Registration with SEBI as Merchant Banker:

Q. Is it mandatory for a merchant banker to register with the SEBI?

A. Yes. Without holding a certificate of registration granted by the Securities and Exchange Board of India, no person can act as a merchant banker.

Q. Who is eligible to obtain registration as a merchant banker?

A. Only a body corporate other than a non-banking financial company shall be eligible to get registration as merchant banker.

Q. What are the various categories for which registration can be obtained?

A. The categories for which registration may be granted are given below:

Category I – to carry on the activity of issue management and to act as adviser, consultant, manager, underwriter, portfolio manager.

Category II - to act as adviser, consultant, co-manager, underwriter, portfolio manager.

Category III - to act as underwriter, adviser or consultant to an issue

Category IV – to act only as adviser or consultant to an issue

Q. What is the capital requirement for carrying on activity as merchant banker?

A. The capital requirement depends upon the category. The minimum net worth requirement for acting as merchant banker is given below:

Category I – Rs. 5 crores Category II – Rs, 50 lakhs Category III – Rs. 20 lakhs Category IV – Nil

Q. What is the procedure for getting registration?

A. An application should be submitted to SEBI in Form A of the SEBI (Merchant Bankers) Regulations, 1992. SEBI shall consider the application and on being satisfied issue a certificate of registration in Form B of the SEBI (Merchant Bankers) Regulations, 1992.

Q. What is the registration fee payable to SEBI?

A. Rs. 5 lakhs which should be paid within 15 days of date of receipt of intimation regarding grant of certificate.

Q. What is the validity period of certificate of registration?

A . Three years from the date of issue.

Q. How to renew the certificate?

A. Three months before the expiry period, an application should be submitted to SEBI in Form A of the SEBI (Merchant Bankers) Regulations, 1992. SEBI shall consider the application and on being satisfied renew certificate of registration for a further period of 3 years.

Q. What is the renewal fee payable to SEBI?

A. Rs. 2.5 lakhs which should be paid within 15 days of date of receipt of intimation regarding renewal of certificate.

Q. What is the consequence of non-registration or failure to renew registration?

A. The person whose registration is not current shall not carry on the activity as merchant banker from the date of expiry of validity period.

Equipment Finance

Conserving your Business Capital

As your business grows, so do the number of decisions you have to make regarding the finance of your Motor Vehicles, Plant and Equipment etc. Your decision to either purchase goods from available cash flow or finance them may have both cash flow and taxation implications for your business. What’s best for your business will very much depend on your circumstances at the time.

Bendigo Bank have experienced and professional Business Banking Managers and an Equipment Finance Department which specialises in this field of finance which will assist you to make the appropriate decision for your business capital needs. A member of our highly experienced team will sit down with you and assess your requirements and then make a prompt recommendation on a course of action.

You'll find that we're competitive, flexible and able to offer you a choice of terms and finance options.

What sort of business equipment do we finance?

Bendigo Bank can organise finance for a wide range of items, including:

cars, utilities and light commercial vehicles trucks and buses

forklifts, cranes and earthmoving equipment

computing and office equipment

printing, medical and manufacturing equipment

industrial plant equipment.

Origin of Merchant Banking

The origin of merchant banking is to be traced to Italy in late medieval times and France during the seventeenth and eighteenth centuries. The Italian merchant bankers introduced into England not only the bill of exchange but also all the institutions and techniques connected with an organized money market during seventeenth and eighteenth centuries. In France a merchant banker (le merchant banquer) was not merely a trader but an entrepreneur par excellence. He invested his accumulated profits in all forms of promising activities. He added banking business to his merchant activities and became a merchant banker.

Merchant Banking in India

Merchant banking activity was formally initiated into the Indian capital Markets when Grindlays bank received the license from reserve bank in 1967. Grindlays started with management of capital issues, recognized the needs of emerging class of entrepreneurs for diverse financial services ranging from production planning and system design to market research. Even it provides management consulting services to meet the requirements of small and medium sector rather than large sector. Citibank Setup its merchant banking division in 1970. The various tasks performed by this divisions namely assisting new entrepreneur, evaluating new projects, raising funds through borrowing and issuing equity. Indian banks Started banking Services as a part of multiple services they offer to their clients from 1972. State bank of India started the merchant banking division in 1972. In the Initial years the SBI's objective was to render corporate advice And Assistance to small and medium entrepreneurs. Merchant

banking activities is of course organized and undertaken in several forms. Commercial banks and foreign development finance institutions have organized them through formation divisions, nationalized banks have formed subsidiaries companies and share brokers and consultancies constituted themselves into public limited companies or registered themselves as private limited companies. Some merchant banking outfits have entered into collaboration with merchant bankers abroad with several branches

Nature of merchant banking

The services of merchant bank cover project counseling, pre investment activities, feasibility studies, project reports, design of capital structure, issue management, underwriting, loan syndication, mobilization of funds, foreign currency finance, mergers, amalgamation, takeover, venture capital and public deposits. Merchant banking is skill based activities and involves serving financial need of every client. Merchant bankers can turn to any of the activities depending upon resources, such as capital, foreign tie-ups for overseas activities and skills.

The depth and sophistication in merchant banking business are improving since the avenues for raising funds are widening and demands for funds is increasing.

The authorized activities include issue management which consists of preparation of prospectus and other information relating to the issue, determining financing structure, and tie up of finances and final allotment or refund of subscription, corporate advisors to the issue and underwriting. Other authorized activities would be portfolio management services

Types of issues

Public issue Exchange issue

Bonus issue

Rights issue

Public issue:

Public issues of securities, debentures or shares are made in the primary market. The funds mobilized through primary market constitute investment. An offer to public is made through issue of prospectus or subscribed directly. Different media newspapers televisions periodicals are used for publicity. The intermediaries who organize these

activities are merchant bankers. In past stock brokers used to organize public issue. Initial issues are issues of shares for the first time either after incorporation or conversion from private limited to public limited company. The initial as well as further issues may be offered for cash subscription or for consideration other than cash such as change of ownership either of physical assets or technical know-how.

Exchange issue:

An exchange issue is one in which shares of one company are exchanged for another as in case of takeover and mergers. It does not add to funds of the company making the exchange although the merger may result in synergy. Another form of issue that does not result in raising new funds is the bonus issues. Bonus shares are distributed to determine proportion to existing shareholders.

Right issues:

Right issue is the issue of new shares in which existing shareholders are given pre-emptive rights to subscribe to new issue. They are issued at a premium, which is freely determined by the company making the issue.

Contents of prospectus

A prospectus specifies the following: objective of the company

memorandum of association

number and classes of shares

number of redeemable preference shares

qualification of directors and their remuneration

particulars about managing directors and directors

minimum subscription for shares

the time and opening of subscription lists

amount payable for application and allotment of each shares

shares issue for consideration other than cash

name of the underwriter

underwriting commission

preliminary expenses and issues expenses

particulars of the auditors

interest of directors and promoters

voting and dividend rights

time of business

capitalization of profits and surplus from reevaluation of assets