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June 14, 2026
The Dispatch

Definition

Underwriting (IPO)

Underwriting is a commitment by an intermediary to buy any unsubscribed shares of an IPO, guaranteeing the company raises its target amount.

Underwriters — usually merchant bankers or brokers — agree to subscribe to the shortfall if the public does not take up the entire issue, in exchange for an underwriting commission. This shifts the risk of undersubscription from the company to the underwriter.

In India, mainboard book-built issues are often not fully underwritten because they must meet a 90% minimum subscription to proceed anyway. SME IPOs, however, are required to be 100% underwritten, with a portion of the underwriting taken by the market maker.

Related terms

  • UndersubscriptionUndersubscription is when an IPO fails to attract bids for all the shares on offer.
  • Merchant Banker / BRLMA merchant banker, acting as Book Running Lead Manager (BRLM), is the SEBI-registered intermediary that manages an IPO from filing to listing.
  • SME IPOAn SME IPO is a public issue by a small or medium enterprise listed on a dedicated exchange platform with relaxed eligibility but higher minimum investment.

Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.