Merchant Banking in India- Last

8/8/2019 Merchant Banking in India- Last

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Merchant Banking

PREPARED BY MS.S.SANGEETHA, SENIOR LECTURER, KCTBS


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Origin of MB

Italy

Later in France



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Merchant Banking in India



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Grindlays bank in India, which got license from

RBI (1967).

Activities of Grindlays bank: Capital issue management,

Financial consultancy

Recognizing the reqts of emerging entrepreneursfor diverse FS

Financial Services

Production Planning

Sys design

Market research

Management consultancy services



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Later Citibanksets its division

(1970)

Tasks undertaken:

Assisting new entrepreneurs &existing units in the evaluationof projects &

Raising funds through

Borrowing &

Issue of equity



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Recommendations of banking

commission 1972

Indian banks should start MB services as partof their multiple services they couldoffer the clients

SBI Started MB Division in 1972

In initial years it rendered :Corporate advice and

Assistance to small & medium entrepreneurs.



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Followers of SBI Central Bank of India Bank of India Syndicate bank

Bank of Baroda Standard Chartered Bank Mercantile Bank United Bank of India

United Commercial bank Punjab National Bank Canara Bank IOB

1977

1978

Late 70s

& Early

80sPREPARED BY MS.S.SANGEETHA, SENIOR LECTURER, KCTBS


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Development Banks

ICICI (1973)

IFCI (1986)

IDBI (1991)PREPARED BY MS.S.SANGEETHA, SENIOR LECTURER, KCTBS


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Boom in MB- mid 70s

Sponsored by banks, financial institutions,

NBFCs, brokers.

Activities / services

Loan

Syndication

Portfolio

mngt

Corporate

Counseling

Project

Counseling

Debenture

trusteeship

M&ATakeovers & Acqn



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Differences between MBs & CBs

Commercial Banks Debt & Debt

related finance

Avoids risks.

They are merely

Financiers.

Merchant Banks Equity & Equity related

finance (money & capitalmarket)

Management oriented.Willing toaccept risks.

Many activities like corporatecounseling & projectcounseling, M&A, takeovers,

restructuring, Discounting &Rediscounting ST papers etc.



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Till 1992, - nodefinition / noset of rules &regulations.



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1992 SEBIs formation MBs mandatory to register with

SEBI.

Registration is must

Capital issues (pre & post issues),

Portfolio mngt,M&A.



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Services rendered by MB

Extending finance forinvestment in projects

Assistance in financialmanagement

Raising Euro Dollar loans

Issue of foreign currencybonds



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Financing export of capital goods,

ships & railways, Hydro power

installation,

Financing ofHP transactions

Equipment leasing, mergers &takeovers

Valuation of assets

Investment mngt

Promotion of investment trusts



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External Commercial Borrowings (ECB) are definedto include

Commercial bank loans,Buyer's credit,Supplier's credit,Securitised instrumentssuch as floating rate notes,fixed rate bonds etc.,

Credit from official exportcredit agencies



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Commercial borrowings from theprivate sector window of multilateral

financial institutions such as IFC,ADB, AFIC (Asian Finance and InvestmentCorporation Ltd ), etc. and

Investment by Foreign Institutional

Investors (FIIs) in dedicated debt funds Applicants will be free to raise ECBfrom any internationally recognisedsource like banks, export credit

agencies, suppliers of equipment,foreign collaborations, foreignequity - holders, internationalcapital markets etc..



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FCCBs: A type of convertible bond issued in a currency

different than the issuer's domestic currency. Inother words, the money being raised by the issuingcompany is in the form of a foreign currency.

FCCB can be converted into Indian Shares orAmerican Depository Shares (ADS).

FCCB have been extremely popular with IndianCorporate for raising Foreign Funds at competitiverates.

FCCB are treated as Foreign Direct Investment(FDI) by Government of India.

They are called in different names in differentcountries



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ECB/FCCB can be raised underAutomatic route ( for specifiedIndustries only on meeting specifiedconditions) or on RBI approval.

Reliance Energy Limited, has issuedtwo series of FCCB till date, first beingUS$ 120 Million, 0.5 per cent FCCB

due on 25th Sep. 2007 and other US$178 Million, ZCB due on 29th March,2009.



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All MBs dont offer

all services.Specialised in different

services



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Definition of MB- by SEBI

A MB has been defined as

any personwho is engaged in thebusiness of issue management either bymaking arrangements regarding

selling, buying or subscribing tosecurities or

acting as a manager, consultant,

adviser orrendering corporate advisory services inrelation to each issue mngt



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Functions

Corporate counselingProject counselingPre invt studiesCapital restructuringCredit syndication &Project financeIssue mngt &

UnderwritingPortfolio mngtWC finance

Acceptance credit &Bill DiscountingM&A, takeoversVC financingLease financingForeign currency financeFixed deposits Broking

Mutual FundsRelief to sick industriesProject appraisal


C t li


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Corporate counseling

Providing guidance - diversificationbased on Govts economic & licensing policies

Undertaking appraisal of pdt lines,analysing their growth & profitability &

forecasting future trends.

Rejuvenating old line companies &

ailing sick unitsby appraising theirtech & process, Assessing the reqts &

restructuring the capital base



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Commissioning ofdiagnosticstudies

Assessment ofrevival prospects &planning for rehabilitationthrough modernisation & dvfn & revamping ofthe financial & orgnal structure

Arranging for the approval of thefinancial institutions/ banksforschemes of rehabilitation involving financialrelief .



