Merchant Banking Final Copy

8/7/2019 Merchant Banking Final Copy

1/22


2/22

WHAT IS MERCHANTWHAT IS MERCHANTBANKING?BANKING?


3/22

Meaning

Merchant Banking may be defined as aninstitution which covers a wide range of

activities such as Underwriting of shares,

Portfolio Management, Project Counseling,

Insurance, Issue Management etc

Dictionary meaning

An organization that underwrites corporate

securities and advises clients on issues likecorporate mergers, etc. involves in the ownership

of commercial ventures.


4/22


5/22

ORIGIN IN INDIA

Origin of merchant banking in India National

Grindlays bank in India initiated merchantbanking services in1969

The Citibank followed it in 1970.

The state bank of India was the first Indiancommercial bank to set up a separate merchant

banking division in 1973.

ICICI followed it in 1974. both these Indian

merchant bankers emerged as leader inmerchant banking having done significant

business during the period 1974-85 in

comparison to foreign banks.


6/22

Merchant banking began practice during the Middle Ages

in Italy and was introduced by grain merchants, making them

the original banks.

In todays world, merchant banking involves manyactivities to include, portfolio management, mergers and

acquisitions counseling, and acceptance credit, etc. Todays

merchant banks do not have the same characteristics of their

predecessors.

Modern merchant banks offer a wide range of activities,including portfolio management, credit-syndication,

acceptance credit, counsel on mergers and acquisitions,

insurance, etc


7/22

Loan syndication.(CREDIT)

Portfolio management.

Project Counseling.

Project finance

Issue management (Pre &Post Issue)

Mergers Amalgamations and takeovers.

Off Shore Finance

Arrange for Rehabilitation of sick projects.


8/22

It regulates the rising of fund in primary market.

It assures the issuer a market for rising resourceat low cost, effectively and easily.

Easily it ensures a high degree of protection tothe interest of the investors.

It provides for the merchant banker a dynamicand competitive market with high standard of

professional competence , integrity and solvency. It ensures fair efficient and flexible primary

market to all involved in the process of primaryissue.


9/22

Applicant should be a body corporate

Applicant should not carry on any business other than those

connected with security markets.

Should have the necessary infrastructure

Should have at least 2 employees with experience in merchant

banking

Any associate or subsidiary company should not have been a

registered merchant banker.

The applicant should not be involved in any securities scam

or proved guilty for any offence.

Should have a min net worth of 5crores.


10/22

Commercial banks (SBI, Canara Bank.BOB)

All india financial institutions

Private consultancy firms

Technical consultancy organizations.


11/22

GUIDELINESGUIDELINES FORFOR MERCHANTMERCHANT BANKERSBANKERS

SEBIs authorization is a must to act as merchant bankers.

Authorization criteria includeProfessional qualification in Finance, Law orBusiness Management

Infrastructure like office space, equipment and man power

Capital adequacy

Past track of record, experience, general reputation and fairness in

all transactions.

Every merchant banker should maintain copies of balance sheet,

Profit and loss Account, statement of financial position

Half-yearly unaudited result should be submitted to SEBI

Merchant bankers are prohibited from buying securities based on the

unpublished price sensitive information of their clients


12/22

SEBI has been vested with the power to suspend or cancel the

authorization in case of violation of the guidelines

Every merchant banker shall appoint a Compliance Officer tomonitor compliance of the Act

SEBI has the right to send inspecting authority to inspect books of

accounts, records etc of merchant bankers

Inspections will be conducted by SEBI to ensure that provisions of the

regulations are properly complied

An initial authorization fee, an annual fee and renewal fee may be

collected by SEBI

A lead manager holding a certificate under category I shall accept a

minimum underwriting obligation of 5% of size of issue or Rs.25 lakhs

whichever is less


13/22

BANKS PROVIDING MERCHANT BANKINGBANKS PROVIDING MERCHANT BANKINGSERVICES IN INDIASERVICES IN INDIA

Commercial banks

Foreign banks like National Grindlays Bank,Citibank, HSBC bank etc..

Development banks like ICICI, IFCI, IDBI etc..

SFC, SIDCs

Private firms like JM Financial and Investmentservice , DSP Financial Consultants, CeatFinancial Services, Kotak Mahindra, VMCProject Technologies, Morgan Stanley, JardieFleming, Kleinwort Benson etc


14/22

ListList Of Recently Updated Merchant Banking in IndiOf Recently Updated Merchant Banking in India

Dsp Merrill Lynch Ltd.

Merchant Banking, Stock

Brokin...

Prime Securities Ltd

Debit and Equity

Organisation....

Tata Finance Merchant

Bankers LtdFinance Solutions

Sicom Ltd

Merchant Banking

Division Asso...

Exta Exprots

Merchant Exporters

Expo Gas Containers P

Ltd

Merchant Exporters

Everex Infotech P LtdMerchant Exporter

Esoffina Svcs Ltd

Merchants Bankingdivn

Associat...

Erudite Capital Creation

Ltd

Merchants Banking

Emjay Enterprise

Merchant Exporters


15/22

PROBLEMS IN MERCHANT BANKINGPROBLEMS IN MERCHANT BANKING

SEBI stipulates high capital adequacy norms for

authorization which prevents young specialized professionals

into merchant banking business

Non co-operation of the issuing companies in timely

allotment of securities and refund of application of money

etc.. is another problem

Yet merchant banking is vast but should develop adequate

expertise to provide a full range of merchant bankingservices


16/22

REGISTRATION CHARGESREGISTRATION CHARGES

Category 1- sum of Rs. 2.5 lakh to be paid annually for

the first two year commencing from the date of initial

registration and thereafter a sum of Rs. 1 lakh to keep the

registration in force.

Category 2- A sum of Rs. 1.5 lakh to be paid annually

thereafter a sum of Rs. 50000 to keep the registration in

force.

Category 3- A sum of Rs. 1 lakh to be paid annually for 2

years there after a sum of 25000 to keep the registration

in force.

Category 4- A sum of Rs. 5000 to be paid annually for 2

years & Rs. 1000 to keep the registration in force


17/22

FORMATION OF THE COMPANY

LOAN SYNDICATION

MAKINGOF PUBLIC ISSUE AND ISSUEMANAGEMENT

CAPITAL STRUCTURE ANDRESTRUCTURING

PREPARATIONO

F PRO

JECT REPO

RT ANDITS APPRAISAL.

MERGERS AND ACQUISITIONS


18/22

TECHNICALASSISTANCE

MARKET SURVEY AND RESEARCH RAISING FOREIGN CURRENCYLOANS

TAX PLANNING

FINANCIALREENGINEEERING

PRODUCT MIX AND QUALITY CONTROL


19/22

Merchant banker should have a knowledge about his

field.

Maintain high standard of profession. Ability to analyze different aspects.

Use of innovative approaches in developing capital

market instruments.

Ability to build up client relationship.


20/22

In channelizing the financial surpluses.

To coordinate the activities of various intermediaries.

To ensure the compliance with rules and regulationsgoverning the securities market.

Facilitate people interested in stock market.


21/22

SL

NO

COMMERCIAL BANKING MERCHANT BANKING

1. It is a banking intermediary. It is a non banking financial

intermediary.

2. Main function is accepting thedeposits and lending of funds.

Provides various functionsuch as underwriting, portfoliomanagement, mergers take-

over's etc.

3. Situated everywhere in all thestates.

They have very few branchesin selected cities.


22/22

Documents

Merchant Banking Final Copy