What is a Book Running Lead Manager (BRLM) in IPO?

Whenever you invest in any IPO, you might have gone through a term commonly known as the Book Running Lead Manager. BRLMs are institutions responsible for managing and ensuring the successful listing of an IPO. They handle pricing, regulatory compliance, and investor coordination throughout the IPO process. Understanding their role can help investors make better IPO investment decisions. 

In today’s blog post, we will give you an overview of Book Running Lead Manager, along with their importance in the IPO listing process.

What is a Book Running Lead Manager?

A book-running lead manager is often known by various names in the financial industry, such as investment banks and merchant bankers, who are primarily engaged in launching an Initial Public Offer (IPO) or Follow-On Public Offer (FPO) for a company. The Book Running Lead Manager manages the entire process, including preparing the IPO document, filing the draft red herring prospectus, and obtaining SEBI approval.

Key Features of Book Running Lead Manager

The features of the book running lead manager are as follows:

• IPO Process: The book running lead manager manages the entire IPO process for a company, which includes preparing documents, coordinating with the regulating authorities, etc.
• Pricing of IPO: Deciding the IPO price is one of the key roles of the book-running lead manager. The BRLM analyses the market conditions, valuation of the company, and sector performance and then decides the price at which the IPO can be issued.
• Book Building Process: BRLM handles the entire book-building process. In which the investor places the bids within the defined price band, and based on which it determines the price.
• Intermediary: The book-running lead managers act as a middleman between the company that is issuing shares, investors, regulating authorities, etc.

Why Is a Book Running Lead Manager Important in an IPO?

The key importance of a book-running lead manager is as follows:

• Easy Execution: Whenever the company decides to launch an IPO, it has to go through several steps, such as documentation, approvals, marketing, pricing, etc. A book-running lead manager helps a company in all such steps so that the company can launch its IPO efficiently.
• Regulatory Compliance: Several regulatory authorities, such as SEBI, exchanges, etc., have laid down various compliances that need to be followed by a company that wants to list themself on the exchange. BRLM helps companies in following those compliances.
• Managing Subscription: BRLM manages the IPO issue in a way that it reaches the potential investors. BRLM’s marketing strategies help in increasing the participation of investors and the chances of subscription.
• Increase Investor Confidence: If a company hires an experienced book-running lead manager, it increases the credibility of the IPO. And investors feel more confident about the company issuing an IPO.

Read Also: What is the Book-Building Process in an IPO?

Responsibilities of a Book Running Lead Manager

The key responsibilities of a book running lead manager are as follows:

• Initiating IPO Process: Once the company decides to go public, it appoints a book-running lead manager to handle the entire process. The BRLM manages the entire IPO process, prepares the timeline, coordinates with intermediaries, etc.
• IPO Documents: The key importance of BRLM is to prepare the important documents related to IPOs, such as DRHP, RHP, offer documents, etc. They evaluate the company’s financial performance, and based on this, they prepare such data.
• Regulatory Compliance: The BRML ensures that the IPO complies with all the regulatory guidelines laid down by the different authorities, such as the Securities and Exchange Board of India and stock exchanges.
• Underwriting the IPO: There are a few cases in which the book-running lead manager underwrites the IPO by agreeing that if the shares are undersubscribed by the public, they will subscribe to make the IPO a successful issue.
• Marketing IPO: Once the IPO approval is given by the SEBI, after the finalisation of the price band. The book-running lead managers start marketing the IPO through investor presentations, electronic media, etc.
• Managing Allotment Process: After the closure of the IPO issue date, the book-running lead manager completes the process of IPO allotment by allotting the shares to the successful bidder, and the refund process.
• Listing: Once the refund and allotment process is completed successfully, the book running lead manager coordinates with the exchanges and gets the formalities done related to listing, and gets the share listed on the final date.

BRLM vs Other IPO Intermediaries

The key difference between BRLM and other IPO intermediaries is as follows:

Particulars	BRLM	Other IPO Intermediaries
Key Role	The book running lead manager manages the entire IPO prices.	While other IPO intermediaries performs specific tasks related to an IPO.
Responsibilities	BRLM acts as an coordinator between company, SEBI, and investor.	They are only responsible for the specific IPO process.
Pricing	It helps in deciding the price band of the IPO.	Other IPO intermediaries are not involved in pricing decision.
Marketing	BRLM conducts the entire marketing of the IPO and ensures that it reaches to every potential investor.	IPO intermediaries do not focus on the marketing or have a limited role in marketing of the IPO.
Documenting	BRLM prepares different types of documents such as DRHP, RHP, etc.	Whereas, other IPO intermediaries prepares documents related to specific tasks.
Interaction with Institutional Investors	BRLM directly interacts with the institutional investors to manage the subscription.	They do not interact with investors; they interact only with operational teams.
Coordination	BRLM works with various intermediaries, such as registrars, underwriters, and advisors.	They consist of the registrar, bankers, auditors, etc.

How Companies Select a Book Running Lead Manager

There are various factors based on which a company selects a book running lead manager, a few of which are mentioned below:

• Experience: Most of the companies choose the book running lead manager based on their experience in handling IPOs and FPOs. They check their track records and how they manage the entire IPO process. This is a key factor in selecting an IPO book-running lead manager.
• Expertise: There are certain book-running lead managers who are experts in managing the IPOs of a particular sector or industry. Hence, companies choose BRLM that understands their industry, business model, etc.
• Network: The book-running lead managers’ network plays a key role in their selection for an IPO. BRLMs that have strong connections with the institutional, foreign, and anchor investors are chosen by the companies to manage their IPOs.
• Fees and Services: The fees charged by the book-running lead managers are generally high; companies must evaluate and compare the fees and services offered by the book-running lead managers before choosing them for the IPO process.
• Understanding Valuations: The valuation of the companies plays a key role in deciding the company’s IPO success. Therefore, companies are required to choose the book running lead managers that can accurately calculate the company’s valuation, price band, etc. 

Conclusion

On a concluding note, a book-running lead manager plays a role in the success of an IPO. They take sole responsibility for managing the entire IPO process, including determining the valuation and price band of the issue till the final step of listing shares on the exchange. Companies select the book running lead managers based on their experience, expertise, etc. The marketing and networking of the BRLMs increases the investors’ confidence in the company and the successful listing of the IPO. However, only reputed BRLMs do not always guarantee the success of an IPO; it is advisable to consult your investment advisor before making any investment in an IPO. Invest in IPOs with Zero Brokerage on Pocketful – an easy-to-use platform built for seamless investing and trading.

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