subscribe to, or procure subscription for, securities that remain unsubscribed. Remember: The underwriting obligation concerns the unsubscribed portion specified by the agreement.
Hint, shown before you answer in practice mode: Common mistake: Confusing an issue-subscription commitment with insurance against later investment losses. Recall the purpose of a subscription-support agreement.
IX-074easyregulatory
Q5What does the floor price represent in a stated book-building price band?
Option A. The highest price in the band
Why it is wrong: The highest stated band price is the cap rather than the floor.
Option B. The share’s original face value
Why it is wrong: Face value need not equal the lower band price.
Option C. The guaranteed first trading price
Why it is wrong: The price band does not guarantee the first trading price.
Option D. The lowest price in the band — Correct answer
Answer: D. The floor price is the lowest price in the stated book-building band. Remember: The floor and cap are the lower and upper boundaries of the price band.
Hint, shown before you answer in practice mode: Common mistake: Equating the floor price with face value or the eventual listing price. Recall how the two endpoints of a price band are named.
IX-075easyconceptual
Q6When is an issue described as oversubscribed based on valid demand and the shares available?
Option A. No investor submits a valid application
Why it is wrong: An absence of valid applications cannot create oversubscription.
Option B. Valid demand equals the shares offered
Why it is wrong: Equal demand and supply means full subscription rather than oversubscription.
Option C. Valid demand exceeds the shares offered — Correct answer
Option D. Valid demand falls below the shares offered
Why it is wrong: Demand below supply indicates undersubscription rather than oversubscription.
Answer: C. An issue is oversubscribed when valid demand exceeds the shares available in the relevant offer or category. Remember: Oversubscription is measured against the relevant supply of securities.
Hint, shown before you answer in practice mode: Common mistake: Calling an issue oversubscribed merely because it attracts many applications. Compare eligible demand with the available supply.
IX-076easyconceptual
Q7When must a merchant banker subscribe to securities arising from underwriting devolution under Regulation 22B(3)?
Option A. Whenever the issuer chooses after completion
Why it is wrong: The rule specifies a point in the allotment sequence rather than leaving performance open-ended.
Option B. Before finalisation of the basis of allotment — Correct answer
Option C. Only after the first post-listing settlement
Why it is wrong: The obligation belongs to the issue process rather than the first secondary-market settlement.
Option D. After finalisation but before normal market trading
Why it is wrong: The prescribed point is before finalisation of the basis, not a later pre-trading stage.
Answer: B. The merchant banker must subscribe to devolved securities before the basis of allotment is finalised. Remember: Underwriting devolution must be resolved within the issue process, not deferred indefinitely.
Hint, shown before you answer in practice mode: Common mistake: Treating underwriting performance as an obligation that begins after normal trading. Place the underwriter’s subscription within the issue’s allotment sequence.
IX-077easyregulatory
Q8An issue of 40 lakh shares is fully underwritten at ₹120. Valid public subscriptions cover 36 lakh shares. What subscription amount devolves?
Option A. ₹48 crore
Why it is wrong: This is the full issue value, not the shortfall.
Option B. ₹4.8 crore — Correct answer
Option C. ₹43.2 crore
Why it is wrong: This is the value of the public subscription, not the uncovered balance.
Option D. ₹0.48 crore
Why it is wrong: This understates the value of 4 lakh shares at ₹120 by ten times.
Answer: B. The devolved amount is ₹4.8 crore because 4 lakh shares remain unsubscribed. Shortfall = 40 lakh − 36 lakh = 4 lakh shares. Amount = 4 lakh × ₹120 = ₹4.8 crore, assuming the whole shortfall is covered and there are no other commitments. Remember: Underwriting devolution depends on the uncovered quantity and the subscription price.
Hint, shown before you answer in practice mode: Common mistake: Valuing the subscribed portion instead of the remaining shortfall. First find the unfilled share quantity, then value that quantity.
IX-078mediumnumerical
Q9An underwriting agreement charges 0.8% on ₹50 crore committed, regardless of devolution. What commission is payable if ₹10 crore devolves?
Option A. ₹32 lakh
Why it is wrong: This applies the rate only to the non-devolved portion.
Option B. ₹8 lakh
Why it is wrong: This applies the commission rate to devolution instead of the agreed commitment base.
Option C. ₹4 lakh
Why it is wrong: This understates 0.8% of the ₹50 crore commitment by ten times.