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Providing assistance in getting loansfrom financial inst for cap exp , and the

requisite credit facilities from the bank

Monitoring of rehabilitationschemes

Exploring possibilities oftakeoverof sick units & providing

assistancePREPARED BY MS.S.SANGEETHA, SENIOR LECTURER, KCTBS


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IDLCCorporate Counseling :

Provides advice to ensure bettercorporate performance in terms of prolonged existence and survival,

steady growth through better workingresults and

provide suggestions and opinions totake corrective actions for solvingcorporate problems and help byrestructuring the corporate set-up ifnecessary.



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IDLC of Bangladesh Ltd. (IDLC)- thelargest Non Banking Financial

Institution in Bangladesh and a majormerchant banker, has formed astrategic alliance with SBI Capital

Markets Limited (SBI Caps).

SBI Caps is the largest investment bank

in India and subsidiary of Indiaslargest bank, the State Bank of India.



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Project counseling

Reviewsproject ideas/ project

profiles

Advice onprocedural aspects-project implementation

Review oftechnical feasibility

Viabilitystudy


Project counselling


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Project counselling AssistingTCO in preparing pjt reports &

make mkt surveys / review

Assisting preparation of project reports infinancial angle, & advising & acting on variousprocedural steps including Govt consent.

Assisting in obtaining approvals

licences/permissions/ grants from

govt agencies in the form ofletter of indent,industrial licence, registration & govt approval



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Providing guidance to IndianEntrepreneurs for making invts inIndian projects in India & in Indian JVsoverseas.

Identification of potential invtavenues.

Arranging & negotiating foreigncollaborations, amalgamations,mergers & takeovers



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Carrying out precise

capital structuring &shaping the pattern

of financing.



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Preparation ofpjt profiles &

feasibility studiesbased

on preliminary pjt ideas, coveringthe technical, financial inst &banks

Advising & Assisting clients in

preparing applicationsfor financial assistance tovarious national, state inst &banks.



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Project Counseling:

IDLC contributes to the basic idea thatCompany , as a promoter, will initially pickup for a new project or an industrialactivity.

They systematically develop companysidea into a plan or scheme and helppreparing the appraisal and projectfeasibility report including its financingstructure.

IDLC also prepares complete feasibilityreport for BMRE project.(Balancing Modernization Rehabilitation &Expansion)



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Capital Restructuring Services

Examining capital structure of the

client co. Preparation of memorandum for the

Controller of capital issues

Suggesting alternative capital

structure conforming legal reqts.

Preparingmemorandum coveringvaluation of shares& justifying

the level ofpremium appliedfor



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Memorandum of association

Name

Registered office

Background

Objectives Any grants availed

Name, address, occupation of themembers of the management.

SignaturePREPARED BY MS.S.SANGEETHA, SENIOR LECTURER, KCTBS

Suggesting ideal capital


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Suggesting ideal capitalrestructuring for sick units

and advising the client cos onthe extent & means of bringingfresh capital into business

Cap restructuring may covermergers, takeovers &

amalgamations, involvingmodernisation /dvfn of theexisting pdn sys & the units.



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IDLC With improper corporate structure of the

customers company, the company mayexperience high financial risk, low or nogrowth, etc. IDLC helps to redesign thecapital and provide an appropriate

structure so that they may experience anoptimum growth and minimum risk.

IDLC will helps to diagnose the financial

problems of the customers company andprovide the customers the customizedsolution for the company throughfinancial engineering.


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Credit Syndication

Estimating total cost ofthe project to beundertaken

Drawing up a financingplan for the total project

costPREPARED BY MS.S.SANGEETHA, SENIOR LECTURER, KCTBS

C di S di i


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Credit Syndication Preparing loan application for

financial assistance Selecting inst & banks for

participation in finance

Follow up of term loan applicationwith the financial inst & banks &

obtaining approval for their respectiveshare of participation


Credit Syndication


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Credit Syndication

Arrangingbridge finance

Assisting in completion offormalities for drawing of

term finance sanctioned byinstitution by expediting legaldocumentation formalities,drawing up agreements

Assessing WC reqts.PREPARED BY MS.S.SANGEETHA, SENIOR LECTURER, KCTBS

SBI Caps has been a leading player in the Indian


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p has been a leading player in theloan syndication market. It has been ranked firstin Asia-Pacific for project finance syndication byThomson Project Finance International.

Realising the huge potential in the loan syndicationmarket, the investment bank recently tied withIDFC for syndication of debt financing of infrastructure projects.

Some Japanese banks lending to Indian Corporatesare the Sumitomo group and Mizuho group.

New players -- Merrill Lynch, Lehman Brothers andDonaldson, Lufkin & Jenrette, the Equitable unit --have started their own loan syndication businesses.



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Issue Management

Preparation of an action planPreparation of budget for the

expenses for the issuesPreparation ofCI application &assisting in obtaining consent/ acknowledgement

Drafting ofprospectusPREPARED BY MS.S.SANGEETHA, SENIOR LECTURER, KCTBS


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Issue Management

Selection of institutional &brokerS, underwriters forsyndicating / underwriting

arrangements. Selection ofIssue houses & advtg

agencies for undertaking pre &postissue publicity


Issue Management


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Issue Management Obtain approval from institutional

underwriters & stock exchanges for

publication of the prospectus & applicationforms, as well as their dispatch, if necessary

Providing assistance launching the issue in

the form of advertisement campaignsby holding press, brokers and investorsconferences etc

Coordination with the Underwriters, brokers &

bankers to the issue, & the stock exchange



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Issue Management

Providing advice on the design of asound capital structureacceptable to financial institutions.

