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8/2/2019 Merchant Banking Final
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MERCHANT BANKING
SUBMITTED BY
VINAY SHUKLA 66
VIVEK AGRAWAL 69
AVINASH KUMAR 86
BALAMURLI KRISHNA 87
ASHOK KUMAR MAITY 88
SUBMITTED TO
K.K JINDAL SIR
8/2/2019 Merchant Banking Final
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*
In banking, a merchant bank is a financial institution primarily
engaged in international finance and long-term loans for
multinational corporations and governments.[1] It can also be used
to describe the private equity activities of banking
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*Merchant Banking refers to negotiated private equityinvestment by financial institutions in the unregisteredsecurities of either privately or publicly held companies. A
bank that offers these services is called a merchant bank.Both commercial and investment banks may engage inmerchant banking activities. The original purpose of merchant banks was to facilitate and/or finance productionand trade of commodities and hence the name "merchant"
Commercial banks are the normal banks that provide day today banking services like checking/saving accounts, fixeddeposits, loans etc.
*
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*Key differentiators between Commercial Banking and
Merchant Banking
*Commercial banks verify and uphold savings accounts of
individuals; provides loans and mortgages to individuals or
small-scale businesses. But, merchant banks operate as fiscal
consultants to large-scale companies. Commercial banking isusually reachable to everyone for elementary banking
requirements,
*whereas merchant banking is concerned to hand out primarily
large corporations and very wealthy persons.
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MERCHANT BANKING
Merchant banking may be defined as an ‘institution which covers awide range of activities such as underwriting of shares, portfolio
management, project counseling, insurance etc…They render all
these services for a fee
ORIGIN :
The term merchant banking originated from the London who started
financing foreign trade through acceptance of bills
Later they helped government of under developed countries to raise
long term funds
Later these merchants formed an association which is now
called”
Merchant Banking and Securities House Association”
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Merchant Banking:
The merchant banker are those financial intermediary involvedwith the activity of transferring capital funds to those borrowers
who are interested in borrowing.
The activities of the merchant banking in India is very vast in
nature of which includes the following
a) The management of the customers securities
b) The management of the portfolio,
c) The management of projects and counseling as well as appraisald) The management of underwriting of shares and debentures
e) The circumvention of the syndication of loans
f) Management of the interest and dividend etc
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SERVICES OF MERCHANT BANKERS
PROJECT COUNSELLING :
It includes preparation of project reports,deciding upon the
financing pattern, appraising the project relating to its technical,
commercial and financial viability. It includes filling up of
application forms for obtaining funds from financial institutions.
LOAN SYNDICATION :
Assistance is rendered to raise loans for projects after determiningpromoter’s contribution. These loans can be obtained from a single
institution or a consortium.
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ISSUE MANAGEMENT :
Management of issues involves marketing of corporate securities
ie…equity shares, preference shares and debentures by offering them to
public.
Pre-issue activities:
They prepare copies of prospectus and send it to to SEBI and then file
them to Registrar of Companies
They conduct meetings with company representatives and advertising
agencies to decide upon the date of opening issue,closing issue,launching
publicity campaign etc..
They help the companies in fixing up the prices for their issues
Post-issue activities:
It includes collection of application forms,screening of
applications,deciding allotment procedure,mailing of allotmentletters,,share certficates and refund orders
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*
*The basic function of merchant banker or investment bankeris marketing of corporate and other securities. In the process,he performs a number of services concerning various aspectsof marketing, viz., origination, underwriting, and
distribution, of securities. During the regime of erstwhileController of Capital Issues in India, when new issues werepriced at a significant discount to their market prices, themerchant banker’s job was limited to ensuring press coverageand dispatching subscripttion forms to every corner of the
country. Now, merchant bankers are designing innovativeinstruments and perform a number of other services both forthe issuing companies as well as the investors. The activitiesor services performed by merchant bankers, in India, todayinclude:
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*1. Project promotion services.
*2. Project finance.
*3. Management and marketing of new issues.
*4. Underwriting of new issues.
*5. Syndication of credit.
*6. Leasing services.
*7. Corporate advisory services.
*8. Providing venture capital.
*9. Operating mutual funds and off shore funds.
*10. Investment management or portfolio management services.
*11. Bought out deals.
*12. Providing assistance for technical and financial collaborationsand joint ventures.
*13. Management of and dealing in commercial paper.
*14. Investment services for non-resident Indians.
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UNDERWRITING OF PUBLIC ISSUES :
Underwriting is an insurance to the company which makes public
issues.Raising of external resources is easy for the issues backedby well known underwriters.
MANAGERS,CONSULTANTS OR ADVISERS TO THE
ISSUE :
SEBI insist that all issues should be managed by atleast one
authorised merchant banker but not more than two.For an issue of
100 crores,upto a maximum of four merchant bankers shall be
appointed.They help in listing of shares in stock exchange,
completion of formalities under Companies Act etc..
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PORTFOLIO MANAGEMENT :
Portfolio refers to investment in different kinds of securities such
as shares,debenture issued by different companies.It is acombination of assets but a carefully blended asset combination.
Portfolio management refers to maintaining proper combination
of securities in a manner that they give maximum return
Investors are interested in safety,liquidity and profitability of his
investment but they cant choose the appropriate securities.So
merchant bankers help their investors in choosing the
shares.They conduct regular market and economic surveys.