Option D. ₹40 lakh — Correct answer
Answer: D. The commission is ₹40 lakh because the agreement charges on ₹50 crore committed. Commission = 0.8% × ₹50 crore = ₹0.40 crore = ₹40 lakh, ignoring taxes. Remember: The underwriting fee base may differ from the amount that actually devolves.
Hint, shown before you answer in practice mode: Common mistake: Automatically charging commission only on securities the underwriter must take up. Read the contractual fee base rather than substituting the eventual shortfall.
IX-079mediumnumerical
Q10An ASBA application blocks ₹1,00,000. The investor receives 200 shares at ₹120 each. What amount should be released, ignoring charges?
Option A. ₹80,000
Why it is wrong: This uses ₹100 per allotted share rather than the stated ₹120 price.
Option B. ₹24,000
Why it is wrong: This is the amount used for the allotted shares rather than the amount released.
Option C. ₹76,000 — Correct answer
Option D. ₹1,00,000
Why it is wrong: This ignores the payment required for the allotted shares.
Answer: C. The amount released is ₹76,000 because only ₹24,000 is needed for the allotment. Allotment debit = 200 × ₹120 = ₹24,000. Release = ₹1,00,000 − ₹24,000 = ₹76,000. Remember: Only the allotment payment should remain debited from the blocked application amount.
Hint, shown before you answer in practice mode: Common mistake: Confusing the amount debited for allotment with the amount unblocked. Separate the amount needed for allotted shares from the blocked surplus.
IX-080mediumnumerical
Q11A category offers 12 lakh shares and receives valid demand for 54 lakh shares. What is its subscription multiple?
Option A. 3.5 times
Why it is wrong: This measures only excess demand rather than total valid demand.
Option B. 0.22 times
Why it is wrong: This divides supply by demand instead of demand by supply.
Option C. 5.5 times
Why it is wrong: This incorrectly adds the offered shares to demand before dividing by the offer quantity.
Option D. 4.5 times — Correct answer
Answer: D. The subscription multiple is 4.5 times because valid demand is compared with the available category shares. Multiple = 54 lakh ÷ 12 lakh = 4.5. Remember: Subscription multiples use valid demand divided by the relevant offered quantity.
Hint, shown before you answer in practice mode: Common mistake: Subtracting offered shares before calculating the subscription multiple. Use total valid demand, not just the excess above the offer.
IX-081mediumnumerical
Q12At an issue price of ₹110, bids are 2 lakh shares at ₹120, 3 lakh at ₹110 and 4 lakh at ₹100. What quantity meets the price?
Option A. 5 lakh shares — Correct answer
Option B. 3 lakh shares
Why it is wrong: This excludes bids above the issue price.
Option C. 9 lakh shares
Why it is wrong: This includes bids below the issue price.
Option D. 2 lakh shares
Why it is wrong: This excludes bids exactly at the issue price.
Answer: A. Five lakh shares meet the issue price because bids at ₹120 and ₹110 qualify on price. Eligible quantity = 2 lakh + 3 lakh = 5 lakh shares, assuming all bids otherwise remain valid. Remember: Price eligibility includes bids at or above the final issue price.
Hint, shown before you answer in practice mode: Common mistake: Including lower-priced bids merely because they fall within a wider bidding range. A bid must be willing to pay at least the final price.
IX-082mediumnumerical
Q13An issuer argues that a ₹10 face value proves its proposed ₹300 offer price is fair. What is the main analytical problem?
Option A. Face value does not establish economic valuation — Correct answer
Option B. Face value automatically equals current market value
Why it is wrong: Face value and market value are different concepts.
Option C. Investor demand makes disclosures unnecessary
Why it is wrong: Demand does not remove the need for information supporting an informed assessment.
Option D. Every offer price must equal face value
Why it is wrong: An issue can be priced differently from its face value.
Answer: A. Face value does not establish economic valuation because offer pricing requires consideration of relevant business and valuation information. Remember: A share’s face value is not evidence that a proposed offer price is fair.
Hint, shown before you answer in practice mode: Common mistake: Using face value as the sole benchmark for evaluating issue pricing. Distinguish an accounting denomination from an assessment of business value.
IX-083mediumapplication
Q14An issue has a ₹12 crore subscription shortfall. Its only underwriting commitment of ₹9 crore is fully performed. What balance remains uncovered?
Option A. ₹12 crore
Why it is wrong: This ignores the subscription support provided by the contract.