Determining thequantum , terms

and timing of the publicissueof different forms of securities


I M t


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Issue Management

Arranging for Stock exchangeClearances & listing of Securities

Liasioning & Coordination withvarious constituents of the publicissue to make the function of

issue mngt successful.


3


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Public Issue can take place in 3 forms

Prospectus

Offer for sale

Private placement



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Public Issue thro

Common method

of public issue

throProspectus.


The information required by the


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The information required by the

companies Act & SEBI are furnished

in the prospectus.

When the prospectus is ready

sent to

SEBI (for vetting & clearance)

Filed with the Registrar of companies

Brokers canvass the subscription

(Members of the stock exchange)



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Offers for sale

Offers thro the intermediary of issuehouse/ firm of stock broker

Co Sells entire Issuehouse

at agreedprice(par value)

Issue of shares

/ Debentures



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Private Placement

Direct sale of securities by a companyto investors

LIC UTI GIC SFC



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Role of Merchant Bankers

Merchant Bankersappoint

Brokers Principal Agent Bankers to

issue



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Pricing of the Issues

The SEBI guidelines (1992) for cap issueshave opened the cap mkt for free pricing.

Pricing done by cos with consultationwith MBs.

An existing Listed company & a new coset up by an existing co with 5 years of track record.

An existing Unlisted company going in forpublic issues for the 1st time & 2 1/2years of track record of constantprofitability can freely price the issue.


R li h t


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Reliance coms- merchantbankers

Goldman Sachs, Deutsche Bank, MorganStanley and UBS

The proceeds raised from the IPO will beused to part finance expansion plansannounced last year, which include laying50,000 km fresh undersea cable in regionswhere there is dearth of internationalbandwidth. The expansion plan could entailan investment of about 1.5 billion dollar(nearly Rs 7,000 crore).


P i


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Premium

Premium will be based on

Net Asset Value

Profit Earning Capacity

Market Price

Justification of price has to bestated & included in the prospectus.



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Rights issue

New shares are offered to the existingshareholders.

Only in equity shares

Can be done only after 1 year of thefirst issue


Prospectus


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ProspectusSec2(36)of the Cos Act 1956

Is any document described/ issued as aprospectus & includes any notice ,circular, advt or other document invitingdeposits from the public, inviting offers

from the public for the subscription orpurchase of any shares in or debenturesof a body corporate

Registered with the Registrar Advertised in newspapers atleast 10 days

before opening of subscriptionPREPARED BY MS.S.SANGEETHA, SENIOR LECTURER, KCTBS

S b i ti li t Mi i i d


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Subscription list -Minimum periodfor which the company will continueto receive application.

Must be open atleast for 3 days

Minimum subscription is fixed at 90%of the issued capital to the public

Has to be subscribed within thestipulated period after the issue of the prospectus , if not to be returned

to the applicants. In case of over subscription, partial

allotment is made


M k ti g


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Marketing

After the despatch of Prospectus , the MB arrange ameeting with the representatives & advertising

agencies to finaliseDate of opening

Closing of issue

Registration of Prospectus

Launching publicity campaign

Fixing date of Board meeting to approve & signprospectus

Pass necessary resolutions.

Security issues are to underwritten . SEBI hasmade it mandatory.


Post Issue management


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os ssue ge e

Collection of application forms &

(applicant should submit only oneapplication )

Statement of amount received from bankers

Screening Application

Deciding allotment procedure

Mailing of allotment letters , sharescertificates & refund orders.


R l f R i t


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Role of Registrars

Receive application

Verify

Submit the basis of allotment to thestock exchange

They have to ensure that theapplication are processed &allotment /refund orders are sent

within 70 days of date of close of issue.



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After the approval by the Stock

exchange and the Board

The Auditor has to certify theallotment


Underwriting the public issue


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g p Guarantee given by underwriter at under

subscription is that the amount underwritten

would be subscribed by him.

Only Category I & II & III MBs are permittedto underwrite an issue.

Lead managers underwrite mandatorily 5% ofissue /2.5 lakhs whichever is less.

Banks /MBs cannot write > 15% of any issue.

The underwriting commission may notexceed 5 % on shares and 2.5 % in case ofdebentures.



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Underwriting by Capital

Market Services Limited

Till to date they have

underwritten shares of 27companies valuingTaka.372.59 million.


Types of Underwriting


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yp g

Syndicate Underwriting:- two or moreagencies or underwriters jointly underwrite anissue of securities.

Sub-Underwriting:- is one in which anunderwriter gets a part of the issue further

underwritten by another agency. Firm Underwriting:- is one in which the

underwriters apply for a block of securities.Under it, the underwriters agree to take up

and pay for this block of securities as ordinarysubscribers in addition to their commitmentas underwriters.


M /C lt t /Ad i t


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Managers /Consultants/Advisers to

the Issue

SEBI at least one authorised MB

Not more than 2 MB should beassociated as lead managers, advisers &consultants to a public issue

Issue >100 crores max. of 4 MBsassociated as Lead Managers


Size of issue No. of. LMB


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f f

Less than Rs.50 Cr 2

Rs.50 crRs.100 cr 3

Rs.100 crRs.200 cr 4

Rs.200 Cr- Rs.400 cr 5

> Rs.400 cr5 or more as

agreed by

SEBI


MBs has to be aware of


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MBs has to be aware of

Monetary & Fiscal policies of the Govt.