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NRI INVESTMENT :
NRIs has to follow lots of complicated rules for investing in the
shares in India.Merchant bankers help them in choosing the shares
and offer expert advice fulfilling government regulations thusmobilising more resources for corporate sector.
ADVISORY SERVICE RELATING TO MERGERS AND
TAKEOVERS :
Merger is a combination of two or more companies into a singe
company where one survives and other loses its existence
Takeover is the purchase by one company acquiring controlling
interest in the share capital of another company
Merchant banker acts as middlemen between offeror and
offeree,negotiates mode of payment and gets approval from
government.
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OFF SHORE FINANCE :
Merchant bankers help their clients in :
Long term foreign currency loan
Joint venture abroad
Financing exports and imports
Foreign collaboration arrangement
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BANKS PROVIDING MERCHANT BANKING SERVICES 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 Investment service , DSP Financial
Consultants, Ceat Financial Services,Kotak Mahindra, VMC ProjectTechnologies,Morgan Stanley,Jardie Fleming,Klienwort Benson etc…
* Dsp Merrill Lynch Ltd
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*
Dsp Merrill Lynch Ltd. Merchant Banking, Stock Brokin... Prime Securities Ltd Debit and Equity Organisation.... Dash Impex Merchant Exporter & Importer... Desai Financial Services PL... Mercbanker Fin. Consultant Dsp Merrill Lynch Ltd Merchant Banking Emjay Enterprise Merchant Exporters Erudite Capital Creation Ltd Merchants Banking Esoffina Svcs Ltd Merchants Bankingdivn Associat... Everex Infotech P Ltd
Merchant Exporter Expo Gas Containers P Ltd Merchant Exporters Exta Exprots Merchant Exporters Sicom Ltd Merchant Banking Division Asso... Tata Finance MerchantBanker... Finance Solutions V B Dalal & Co Merchant Bank Abn Amro Securities India P ... Merchant Bank Ak Capital Services Ltd Merchantile Banking Firm Allianz Securities Ltd Merchant Banker Arihant International General Merchandise Bahtco Essem Trading Co P Lt...
Merchant Exporter Bajaj Consultants P Ltd Merchant Bankers Bhavesh Traders Merchant Exporters
* Boom Exports International Merchant Exporter Bramco India P Ltd Merchant Exporter Dandy Exports Merchant Exporters French & International Bank Ho Merchant Bank Harvey Rud & Co Merchant Exporters Ind Bank Merchant Services L... Merchant Bank Jay Shree Trading Company Merchant Exporter Jaya Green Acres P Ltd
Merchant Exporter Kena Exim Merchant Exporters Keymed Merchant Exporter Kinjal Export Merchant Exporter- Eng. Produ... Kk Thaker Merchant Exporter L& T Capital Ltd Merc. Banking Co. Corp Fina Meghraj Fincl Svcs i) P Limited( Merc. Bnk Fin. C... Mitul Exports Merchant Exporters Nouveau Finance Ltd Merchant Bankers/ Nse Brokers Priti International Merchants Exporters Puneet Advisory Services P L... Merchant Banking Sbi Capital Marketltd
Fin Invt& Leas Compn Mrh Bnkg Sbi Coml & Intl Bank Ltd Banking, Branch, Ambika Enterprises Merchandising Service Merchand... Mehta Traders
C A A G G A O S
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MERCHANT BANKING REGULATIONS :
Certificate from SEBI is a must.They are of four types:
Category I merchant bankers : Can act as Issue managers
Category II merchant bankers : can act only as co-managers
Category III merchant bankers : can act as co-managers but cannot
undertake portfolio management
Category IV merchant bankers :can merely act as consultant or
advisor to issue of capital
CAPITAL ADEQUACY NORMS :
Category I : Rs. 5 crores
Category II : Rs.50 lakhs
Category III : Rs.20 lakhs
Category IV : Nil
GUIDELINES FOR MERCHANT BANKERS
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GUIDELINES FOR MERCHANT BANKERS :
SEBI’s authorization is a must to act as merchant
bankers.Authorisation criteria include
Professional qualification in finace,law or business 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
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SEBI has been vested with the power to suspend or cancel the
authorisation in case of violation of the guidelines
Every merchant banker shall appoint a ‘Compliance Officer‘ to
monitor 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 theregulations are properly complied
An initial authorisation 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
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CODE OF CONDUCT :
Should make all efforts to protect the interest of investorsShould maintain high standards of integrity,dignity and fairness in
conduct of business
Should fulfill all obligations in a professional and ethical manner
Should not discriminate among the clients
Should ensure that prospectus, letter of offer etc.. is available to
investors at the time of issue
Should render best possible advice to its clients
Any penal action taken by SEBI should be informed to its clients
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Should inform the board about any legal proceedings
initiated against it
Should abide by the rules of ‘‘Securities and Exchange
Board of India Regulations,2003 “
Shall develop its own internal code of conduct for
governing its internal operationsShould ensure that any person it employs should have the
capacity to be a merchant banker
It is responsible for the act of its employees and agents
Should not create false market
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SOME PROBLEMS OF MERCHANT BANKERS
SEBI stipulates high capital adequacy norms for
authorisation which prevents young,specialised
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 banking
services
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