Option B. ₹9 crore
Why it is wrong: This is the maximum underwritten amount rather than the remaining uncovered balance.
Option C. ₹3 crore — Correct answer
Option D. ₹21 crore
Why it is wrong: This adds support to the shortfall instead of using it to cover part of the shortfall.
Answer: C. The uncovered balance is ₹3 crore after applying the maximum ₹9 crore support. Remaining gap = ₹12 crore − ₹9 crore = ₹3 crore, assuming the contract is performed in full. Remember: Partial underwriting does not necessarily cover the entire subscription shortfall.
Hint, shown before you answer in practice mode: Common mistake: Assuming any underwriting arrangement means the whole issue is covered. Apply the contractual cap before assessing the remaining gap.
IX-084mediumnumerical
Q15What does an in-principle listing approval NOT establish for a prospective investor?
Option A. The need to satisfy applicable conditions
Why it is wrong: Conditional approval does not eliminate the applicable conditions.
Option B. A guarantee of investment returns — Correct answer
Option C. A preliminary exchange-stage approval
Why it is wrong: This is the nature of an in-principle approval rather than the unsupported claim.
Option D. A step in the listing process
Why it is wrong: An in-principle approval is a step within that process.
Answer: B. An in-principle listing approval does not guarantee investment returns because it is a procedural approval rather than investment insurance. Remember: Exchange approvals should not be presented as guarantees of investor profit.
Hint, shown before you answer in practice mode: Common mistake: Reading regulatory or exchange review as endorsement of future returns. Distinguish a procedural permission from an economic promise.
IX-085mediumconceptual
Q16A material business event occurs after draft disclosures were prepared but before the offer. What should the lead manager do?
Option A. Assess it and update relevant disclosures promptly — Correct answer
Option B. Mention it only in private meetings with favoured bidders
Why it is wrong: Selective private information does not replace appropriate offer disclosure.
Option C. Wait until investors complain after listing
Why it is wrong: Waiting for complaints can leave investors making decisions on outdated information.
Option D. Ignore it because the draft was already prepared
Why it is wrong: A prepared draft does not remove the need for materially current disclosure.
Answer: A. The lead manager should assess the event and promptly update relevant disclosures so investors are not relying on materially outdated information. Remember: Issue disclosures must remain adequate when material information changes.
Hint, shown before you answer in practice mode: Common mistake: Treating disclosure preparation as a one-time task that ends with the first draft. Consider whether the existing information still supports an informed decision.
IX-086mediumapplication
Q17The demand summary contains unvalidated bids alongside valid bids. What should the issue team do before reporting usable subscription demand?
Option A. Reconcile validity before relying on the total — Correct answer
Option B. Count every record as a valid subscription
Why it is wrong: An unvalidated record cannot automatically be treated as usable demand.
Option C. Replace missing details with the largest possible bid
Why it is wrong: Inventing missing details overstates demand and damages data integrity.
Option D. Use publicity interest instead of application records
Why it is wrong: Publicity interest is not a substitute for validated applications.
Answer: A. The issue team should reconcile validity before relying on the total because raw records may overstate usable subscription demand. Remember: Operational decisions should use reconciled application data rather than raw totals.
Hint, shown before you answer in practice mode: Common mistake: Treating every recorded bid as a valid and funded application. Distinguish interest recorded in a system from applications that can actually support allotment.
IX-087mediumapplication
Q18An offer advertisement highlights possible gains while hiding a major disclosed business risk. What is the appropriate response?
Option A. Retain it if subscriptions are weak
Why it is wrong: Weak demand does not justify misleading investor communication.
Option B. Revise it to avoid a misleading impression — Correct answer
Option C. Retain it because the risk exists elsewhere
Why it is wrong: Disclosure elsewhere does not justify a misleading overall advertisement.
Option D. Remove the risk from the offer document too
Why it is wrong: Deleting relevant risk disclosure would compound rather than solve the problem.
Answer: B. The advertisement should be revised because investor information must not create an exaggerated or misleading impression. Remember: Marketing should not undermine balanced issue disclosure.
Hint, shown before you answer in practice mode: Common mistake: Assuming a risk can be hidden in advertising because it appears in a longer document. Consider the impression created by the communication as a whole.
IX-088mediumapplication
Q19The allotment register shows 1,000 shares for an applicant, but the payment record covers only 800. What should happen before final reconciliation?
Option A. Treat the extra shares as an automatic bonus
Why it is wrong: An unexplained mismatch does not authorise a bonus allotment.