Financial statements of various corporatesectors.

Secondary market position.

Competition faced by the industry.


Bajaj Capital


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Bajaj CapitalProvides Merchant Banking Co-ordination

& Advisory Services for Preparation of prospectus/ letter of offer (s)

Liasioning with authorities mainly SEBI,

ROC, RBI, Stock exchange (s) Appointment of various intermediary

agencies

Marketing of issue (s)

Listing of securities

Compliance of other pre issue and postissue formalities


Portfolio Management


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Maintaining proper combination ofsecurities in a manner that they givemaximum return with minimum risk

Every investor is interested in

safety,

liquidity &

profitability of his investment.




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Portfolio Management Undertaking invts in securities

Undertaking invtsfor NRIs

both repatriation and nonrepatriation basis. (Bajaj Capital)

Undertaking review ofPF invt

Safe custodyof securities in India & Overseas

Collection ofRoI & ploughing backthe profits

Invt advisory services to the investors & other relatedservices

March 1991 US$ 14.0 billion



NRI deposits in India




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Portfolio Management Providing advice on selection of invts

Carrying out a critical evaluation of invtportfolio

Securing approval from RBI for the

purchase / sale of securities (NRI Clients) Maintaining invtrecords

Collecting & remitting int & dividend on

invt Providing tax counselling & filing tax

returns through tax consultants.PREPARED BY MS.S.SANGEETHA, SENIOR LECTURER, KCTBS

CMSL (credit market services ltd) is a licensed Merchant Bankcarrying out functions like


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carrying out functions like issue management, portfolio management and underwriting international tax advisory services both home and abroad

Religare- Investment Banking, Corporate Finance, Portfolio Management Services,

Equity & Commodity Broking,

Insurance and Mutual Funds.

IL&FS (Infrastructure leasing & financial services)

* Wealth Management Services* Portfolio Management Services* Securities Broking - Equities & Derivatives

* Depository & Custodial Services* Merchant Banking


Working Capital Finance


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Working Capital Finance Assessment ofWCreqts

Preparing the necessary application tonegotiationsfor the sanction ofappropriate credit facilities.

Providing assistance in negotiationswith all the banks, & suggesting a sharingpattern of credit limits amongst

participating banks, where more than onebank is involved.



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Acquarius Capital & Financial Services

Provides services related to banking andfinancial institution

External Commercial Borrowing,

Project Finance,

Term Loan,

Working Capital,

Letter of Credit Discounting


Acceptance Credit & Bills


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Acceptance Credit & BillsDiscounting

Accepts & discounts B/E


Merger and Acquisition


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Specialised service provided bythe merchant banker

Undertaking mngt audits to

identify areas of corporatestrength & weaknesses inorder to help formulateguidelines & directions forfuture growth




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g q

Undertaking studies on a global basis

to locate overseas mkts, fgncollaborations & prospective JVassociates.

Examining the pros & cons of proposals & formulating schemes forfinancial reconstruction, M&A

Obtaining approvals from shareholders,depositors, creditors, Govt & otherauthorities




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g q Monitoring the implementation of

M&A Schemes

Identifying Orgns with MatchingCharacteristics

Assisting in the compliance oflegalreqts

Advising on cap reorgn of businessenterprises


Advisory services relating to Mergers &


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Advisory services relating to Mergers &

Takeovers

Once the approval is done, the MBsappraises M/T proposal

Financial viability Technical Feasibility

Negotiates purchase consideration & mode of payment

Gets approval from the GOI /RBI.Drafts scheme of Merger & obtains approval from

the financial institutions. Bajaj capital


R f M&A


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Reasons for M&A

Unused capacity

Lack of mftg space for the purchaser

Advantages of economies of scale

Benefits of VI


Venture financing


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Venture financing

Originated in USPopular 60s & 70s.

High risk- high rewardprojects

New technology Cos. In India IFCI, ICICI,IDBI


VC financing really started in India in1988 with the formation of Technology


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1988 with the formation ofTechnologyDevelopment and InformationCompany of India Ltd. (TDICI) -promoted by ICICI and UTI.

State level financial institutions started VCs like

Gujarat Venture Finance Ltd. & APIDC (Andhra Pradesh Industrial

Dvlpt Corp) Venture Capital Ltd.

Sources of these funds financialinstitutions, foreign institutionalinvestors or pension funds and highnet-worth individuals. (Angel groups)


First Private Venture Capital


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Promoters

Bank of India,

Asian Development Bank&

Commonwealth

Development Corporation

Sponsor

Credit Capital

Finance Corporation

(CFC)

Credit Capital Venture Fund

p


Chrysalis Capital - Venture capitalf di f IT i


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funding for IT companies Cipher Securities - Offers startup

funding, venture capital & strategicinvestment services CoolStartups - Initial stage mentoring,

services & funds to startups Dawn Consulting - Venture capital

fund raising consulting Draper - US VC company investing in

Indian IT start-ups Gujarat Venture Finance - Venture

finance & managerial support servicesPREPARED BY MS.S.SANGEETHA, SENIOR LECTURER, KCTBS

