Scribd Logo
Upload

Welcome to Scribd!

  • 59 views

    Chapter 2 FSM - 85456

    Uploaded by

    Amisha
    Merchant banking provides advisory services and assists with financial activities like mergers and acquisitions for corporate clients. They help channel funds for productive investments and provide long-term funding. Key services include corporate advisory, issue management, portfolio management, and underwriting. Merchant banking started in Italy and spread to other European countries before developing in the US and India. In India, merchant banking is regulated by SEBI and provides important functions for corporate growth.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    Chapter 2 FSM - 85456

    Uploaded by

    Amisha
    59 views24 pages
    Merchant banking provides advisory services and assists with financial activities like mergers and acquisitions for corporate clients. They help channel funds for productive investments and provide long-term funding. Key services include corporate advisory, issue management, portfolio management, and underwriting. Merchant banking started in Italy and spread to other European countries before developing in the US and India. In India, merchant banking is regulated by SEBI and provides important functions for corporate growth.

    Original Title

    Chapter 2 Fsm_85456

    Copyright

    © © All Rights Reserved

    Available Formats

    PPTX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Merchant banking provides advisory services and assists with financial activities like mergers and acquisitions for corporate clients. They help channel funds for productive investments and provide long-term funding. Key services include corporate advisory, issue management, portfolio management, and underwriting. Merchant banking started in Italy and spread to other European countries before developing in the US and India. In India, merchant banking is regulated by SEBI and provides important functions for corporate growth.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    59 views24 pages

    Chapter 2 FSM - 85456

    Uploaded by

    Amisha
    Merchant banking provides advisory services and assists with financial activities like mergers and acquisitions for corporate clients. They help channel funds for productive investments and provide long-term funding. Key services include corporate advisory, issue management, portfolio management, and underwriting. Merchant banking started in Italy and spread to other European countries before developing in the US and India. In India, merchant banking is regulated by SEBI and provides important functions for corporate growth.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 24

    Merchant Banking

    What do you mean by Merchant


    bank?
    Introduction
    • Merchant banking is an entity that performs different
    types of financial activities for its clients. It does not
    provide an regular banking services to regular public.
    • Merchant bank provides advisory services on
    corporate matters to the firms in which they invest.
    • They are also experts in international trade, which
    make them specialists in dealing with multinational
    corporations.
    • They also give expert advice on mergers and
    acquisition, and, Project counseling.
    • In the USA, the historical term Merchant bank
    refers to an ‘Investment Bank’.
    • Their activities are regulated by SEBI.
    • Popular merchant banks of India are:
    1. JP Morgan
    2. JM Financial
    3. Goldman
    4. Citi
    Definition
    • Rule 2(E) of SEBI rules 1992, defines Merchant
    Banking as, “any person who is engaged in the
    business of issue management either by
    making arrangements regarding selling,
    buying, or subscribing to securities as
    manager-consultant, advisor or rendering
    corporate advisory services in relation to such
    issue management.
    Features
    • Providing consultancy services is the key
    feature of merchant banking in India
    • Acts as an financial engineer.
    • Promotion of financial surplus.
    • A variety of services are offered to help in the
    growth of capital markets.
    Objectives
    • Channelizing the financial surplus of the
    general public into productive investment
    avenues.
    • Providing long term funds to projects or
    companies.
    • Portfolio management
    • Corporate advisory and issue management
    History