Option B. Ignore the payment record after the shares are recorded
Why it is wrong: Ignoring one record does not reconcile the issue data.
Option C. Investigate and resolve the quantity-payment mismatch — Correct answer
Option D. Delete the applicant without investigating the cause
Why it is wrong: Deleting the record could create another error rather than establish the facts.
Answer: C. The team should investigate and resolve the mismatch so the allotted securities and payment records agree. Remember: Post-issue reconciliation must connect quantities, applicants and money.
Hint, shown before you answer in practice mode: Common mistake: Checking share records and fund records separately without matching them. Compare the securities obligation with the corresponding cash obligation.
IX-089mediumapplication
Q20Several intermediaries participate in an issue. What arrangement best prevents gaps caused by each assuming another will perform a task?
Option A. Clear allocation of responsibilities between intermediaries — Correct answer
Option B. A decision to allocate work only after the issue closes
Why it is wrong: Late allocation cannot guide execution during the issue.
Option C. An informal assumption that everyone covers everything
Why it is wrong: An undefined shared assumption creates rather than prevents responsibility gaps.
Option D. A single fee invoice without a work allocation
Why it is wrong: A fee invoice alone does not identify responsibility for each task.
Answer: A. Clear allocation of responsibilities reduces gaps and is required by the merchant-banker conduct framework. Remember: Multi-intermediary issues need explicit responsibility boundaries.
Hint, shown before you answer in practice mode: Common mistake: Assuming that having more intermediaries automatically means every task is covered. Think about assigning an accountable owner to each part of the process.
IX-090mediumapplication
Q21Two underwriters cover 6 lakh and 4 lakh shares. Marked applications are 3 lakh and 2 lakh. Unmarked applications of 2 lakh are credited 60:40. What devolves on the first?
Option A. 1.2 lakh shares
Why it is wrong: This is the first underwriter’s unmarked credit, not its remaining liability.
Option B. 1.8 lakh shares — Correct answer
Option C. 2.2 lakh shares
Why it is wrong: This gives the first underwriter only the second underwriter’s 0.8 lakh unmarked credit.
Option D. 3.0 lakh shares
Why it is wrong: This ignores the first underwriter’s credit from unmarked applications.
Answer: B. The first underwriter’s liability is 1.8 lakh shares after both credits. Its unmarked credit = 2 lakh × 60% = 1.2 lakh. Devolution = 6 lakh − 3 lakh − 1.2 lakh = 1.8 lakh shares. Assume no firm underwriting or other adjustments. Remember: Underwriting liability must reflect each credit specified in the agreement.
Hint, shown before you answer in practice mode: Common mistake: Deducting marked applications while forgetting allocated unmarked applications. Deduct both the marked applications and the agreed share of unmarked applications.
IX-091hardnumerical
Q22A book offers 5 lakh shares. Bids are 2 lakh at ₹130, 2 lakh at ₹120 and 3 lakh at ₹110. What is the highest price filling supply?
Option A. ₹120
Why it is wrong: At ₹120 or above, cumulative demand is only 4 lakh shares.
Option B. ₹125
Why it is wrong: At ₹125, only the 2 lakh shares bid at ₹130 qualify on price.
Option C. ₹130
Why it is wrong: At ₹130, only 2 lakh shares meet the price and the issue cannot fill 5 lakh.
Option D. ₹110 — Correct answer
Answer: D. ₹110 is the highest price that fills 5 lakh shares under the stated demand-only assumption. Demand at ₹130 is 2 lakh, at ₹120 or above is 4 lakh, and at ₹110 or above is 7 lakh. Only the last level covers supply, ignoring category rules and assuming all bids are valid. Remember: A demand-clearing price is based on cumulative demand at or above that price.
Hint, shown before you answer in practice mode: Common mistake: Selecting the highest bid without checking whether enough shares are demanded at that level. Build cumulative demand from the highest price down until it covers the offered quantity.
IX-092hardnumerical
Q23A fresh issue raises ₹150 crore and an offer for sale raises ₹50 crore. The issuer bears 2% of its fresh proceeds plus ₹1 crore fixed costs. What remains with it?
Option A. ₹147 crore
Why it is wrong: This deducts the percentage cost but forgets the fixed cost.
Option B. ₹145 crore
Why it is wrong: This applies the percentage cost to the whole offer instead of the stated fresh-issue base.