India Technology Fund - Boston, MAbased hedge fund in estor


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based hedge fund investor Indiaco - Virtual and physical

incubator support and services IndianVentureCapital - Interactive

forum for venture capitalists & startups

Intel India - Software development,venture capital funding & marketdevelopment

Jumpstartup's VC Database - Listing of

Indian venture capital firms Mantra Consultants - Venture capital

consultancy and investment bankingservices PREPARED BY MS.S.SANGEETHA, SENIOR LECTURER, KCTBS


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Technology Capital Partners - Providesi t i ki b i l


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assistance in making business plansand accessing venture capital funds

exclusively to information technologycompanies. VC Addresses - Address of VC firms

from VC Line

VCFirm.com - Seed & early stageventure capital firm VCline.com - Venture capital guidelines

and advisory services

Venture Finance - Portal on venturefinance Venture Bazaar-Venture formation

servicesPREPARED BY MS.S.SANGEETHA, SENIOR LECTURER, KCTBS

R i t ti
http://www.rekha.com/search/Venture_Capital/index1.shtml


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Registration

For grant of certificate as VCs:

Registered with SEBI and

Application fee pay Rs.25,000 and

Registration fee Rs. 5,00,000


The venture capital investment in India till the year2001 was continuously increased and thereby


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2001 was continuously increased and therebydrastically reduced. Venture capital investors slowdown their investment.

Years Growth

1998-99 327 %

1999-00 132 %

2000-01 40 %

2001-02 -4 %

2002-03 -54 %


Lease Financing


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Lease Financing

Letting out assets on lease for a

particular time for use by the lessee.

Important services offered:

Providing advice on the viability as analternative

Providing advice on the choice of favourable rental structure

Providing assistance in establishinglines of lease for acquiring capitalequipment


E l


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Examples

Pan Caribbean Merchant Bank (PCMB)offers lease financing for BMW customers

Bajaj capital

SBI, Canara Bank, ICICI, IDBI, IFCI


Foreign Currency Financing


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Providing assistance

turnkey projects & construction contract projects

(supply, erection and commissioning of boilers, power plants, transmission lines, sub-stations,plants for manufacture of cement, sugar, textilesand chemicals)

In appln to working groups, liaison with RBI,ECGD & other institutions.

In Opening & Operating Bank accounts

abroad. In obtaining export credit facilities from EXIMbank capital, packing credit


Financing Indian JV abroad & Providing


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g gAssistance in fgn collaboration

Advice in legal laws, pdt risk, Govtregns shareholdings, exgerestrictions, taxation, dividends,

incentives & subsidies etc.Providing guidance on negotiating fgn

financial & technical collaboration

agreements within the framework of Govtpolicies, rules & regulations, assistance inthe formation of corporate ventures in Indiain collaboration with suitable foreign parties.


Foreign Currency Financing


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g y g

Arranging

Foreign currency loans underbuyerscredit scheme for importing goods

Deferred payment guarantees undersuppliers credit scheme for importingcapital goods.

LoC, Pre shipment Credit, Postshipment credit, bridge loans (bajajcapital)


Forms of foreign currency


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Procuring euro currency in the form of

mngt & syndication of Euro currencyloans, bonds, FRN, US Commercialpapers, with the assistance ofInternational Treasury Mngt Ltd (ITM)

Eg: The National Bank of Abu Dhabi(NBAD) announced the launch of its $2billion settled floating rate subordinated

convertible notes due in 2018.

Cross border leasing packagesPREPARED BY MS.S.SANGEETHA, SENIOR LECTURER, KCTBS


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Capital & Credit Merchant Bank Ltd is engaged in

taking deposits,

granting loans and

trading in foreign currencies andgovernment securities.


SBI


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Pre-Shipment Export Credit

offers Pre-shipment Credit (PackingCredit) to the exporters,

for financing purchase,

processing,manufacturing or packing of goods

prior to shipment.


Post-Shipment Export Credit


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SBI extend Post-shipment Credit that is

any loan / advance granted or any othercredit provided by SBI for purposes suchas export of goods from India.

The exporter has the option to avail of

pre-shipment and post-shipment crediteither in rupee or in foreign currency.


PRE-SHIPMENT CREDIT IN FOREIGN CURRENCY(PCFC)

SBIs Pre-shipment Credit in Foreign Currency


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p g y

Avail it to meet the customers manufacturing,processing and packing fund requirements atinternational interest rates.

Offers 4 different currencies the US Dollar,Pound Sterling, Euro and the Japanese Yen.

Has 64 branches across the country PCFCfacility

Their Foreign Department Kolkatta, is thenodal centre for raising and deploying offshoreand onshore funds for lending under PCFC.


Brokering FDA t th t b i d b th


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Amt that can be raised by thecompany in the form ofFD from thepublic & loans from the shareholders(Ranbaxy, Jindal steel & power)

Drafting of advtg for inviting deposits

Filing a copy of advtg with theRegistrar of Companies for registration

Arranging for the issue of advtg innewspapers, as reqd by theCompanies Act


Brokering FDD fti g & i ti g f li ti


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Drafting & printing of applicationforms

Making arrangements for thecollection of deposits at the banks

branches Submission of periodical

statements to companies concerned

Making arrangement for payment ofinterest amounts


Brokering FD


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Providing advice to the company on the

terms & Conditions of FDs & Deciding on the appropriate rate of int,

keeping in view the prevailing capital &

money mkt conditions Helping the company to observe all the

rules & regulations in this connection

Assisting in Mntce of records & registersfor this purpose.