    • Merchant banking started in Italy in late medieval


    times
    • Reached in France during the seventeenth century
    • Italian merchant bankers introduced merchant
    banking in England in eighteenth century
    • European bankers developed merchant banking in
    USA
    • In 1972, merchant banking started in south Africa
    • In 1967, National Grindlays bank started merchant
    banking in India
    Merchant banking in India
    • Till early 1960s, there was no merchant banking in Indian banking
    system.
    • It was the Grindlays Bank which started merchant banking services
    in 1967. In 1967, the Reserve Bank of India(RBI) granted license to
    ‘The National Grindlays Bank’ to perform the services relating to
    issue management.
    • On the recommendation of Banking commission, State Bank of
    India(SBI) became the first Indian Bank to start with the merchant
    banking activities in 1972-73.
    • The other banks that followed the SBI were Central Bank of India,
    Bank of India, Syndicate Bank started merchant banking services in
    1977.
    • Among the development banks, ICICI Bank started merchant
    banking in 1973, followed by IFCI(1986) and IDBI(1991).
    Merchant bankers Commission
    • Merchant banking activities are regulated by
    1. Guidelines of SEBI and ministry of finance.
    2. Companies Act 1956
    • Merchant bankers are eligible to charge
    commission from their clients as detailed below:
    1. A merchant banker can charge 0.5% as the
    maximum commission for the whole issue.
    2. They can charge project appraisal fees.
    3. Brokerage commission 1.5%.
    4. Underwriting commission.
    Underwriting Commission
    Types of securities On amount devolving on On amount subscribed
    underwriters by public
    Equity shares 2.50% 2.50%
    Preference
    Shares/Debentures
    Up to Rs. 5,00,000 2.50% 1.50%
    More than Rs. 5,00,000 2.00% 1.50%
    Services of merchant banker
    • It is the intermediary between the company
    and the issue of capital
    • Various stages are:
    1 Business planning stage 1. Project Feasibility study
    2. Advise on capital structuring
    2 Equity raising stage 1. Pricing decision
    2. Underwriting to the issue
    3. Post issue management
    4. Assistance in ADR/GDR
    3 Debt raising stage 1. Management of debenture issue
    2. Loan syndication
    4 Strategic advice stages 1. Advise on expansion program
    2. Advise on mergers and acquisition
    3. Corporate structuring advise.
    1. Business • Project feasibility
    study
    planning stage:
    • Advice on capital
    structuring.
    2. Equity raising
    stage : • Preparation of
    prospectus & liaison
    with SEBI
    • Pricing decisions
    • Marketing in the
    capacity of lead
    managers
    • Underwriters to
    the issue
    • Post issue
    management
    • Assistance IN ADR/
    GDR

    3. Debt raising
    stage: • Management of
    debenture issue
    • Preparation of
    bankable proposal
    & syndication of
    loan
    4. Working capital • Assistance in
    arranging optimal
    raising stage: finance

    5. Strategic advice • Advice on


    stage: expansion
    programme
    • Advice on mergers
    & acquisitions
    • Corporate
    structuring advice
    Qualities of good merchant
    bankers
    LEADERSHIP

    AGGRESSIVE
    ATTITUDE
    ACTION TOWARDS
    PROBLEM
    SOLVING

    CO-OPERATION
    AND
    FRIENDLINESS
    Responsibilities of merchant bankers

    Investor Pricing of
    protection the issue

    Legal Project
    aspect evaluation
    Guidelines for merchant bankers
    • The merchant banker should have a professional qualification
    • Should comply with the SEBI regulations and submit reports
    accordingly-
    • Permission 3 years license

    • Proper fees authorization annual renewal /should be collected by SEBI


    • Category I leader 5crore (issue mgmt., portfolio management,
    underwriter, advisor)
    • C – ii 50L portfolio management, underwriter, advisor)
    • C – iii 20L underwriter, advisor
    • C- iv ---- advisor
    • Proper information should be given when inspected by SEBI
    • The Merchant banker will be suspended if found violation of guidelines
    Scope of merchant banking in India
    • Entry of foreign investors.
    • Corporate restructuring.
    • Growth of new issue market.
    • Innovation in financial investments.
    Challenges
    • Entry Restrictions
    • Industry comparmentalisation – MB,
    HP,LEASING, VENTURE C…
    • MALAFIDE PRACTICES
    • NON COOPERATION COMAPANIES
    • POOR NEW ISSUES MARKET
    Main merchant banking companies
    • Public sector
    1. Bank of Maharashtra
    2. Punjab national bank
    3. IFCI financial services LTD
    • Private sector
    1. Axis bank LTD
    2. Kotak Mahindra capital
    3. Yes bank LTD
    Key foreign players
    Conclusion
    • Merchant banking plays a very important role. It
    helps the corporate companies to develop in
    various fields of business.
    • Function of merchant bankers varies from country
    to country
    • In india merchant bankers are allowed to
    undertake those activities which are related to
    securities market including issue management
    and are prohibited from carrying on fund based
    activities.
    Thank you

    You might also like