Option C. ₹146 crore — Correct answer
Option D. ₹196 crore
Why it is wrong: This wrongly includes the selling shareholders’ ₹50 crore proceeds.
Answer: C. The issuer retains ₹146 crore because only its fresh proceeds and allocated costs enter this calculation. Variable cost = 2% × ₹150 crore = ₹3 crore. Net issuer proceeds = ₹150 crore − ₹3 crore − ₹1 crore = ₹146 crore, ignoring taxes. Remember: Net issuer proceeds depend on both the fresh-issue component and the specified expense allocation.
Hint, shown before you answer in practice mode: Common mistake: Including offer-for-sale proceeds in the issuer’s cash or charging costs to the wrong base. Determine whose proceeds are involved before applying the stated cost allocation.
IX-093hardnumerical
Q24Two underwriters share a 3 lakh-share shortfall 60:40. The second defaults. The first separately guarantees up to 0.5 lakh of the second’s liability. What is the first’s total commitment?
Option A. 3.0 lakh shares
Why it is wrong: This makes the first underwriter cover the whole shortfall despite the stated cap on the extra guarantee.
Option B. 1.8 lakh shares
Why it is wrong: This includes the first underwriter’s original allocation but ignores the stated backstop guarantee.
Option C. 2.3 lakh shares — Correct answer
Option D. 1.7 lakh shares
Why it is wrong: This reverses the sixty-forty allocation before adding the backstop amount.
Answer: C. The first underwriter’s total commitment is 2.3 lakh shares under the stated contracts. Original allocation = 3 lakh × 60% = 1.8 lakh. The second’s liability is 3 lakh × 40% = 1.2 lakh. The extra guarantee covers only 0.5 lakh of that amount. Total = 1.8 lakh + 0.5 lakh = 2.3 lakh shares. Remember: A capped backstop commitment does not automatically transfer every defaulted obligation to another underwriter.
Hint, shown before you answer in practice mode: Common mistake: Assuming either no extra responsibility or unlimited responsibility despite an explicit contractual cap. Calculate the original allocation and then apply the separate capped guarantee.
IX-094hardnumerical
Q25An issue allots 8 lakh shares at ₹250 and 2 lakh shares at ₹240. What is the weighted average issue price?
Option A. ₹248 — Correct answer
Option B. ₹245
Why it is wrong: This gives both price groups equal weight despite their different share quantities.
Option C. ₹242
Why it is wrong: This reverses the relative weights of the two allotment groups.
Option D. ₹250
Why it is wrong: This ignores the shares allotted at the lower price.
Answer: A. The weighted average issue price is ₹248 because the larger tranche carries more weight. Proceeds = 8 lakh × ₹250 + 2 lakh × ₹240 = ₹24.8 crore. Total shares = 10 lakh. Average price = ₹24.8 crore ÷ 10 lakh = ₹248. The stated prices are hypothetical and do not establish eligibility for any regulatory discount. Remember: Different issue prices must be weighted by their allotted quantities.
Hint, shown before you answer in practice mode: Common mistake: Taking a simple average when the share quantities are unequal. Weight each price by the number of shares actually allotted at that price.
IX-095hardnumerical
Issue Management – Process and Underwriting: common questions
How many practice questions are there on Issue Management – Process and Underwriting?
25 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 8 practice topics for NISM Series IX, which has 150 questions in total.
Are these real NISM Series IX questions on Issue Management – Process and Underwriting?
No. LearnNifty wrote every question from NISM's public syllabus. NISM does not publish its question bank, so nobody can offer you the real paper. Use these questions to check that an idea has gone in. Use the official NISM workbook to see what is examined.
Does negative marking apply to NISM Series IX?
Yes. NISM takes off 25% of a question's marks for a wrong answer. On a 1-mark question that is 0.25 marks off. A blank question earns nothing and loses nothing, so a wrong guess costs marks on this paper. Timed practice here uses the same rule.
Are these practice questions kept up to date?
Each question is written against the rules printed on this page, last checked on 5 September 2026. A Budget or a SEBI circular can change a rate, a lot size or an expiry day. If one of those rules changes before your exam, treat the questions that use it as out of date. Then check NISM's current workbook.
Issue Management – General Obligations of Merchant Bankers and Due Diligence
20 questions on Issue Management – General Obligations of Merchant Bankers and Due Diligence. Its quiz opens on that unit.
Open Issue Management – General Obligations of Merchant Bankers and Due DiligencePaper Trading Try it on the practice trading desk