Deposits under corporate FDs :

Governed by Companies Act under Section 58A.


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y p

Unsecured.

Currently corporate fixed deposit rates

Small companies 11%,

Big companies offer 10.5% interest.

Banks 6-7% and these rates can change easily.

Corporate deposits Do not change their rates during asix month to one year period, which provides stability tothe investment.

Tata Motors, Mahindra & Mahindra and Indian Hotelsall offer corporate FDs and are doing well.

People usually invest in lakhs and not thousands incorporate FDs.


The interest paid half yearly basis.


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Tata Motorswas authorised to raise up toRs 1,931.48 crore from the publicthrough fixed deposits and has alreadyraised over Rs 700 crore.

Majority of the companies who raise moneyvia fixed deposits have quarterly interestpayouts and the interest rates vary from9-13% based on the options one chooses.

It is a threat to mutual fundPREPARED BY MS.S.SANGEETHA, SENIOR LECTURER, KCTBS

Bajaj capital


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Bajaj capital

Integrated Enterprises (India)Limited

Integra Capital ManagementLtd.

ICICI LOMBARDKarvy consultancy


Mutual Funds Pooling up public savings


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Investing the funds in a diversified portfolio of shares& debentures belonging to well managed & growingcompanies

Earnings investors a steady ROI with an assurance ofcapital assurance

Engaging in the business ofacqn, holding/ disposal ofsecurities

Making invt in any commercial paper floated by Central

Govt, RBI, any local authority, any fgn Govt, fgnbank/ any other authority outside India & approved

by RBI.


Mutual Fund Companies in India


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ABN AMRO Mutual Fund Birla Sun Life Mutual Fund Bank of Baroda Mutual Fund (BOB Mutual

Fund)

HDFC Mutual Fund HSBC Mutual Fund ING Vysya Mutual Fund Prudential ICICI Mutual Fund Sahara Mutual Fund State Bank of India Mutual Fund (SBI) Tata Mutual Fund


Relief to Sick industries


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Rejuvenating old lines & ailing units

byAppraising their technology &process,

Assessing their reqtsRestructuring their capital base

Evolving the rehabilitationpackages which are acceptableto financial institutions & banks


Relief to Sick industries


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Exploring the possibilities ofM&A

Assisting in obtaining approvals from

the BIFR & other authorities underthe Sick Industrial

Companies Act 1985

Monitoring the implementation ofrehabilitation schemes, M&A


Example- Indian Drugs & Pharmaceuticals Ltd IDPL was formally declared sick by the Board forIndustrial & Financial Reconstruction (BIFR) on the


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12.08.1992. A revival package for the company was approved by

BIFR on the 10.02.1994. BIFR heard the case from time to time.

BENGAL CHEMICALS & PHARMACEUTICALS LIMITED (BCPL)-

declared sick by the Board for Industrial and Financial Reconstruction(BIFR) 14/1/ 1993.A revival package was approved by the BIFR on the 4/4/1995.The revival period was for ten years beginning 1994-95. The companycould achieve a consistent growth of about 20% in the years 1994-95

to 1996-97.The net losses per annum are also came down significantly

thereafter.


M/s. Khatau Makanji Spinning &


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Weaving Mills Ltd. is a sick industrial

company , the Sick IndustrialCompanies (Special Provisions) Act,1985 (SICA). On 27 March, 1995, BIFRsanctioned a scheme for therehabilitation of the company

Rehabilitation scheme has beenprepared by ICICI .


Project Appraisal


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Project Appraisal

Financial appraisal

Technical appraisalEconomic Appraisal


Financial Appraisal


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Financial Appraisal

viability,

profitability,

ST & LT obligations,

Capital structure analysis- LT solvency position


Technical Appraisal


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pp

TechnologyDesign

Scope & content of the plant

Inputs

Infrastructure facilities

Marketable pdt from the resourcesdeployed

Plough back - certain %PREPARED BY MS.S.SANGEETHA, SENIOR LECTURER, KCTBS

Economic Appraisal


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Economic Appraisal

Effect of the Project onemployment & fgn

exge.Impact of the project on

net social benefits /welfare.PREPARED BY MS.S.SANGEETHA, SENIOR LECTURER, KCTBS


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If a fund had net assets of $50

million and there are one millionshares of the fund, then the priceper share (or NAV) ?


The current market value of the fund's net assets on that particular day

Th b f t t di h (or)NAV=


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The number of outstanding shares (or)

The total net assets of the fund - anyliabilities. (or)

Example: If the total value of assets in

a fund = $50 million N= one millionshares in the portfolio,

Total value of assets in a fund $50 millionNAV = = = $50/ share

Shares in the portfolio 1 million shares


Details of the IPO OF DLF: Issue period: Between June 11, 2007 and June 14, 2007

Issue : 175 000 000 shares/ 17 5 crores


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Issue : 175,000,000 shares/ 17.5 crores

Issue Size: Rs 8750crores -Rs 9625 crores

Face Value: Rs.2 Method: 100% book building

Price band: Rs.500 to Rs.550 (250 to 275 times >facevalue)

Rs 8750crores / 17.5 crores= 500;Rs 9625 crores/ 17.5 crores= 550

Market lot: 10 shares

Minimum order: 10 shares

Retail investor cap: Rs.100,000 maximum This is really an excellent IPO.

