Lesson eLearning

An Indian company plans to raise ₹10 crore by issuing 1 lakh equity shares at a face value of ₹100 each. The underwriting commission is 2% of the issue size, and SEBI charges a registration fee of 0.1% of the issue size. Calculate the net amount the company will receive after deducting these charges.

medium 3 marks Class 12 · Business Studies · Financial Markets
Answer
₹9,79,00,000

The correct answer is ₹9,79,00,000 — State the net amount the company will receive.

Step-by-step solution

  1. Calculate the total issue size: 1 lakh shares × ₹100 = ₹10,00,00,000 (₹10 crore).
  2. Compute the underwriting commission: 2% of ₹10,00,00,000 = 0.02 × ₹10,00,00,000 = ₹20,00,000.
  3. Compute the SEBI registration fee: 0.1% of ₹10,00,00,000 = 0.001 × ₹10,00,00,000 = ₹1,00,000.
  4. Add the two charges: ₹20,00,000 + ₹1,00,000 = ₹21,00,000.
  5. Subtract the total charges from the issue size: ₹10,00,00,000 – ₹21,00,000 = ₹9,79,00,000.
  6. State the net amount the company will receive.
Common mistake: Adding percentage charges instead of applying them to the total issue size

Concept tested: Cost of raising capital through issue

Published · How this solution was prepared and checked

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