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Question
PQR Ltd ... invited applications from public for Rs. 1,00,000 Equity Shares of Rs.10 each at a premium of Rs. 5 per share. The entire issue has underwritten by the underwriters A, B, C and D to the extent of 30%, 30%, 20% and 20% respeetively with the provision· of firm underwriting of Rs. 3,000; 2,000; 1,OQO and 1,000 Shares respectively.
The underwriters were entitled to the maximum commission permitted by law .
The Company received applicfitions for 70,000 Shares from public out of which applications for 19,000; .10,000; 21,000 .an4 8,000 Shares were niarked in favour for A, B, C and D respectively.
calculate the liability of each one of the underwriters. Also, ascertain 2.5%
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Solution
Liability of Underwriters (No. of Shares)
| Total | A | B | C | D | |
| Gross Liabiltiy | 1,00,000 | 30,000 | 30,000 | 20,000 | 20,000 |
| Less : Unmarked Applications | 12,000 | 3,600 | 3,600 | 2,400 | 2,400 |
| Balance | 88;000 | 26,400 | 26,400 | 17,600 | 17,600 |
| Less : Marked Applications | 58,000 | 19,000 | 10,000 | 21,000 | 8,000 |
| Balance | 30,000 | .7,400 | 16,400 | (-) 3,400 | 9,'600 |
| Less: Firm Underwriting | 7,000 | 3,000 | 2,000 | 1,OOO | 1,000 |
| Balance | 23,000 | 4,400 | 14,400 | 4,400 | 8,600 |
| Adjustment | - | (-) 1,650 | (-) 1,650 | (+) 4,400 | (-) 1,100 |
| Net Liability | 23,000 | 2,750 | 12,750 | - | 7,500 |
| Total Liability | 30,000 | 5,750 | 14,750 | 1,000 | 8,500 |
| including Firm | |||||
| Underwriting |
Note: The above answer is arrived at by treating 'firm underwriting shares' on par with marked applications.