Reasons for the demand for more housing,infrastructure etc.


Global coordinators & Book running lead managers Kotak invt bank

DSP Merrill Lynch


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Senior Book running lead managers:

Lehman bros Securities private ltd

Registrar of the issue: Karvy Computershare pvt ltd

Bankers o the issue: ABN Amro, ICICI, HSBC, DeutscheBank , citi bank, centurion bank of Punjab, Standardchartered Bank, UTI, Kotak mahindra, HDFC

Refund banks: ICICI, HSBC, Standard chartered Bank


Public Issue can take place in 3 forms


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Prospectus

Offer for sale

Private placement


Public Issue thro


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Common method

of public issuethroProspectus.


The information required by thecompanies Act & SEBI are furnished


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in the prospectus.

When the prospectus is readysent to

SEBI (for vetting & clearance)

Filed with the Registrar of companies

Brokers canvass the subscription

(Members of the stock exchange)


Offers for sale


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Offers thro the intermediary of issuehouse/ firm of stock broker

Co Sells entire Issue house

at agreedprice(par value)

Issue of shares

/ Debentures


Private Placement


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Direct sale of securities by a companyto investors

LIC UTI GIC SFC


Role of Merchant Bankers


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Merchant Bankersappoint

Brokers Principal Agent Bankers to

issue


Pricing of the Issues


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The SEBI guidelines (1992) for cap issues

have opened the cap mkt for free pricing. Pricing done by cos with consultation

with MBs.

An existing Listed company & a new coset up by an existing co with 5 years of track record.

An existing Unlisted company going in for

public issues for the 1st time & 2 1/2years of track record of constantprofitability can freely price the issue.


Reliance coms- merchantb k


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bankers

Goldman Sachs, Deutsche Bank, MorganStanley and UBS

The proceeds raised from the IPO will be

used to part finance expansion plansannounced last year, which include laying50,000 km fresh undersea cable in regionswhere there is dearth of international

bandwidth. The expansion plan could entailan investment of about 1.5 billion dollar(nearly Rs 7,000 crore).


Premium


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Premium will be based on

Net Asset Value

Profit Earning Capacity

Market Price

Justification of price has to be

stated & included in the prospectus.


Rights issue


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g

New shares are offered to the existingshareholders.

Only in equity shares

Can be done only after 1 year of the

first issue


ProspectusSec2(36)of the Cos Act 1956


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Sec2(36)of the Co s Act 1956

Is any document described/ issued as a

prospectus & includes any notice , circular, advtor other document inviting deposits from thepublic, inviting offers from the public for thesubscription or purchase of any shares in ordebentures of a body corporate

Registered with the Registrar

Advertised in newspapers atleast 10 days before

opening of subscription


Subscription list -Minimum periodfor which the company will continue


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for which the company will continueto receive application.

Must be open atleast for 3 days Minimum subscription is fixed at 90%

of the issued capital to the public

Has to be subscribed within thestipulated period after the issue of the prospectus , if not to be returnedto the applicants.

In case of over subscription, partialallotment is made


Marketing

After the despatch of Prospectus the MB arrange a


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After the despatch of Prospectus , the MB arrange ameeting with the representatives & advertising

agencies to finaliseDate of opening

Closing of issue

Registration of Prospectus

Launching publicity campaign Fixing date of Board meeting to approve & sign

prospectus

Pass necessary resolutions.

Security issues are to underwritten . SEBI hasmade it mandatory.


Condition for Fixation of face value:


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Issue prices Face value

Below Rs 500 per share Rs 10 per share.

Rs 500 or more Not below Re 1.


Book Running Lead ManagerThe lead merchant bankers appointed by the IssuerCompany are referred to as the Book Running Lead


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p y gManagers. The names of the Book Running LeadManagers are mentioned in the offer document of the

Issuer Company.

Syndicate Members

The Book Running Lead Managers to the issue appointthe Syndicate Members, who enter the bidsof investorsin the book building system. Syndicate Members areintermediaries registered with SEBI who also carry on theactivity ofunderwriting.

Order BookIt is an 'electronic book' that shows the demand for theshares of the company at various prices on a real timebasis. PREPARED BY MS.S.SANGEETHA, SENIOR LECTURER, KCTBS

Authorised capital is that capital which isdecided by the Registrar (recruited undercompanies act,1956)as the maximum amountthat can be raised from the shareholders.

20 crores


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that can be raised from the shareholders.

Issued capital is that part of the authorisedcapital which is brought before the public forsubscription.

Subscribed capital is that part of the issuedcapital that is actually subscribed by the

public.

Paid-up capital is that part of the subscribedcapital that is collected by the company as apart payment. The due part will be collected bythe company in the immediate future.

18 crores

16 crores

8 crores

Company cannot raise capital amount more thanAuthorised Capital unless the Article of Association is amendedby passing special resolution by the share holders with approval ofCentral Government and Registrar of Companies.


Bajaj Capital is a SEBI approved merchantbankers, investment advisors and financial planners.Their Products and Services :


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hei oducts and Se vices :Investment Advisory Products , Company

fixed deposits, Bonds, Mutual funds, Lifeinsurance, General insurance, Pensionschemes, Post office schemes, Tax savingschemes, Insurance linked investmentschemes, Initial public offerings, Housing

loans, NRI scheme They areCategory II Merchant Banker:

They provide the following services -

Syndications,

Initial Public Offers [IPOs],Advisory Services,Share Buybacks,Mergers, Acquisition.

