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BY:Maneesha Kathuria(15)
Swati Sharma(60)
Sem -10
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M Ô reement between a corporation issuin
new securities to be offered to the public
and the mana in underwriter as a ent for
the underwritin roup .
M Ôlso termed the purchase agreement or
purchase contract, it represents the
underwriters' commitment to purchase the
securities, and it details the public offerin
price , the underwritin spread (includin
all discounts and commissions), the net
proceeds to the issuer, and the settlement
date .
„ole of Merchant Banker
M The issuer a rees to pay all expenses incurred in
preparin the issue for resale, includin the costs of
re istration with the Securities and Exchan e
Commission (SEC) and of the prospectus , and a rees
to supply the mana in underwriter with sufficient
copies of both the preliminary prospectus (red
herrin ) and the final, statutory prospectus.
The issuer uarantees :
(1) to make all required SEC filin s and to comply fully
with the provisions of the securities act of 1933 ;
(2) to assume responsibility for the completeness,
accuracy, and proper certification of all information in
the re istration statement and prospectus;
Contd.
(3) to disclose all pendin liti ation;
(4) to use the proceeds for the purposes stated;
(5) to comply with state securities laws;
(6) to work to et listed on the exchan e a reed upon;
and
(7) to indemnify the underwriters for liability arisin out
of omissions or misrepresentations for which the
issuer had responsibility.

M The underwriters a ree to proceed with the offerin

as soon as the re istration is cleared by the SEC or at
a specified date thereafter. The underwriters are
authorized to make sales to members of a sellin
roup .
`roject Financin
M `roject advisory services falls under one of the core
branches of corporate advisory services.
M It deals with the decision of financin a project based
on its stren th of assurin the future cash inflows.
M In other words `roject financin deals with financin a
project, which can in turn enerate return for its
stakeholders and help in repayin the interest and
loan on the proposed project.
M The assets used for undertakin that project are used
as collateral for financin that project.
„ole of Merchant Bankin

The followin components take care of the financin process.

M `roject Conceptualization
M `roject Structurin
M `roject Consortium
M Key `roject Contracts
M `   The main requirement of financin
depends on the concept of the project, the business opportunity
for it in the market and also the revenue model. Convincin the
lenders for financin a project becomes comparatively easy if the
project is not first of its kind. If the project uses a technolo y that
is already in use and perceives profitability it becomes easier to
convince the lenders. The project should also satisfy the policy
requirements of the overnment, the lendin institutions and the
banks
M `   `roject structurin focuses on reducin the
risks associated with the project in areas like location, operational,
production and distribution, technolo y identification, marketin
issues and the promoter resourcefulness.
Contd.
M `   
Ô stron project consortium helps in
reducin the time required to achieve the financial closures
of the project. Dependin on the nature and size of the
project, the consortium may consist of the combination of
project sponsors, technolo y providers, suppliers,
contractors and various other investors.
M     These are the contracts that
should be kept ready before the company enters in to any
of the financial contracts. Some of the key project contracts
in infrastructure and other projects consist of shareholders
a reement, license a reement, E`C (Equipment
procurement and construction contractors) contract,
operations and maintenance a reement, product buy back
or usa e a reement, forei n collaboration and technolo y
transfer a reement, joint venture a reements etc.
Types of `roject Financin
M   
   
 
M `roject financin throu h lon term debts
M `roject financin throu h equity

¢ `     



`roject financin throu h lon term debts takes three forms.
They are
M V
 
  The project can be financed by
short term or lon -term loans from domestic financial institutions
and commercial banks. They can finance the project throu h rupee
loans or the forei n currency loans and uarantees. These loans
can be either fixed interest rate or floatin interest rate pe ed to
some benchmark rate.
M m   

   ‰oans raised for financin a

project from outside India are called as external commercial
borrowin . These borrowin s are named so because they also add
to the external debt of the country.
Contd.
M V 

  In some
cases, the project can be financed throu h
debentures, bonds and other debt securities. The
projects can make use of private institutional
investors or I` s for ettin the debentures and other
debt securities
 `    
M The main source of equity for a project will be its
promoters. ther sources include consortium
partners, investors, collaborators, JV partners, and
institutional buyers.
Corporate „estructurin
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Methods of Corporate
„estructurin
M The important methods of Corporate
„estructurin are:
M Joint ventures
M Sell off and spin off
M Divestitures
M Equity carve out
M ‰evera ed buy outs (‰B )
M Mana ement buy outs
M Master limited partnerships
M Employee stock ownership plans (ES `)
4 56 p