Merchant Banking

Name : Bhumika Shah Subject : Finance Class : M.E.Biz- II SEM Roll No : 201 MERCHANT BANKING

Merchant banking is defined as an ³institution which covers a wide range of activities such as underwriting of shares, management of customers services, portfolio management, acceptance of bills, project counseling, insurance etc « They render all these services for a fee

ORIGIN : ‡ The term merchant banking originated from the London who started financing foreign trade through acceptance bills ‡ Letter they helped government of under developed countries to raise long term funds ‡ Letter these merchant formed an association which is now called ³Merchant Banking and Securities House Association´ MERCHANT BANKING IN INDIA

 Foreign banks like National Grindlays Bank (1967) & Citibank (1970).

 Commercial banks and Financial institutions

 State Bank of India (1972)

 Later ICICI set up its merchant Banking Division followed by Bank of India, Bank of Baroda, Canara Bank etc.. SERVICES OF MERCHANT BENKERS

 Public Issue through Prospectus

 Marketing

 Issue Management

 Underwriting of Public Issue

 Managers to Issue

 Portfolio Management

 Mergers and Takeovers

 Off Shore Finance

 NRI Investment Duties & Responsibilities Of Lead Managers

 To enter into an agreement

 Certificate of registration with SEBI

 Work of issue management

 Clearly defined responsibility

 Minimum underwriting obligation

 Due care & diligence Contd..

 Submitting due diligence certificates

 Submit all particulars to SEBI

 Suggestions or modifications

 Collections of the amount

 Ensuring refund

 Inform depository participants QUALITIES REQUIRED OF MERCHANT BANKERS

 Ability to analyse

 Abundant knowledge

 Ability to built up relationship

 Innovative approach

 Integrity GUIDELINES FOR MERCHANT BANKERS

SEBI¶s authorization is must to act as merchant bankers. authorisation criteria include ±

 Qualification.  Infrastructure.

 Capital adequacy.  Transactions.

 Report submission to SEBI.  Prohibition from buying Securities.  Power of SEBI.  Appointment of Compliance officer.  Collected by SEBI. MERCHANT BANKERS COMMISSION

 Maximum 0.5%  Project appraisal fees  Lead Manager :- - 0.5% upto Rs.25 crores - 0.2% more in excess of Rs.25 crores

 Underwriting fees  Brokerage commission 1.5%

 Other expenses :- - Advertising - Printing - Registrar¶s expenses - Stamp duty SCOPE FOR MERCHANT BANKING IN INDIA

I. Growth of new issues market

II. Entry of Foreign Investors

III. Changing policy of Financial Institutions

IV. Development of debt market

V. Innovations in Financial Instruments

VI. Corporate Restructuring

VII. Disinvestment Thank you... Thank you...