Underwriting Commission

An underwriting commission is the fee paid by an issuer of securities—such as a company conducting an IPO or a government issuing bonds—to the underwriter(s) for taking on the risk of purchasing and distributing the entire issue. It compensates the underwriter for guaranteeing the fundraise, regardless of whether all securities are sold to the public. In India, SEBI regulates the maximum underwriting commissions for public issues. The commission is typically expressed as a percentage of the total issue size and is disclosed in the offer document, forming part of the total cost of the capital-raising exercise.