Define the term- Origination
Origination offers to the work of investigation, analysis and processing of new project proposals. Origination starts before an issue is really floated in the market. There are 2 aspects in these functions:
(i) Technical, Economic and Financial Analysis: A careful study of technical, economic and financial viability to ensure soundness of the project. This is a primary investigation undertaken by the sponsors of the issue.
(ii) Advisory Services: Advisory services that improve the quality of capital issues and ensure its success. Advisor services include:
Ø Type of issue
Ø Magnitude of issue
Ø Time of floating an issue
Ø Pricing of an issue- whether shares are to be issue at par or at premium
Ø Methods of issue.
Ø Technique of selling securities
Function of origination is carried out by merchant banker, who may be commercial banks and financial institutions, or private firms.