Structuring & Syndication,Lease & Hire Purchase,

Money Markets,Structuring of Short Term Finance Solutions,Placement of Preference Shares/Non-Convertible Debentures,Securitisation of Debt,Private Equity and Venture Capital



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ICICI Lombard.- Asset Financing,- Merchant Banking,- Capital Market Operations,- Corporate Advisory Services,- Fixed Deposits.


Integrated Enterprises (India) Limited the Manufacturer and Services of Investment Avenues, Mutual Funds,


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, Corporate Services,

Demat services, Insurance, Secondary Market, Franchisee, Share News, e-TDS, (Tax deducted at source) BPO services, Depository Registry, Demat Account,

Fixed Deposits, Bonds, Post office Schemes. -Post officeSchemes Public Provident Fund (PPF), Post Office Monthly Income Plan


Integra Capital Management Ltd. -AssetFinancing -Merchant Banking -Capital


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g g pMarket Operations -Corporate Advisory

Services -Fixed Deposits.

IL&FS Investsmart Limited - WealthManagement Services, PortfolioManagement Services , Securities Broking -Equities & Derivatives , Depository &Custodial Service.

Bajaj Capital Ltd - Merchant Banking. -Resource Mobilisation - Distribution ofMutual Fund. - Investment Advisory -Money Market - Financial Planning.


Karvy Consultants Limited

- Stock broking, Depository Participants,Distribution of financial products mutual funds


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Distribution of financial products - mutual funds,bonds, fixed deposit, equities, Insurance Broking,

Commodities Broking, Personal Finance AdvisoryServices, Merchant Banking & Corporate Finance,placement of equity, IPOs.

LKP Shares and Securities Ltd.

-Stock Markets, Primary Market Operations,Secondary Market Operations, Research, MerchantBanking.

Middle East Capital Group: MECG

- Merchant Banking, Private Equity Funds, AndCorporate Finance.


"Offer document" : Prospectus public issue or offer


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for sale

Letter of Offer rights issuewhichis filed with Registrar of Companies

(RoC) and Stock Exchanges. An offerdocument covers all the relevantinformation to help an investor to

make his/her investment decision.


"Draft Offer document" offer document in draftstage. The draft offer documents are filed with


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SEBI, at least 21 days prior to the filing of

the Offer Document with the RoC/ SEs. SEBI may specify changes, if any, in the draft

Offer Document and the issuer or the leadmerchant banker shall carry out such changes in

the draft offer document before filing the OfferDocument with the RoC/ SEs.

The Draft Offer document is available on the SEBIWeb site for public comments for a period of 21

days from the filing of the Draft Offer Documentwith SEBI.


"Red Herring Prospectus" is a prospectus which doesnot have details of either price or numberof shares being offered th t f


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of shares being offered or the amount ofissue. This means that in case the price is not disclosed,the number of shares and the upper and lower pricebands are disclosed. On the other hand, an issuer canstate the issue size and the number of shares aredetermined later.

If the final price are included in the offer document &the offer document filed thereafter with ROC becomes aprospectus.

"Abridged Prospectus" Prospectus + application formof public issues.


DB Merchant Banking ServicesLtd. Cosmos Co-Op. Bank Ltd. Punjab & Sind Bank

Karur Vysya Bank Ltd.Karnataka Bank Ltd.

Dhanalakshmi Bank Ltd.

Bank of Maharashtra

Ci U i B k L d


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State Bank of Patiala State Bank of Hyderabad Lakshmi Vilas Bank Ltd. Catholic Syrian Bank Ltd. Bharat Overseas Bank Ltd. City Co-operative Bank Ltd Shamrao Vittal Co-operative

Bank Ltd. Benares State Bank Ltd. United Bank of India North Kanara G. S. B. Co-

operative Bank

Bank of India Andhra Bank Corporation Bank Vijaya Bank

City Union Bank Ltd.Centurion Bank of Punjab Ltd

YES Bank Ltd.UCO BankInd Bank

Housing Ltd.

Indbank Merchant Banking Services Ltd.

United Western Bank Ltd.Bank of Punjab Ltd.

Bank of Madura Ltd.IDBI Bank Ltd. (OLD)Nedungadi Bank Ltd.Lord Krishna Bank Ltd.Development

Credit Bank Ltd.

Global Trust Bank Ltd.Hindusthan Mercantile Bank Ltd.

State Bank of Indore Ltd.Indian Bank

Central Bank of India

Small Industries Development Bank of

India

Export Import Bank of India


Jammu & Kashmir BankLtd.

ING Vysya Bank Ltd.

Kotak Mahindra Bank Ltd.Dena Bank

Indian Overseas Bank


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Oriental Bank of

CommerceFederal Bank Ltd.

Canara Bank

Axis Bank Ltd.

Syndicate Bank

ICICI Bank Ltd.

HDFC Bank Ltd.

Union Bank of India

IndusInd Bank Ltd.

Bank of Baroda

State Bank of India

IDBI Bank Ltd

Punjab National Bank

Allahabad Bank

Bank of Rajasthan Ltd.

State Bank Of Bikaner andJaipur

State Bank Of Mysore

South Indian Bank Ltd.

State Bank of Travancore

Karur Vysya Bank Ltd.



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Bajaj capital Karvy consultancy

Documents

Merchant Banking in India- Last