Merchant Banking

MERCHANT BANKING
• IN INDIA THE MERCHANT BANKING
BUSINESS STARTED IN 1967, WHEN
GRINDLAYS BANK ESTABLISHED THEIR
MERCHANT BANKING DIVISION
• MERCHANT BANKING STANDS FOR
PROVIDING VARIOUS SERVICES RELATING
TO CAPITAL MARKET TO CORPORATE
SECTOR
 MERCHANT BANKING
• THE SEBI ISSUED GUIDELINES FOR THE
MERCHANT BANKERS
• 1) NECESSARY EXPERTISE
• 2) GOOD FINANCIAL STANDING
• 3) HIGH DEGREE OF PROFESSIONAL
INTEGRITY AND FAIRNESS
• 4) MAINTAIN TRANSPARANCY IN ITS
OPERATIONS
 MERCHANT BANKING
ACTIVITIES
• 1) ISSUE MANAGEMENT
• 2) CAPITAL RESTRUCTURE
• 3) INVESTMENT MANAGEMENT
• 4) PROJECT APPRAISAL
• 5) FOREIGN CURRENCY FINANCES.
• 6) LOAN SYNDICATION
 MERCHANT BANKING
ACTIVITIES
• 7) MUTUAL FUNDS
• 8) ARRANGING FIXED DEPOSITS
• 9) LEASE FINANCE
• 10) MERGERS AND ACQUISITIONS
• 11) GOVERNMENT CONSENTS
• 12) ARRANGING FIXED DEPOSITS
 MERCHANT BANKING
ACTIVITIES
• 13) CORPORATE COUNSELLING
• 14) UNDERWRITING
• 15) RESTRUCTURING OF SICK UNITS
• 16) HIRE PURCHASE
• 17) MONEY MARKET OPERATIONS
• 18) NON-RESIDENT INVESTMENTS
 MERCHANT BANKING
ISSUE MANAGEMENT
• MERCHANT BANKER HELPS
CORPORATES TO RAISE CAPITAL
FROM THE MARKETS THROUGH THE
ISSUE OF SHARES, DEBENTURES,
BONDS ETC.
• THEY ARE DESIGNATED AS
MANAGERS TO THE ISSUE
 MERCHANT BANKING
ISSUE MANAGEMENT
• 1) DRAFTING OF PROSPECTUS AND
GETTING IT APPROVED FROM STOCK
EXCHANGES
• 2) OBTAINING CONSENT FROM SEBI
• 3) APPOINTING BANKERS,
UNDERWRITERS, BROKERS,
ADVERTISERS, PRINTERS ETC.
 MERCHANT BANKING
ISSUE MANAGEMENT
• 4) DECIDING THE PATTERN OF ROAD
SHOWS
• 5) DECIDING BRANCHES FOR
COLLECTING APPLICATION MONEY
• 6) HOLDING ROAD SHOWS TO SELL
THE ISSUE
• 7) DECIDING THE DATES OF OPENING
AND CLOSING OF THE ISSUE
 MERCHANT BANKING
ISSUE MANAGEMENT
• 8) AFTER THE CLOSE OF ISSUE,
OBTAINING THE CONSENT OF STOCK
EXCHANGE FOR DECIDING BASIS OF
ALLOTMENT ETC.
• IN THE ISSUE MANAGEMENT THE
SUCCESS OF THE ISSUE DEPENDS
UPON COOPERATION OF ALL
AGENCIES INVOLVED
 MERCHANT BANKING
UNDERWRITING
• INSURANCE AGAINST THE FAILURE
OF AN ISSUE
• GUARANTEE TO THE COMPANY THAT
EVEN IF THE ISSUE IS NOT FULLY
SUBSCRIBED TO, BY THE PUBLIC, THE
UNDERWRITERS WILL MAKE UP THE
SHORTFALL.
 MERCHANT BANKING
BOOK BUILDING
• SEBI DEFINES BOOK BUILDING AS A
PROCESS BY WHICH A DEMAND FOR
SECURITIES PROPOSED TO BE
ISSUED BY A CORPORATE IS ELICITED
AND BUILT UP AND THE PRICE FOR
SUCH SECURITIES IS ASSESSED
 MERCHANT BANKS
• MERCHANT BANKING IS A
PROFEESION WHICH
– IS RESULT ORIENTED
– NEEDS HIGHER DEGREE OF SKILLS IN
SOLVING PROBLEMS
– ASSISTS IN INVESTMENT AND FINANCIAL
DECISION MAKING
– ASSESSES CAPITAL NEEDS
 MERCHANT BANKING
– RAISES OWNED AS WELL AS BORROWED
FUNDS FOR CORPORATE CLIENTS.
– INSPIRES CONFIDENCE OF INVESTOR BY
PASSING ACCURATE AND ADEQUATE
INFORMATION IN TIME
– FACILITATES FUNCTIONING OF CAPITAL
MARKET AND MONEY MARKET,
 MERCHANT BANKING
• OBLIGATIONS AND RESPONSIBILITIES
IN TERMS OF SEBI GUIDELINES:
– OBSERVE HIGH STANDARDS OF
INTEGRITY AND FAIRNESS