MERCHANT BANKING OF STATE BANK OF INDIA Animesh Shekhar 1Master of Business Administration, People’s University, Bhopal (India) ABSTRACT Globalization of Indian Economy has made the whole economy open, which has move multinational player in era of the financial services. Government has now open up the doors of investments especially in the area of banks and insurance which leads to competitive environment for the present players. The word merchant bank does not have a fixed definition as this term is used differently in different countries. In general the merchant banks are the financial services, solutions and advice to corporate houses. Merchant banks are popularly called “Accepting and issuing houses”. Merchant banking is one of the oldest and specialized financial intermediaries in the primary market. Merchant banking is a much desired innovative step undertaken by the commercial banks in India. The need for merchant banking was stressed by the Banking Commission (1972). In India, at present, a substantial number of Merchant Bankers are operating under the direct supervision of Securities and Exchange Board of India (SEBI). The present study attempt has been made to evaluate the performance of SBI capital market Ltd. in Merchant banking activities. The selected Merchant Bank emphasis has given on categorization of Merchant Bankers and in this direction the Merchant Bank which comes under the purview of Category-I registration with Securities and Exchange Board of India has been chosen to appraise that performance. Keywords: Globalization, Merchant Bankers, Capital Market. I. INTRODUCTION The merchant banking has been defined as to what a merchant banker does. A merchant Banker has been defined by Securities Exchange board of India (Merchant Banker) rules, 1992, as “Any person who is engaged in the business of issue management either by making arrangements regarding selling, buying or subscribing to securities or acting as manager, consultant, advisor or rendering corporate advisory services in relation to such issue management. 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. Merchant banking consisted initially of merchants who assisted in financing the transactions of other merchants in addition to their own trade. In France, during seventeenth and eighteenth centuries a merchant banker was not merely a trader but an entrepreneur par excellence. He invested his accumulated profits in all kinds of promising activities and became a merchant banker. 275 | P a g e Figure 1: Operation of Indian Merchant banking Source: Authors Compilation In India Merchant banking activities started from the year 1967. Prior to the enactment of Indian Companies Act 1956, managing agents acted as issue houses for securities, evaluated project reports, planned capital structure and to some extent provided venture capital for new firms and few share broking firms also functioned as merchant bankers. The need for specialized merchant banking services was felt in India with the rapid growth in the number and size of the issues made in the primary market. Initially, merchant banking services were offered along with other traditional banking services. The Banking Regulation Act permitted commercial banks to offer a wide range of financial services through the subsidy rule through its amendments. The State Bank of India was the first Indian Bank to set up merchant Banking division in 1972. Figure 2: Merchant banking Services in India Source: Internet In addition to the above, the scope of Merchant Banking services has extended to providing advisory services to companies to increase or divest their stales, public sector undertaking disinvestments, international issues, etc. Merchant banks are private financial institution. Their primary sources of income are PIPE (Private Investment In Public Entities) financings and international trade. Their secondary income sources are consulting, Mergers and Acquisitions help and financial market speculation because they do not invest against collateral, they take far greater risks than traditional banks. The reason that businesses should develop a working relationship with a merchant bank is that they have more money than venture capitalists. Their advice is to be more pragmatic than venture capitalists. 276 | P a g e Functions of Merchant Bankers: 1. Consulting advice on going public and international business. 2. Advice and help in taking your company public. If they are unwilling to supply Investment Banking bridge loans, they have a low cost strategy for taking your company public. 3. They do PIPE (Private Investment in Public Equities) financings. 4. They can advise or help with a company’s M&A strategy. 5. They are essential advisors for companies seeking to become multinational corporations. II. LITERATURE OF STATE BANK OF INDIA SBI Merchant Banking Group is strongly positioned to offer perfect financial solutions to your business. We specialize in the arrangement of various forms of Foreign Currency Credits for Corporate. State Bank of India is the nation’s largest bank. Tracing its root back some 200 years to the British East India Company (and initially established as the Bank of Calcutta in 1806), the bank operates more than, 13,500 branches and over 5,000 ATMs within India, where it also owns majority stakes in seven associate banks. State Bank of India has more than 50 offices in nearly 35 other countries, including multiple locations in the US (California), Canada, and Nigeria. The bank has other units devoted to capital markets, fund management, factoring and commercial services, and brokerage services. The Reserve Bank of India owns about 60% of State Bank of India. SBI provide the resources, convenience and services to meet your needs by arranging Foreign Currency credits through: Commercial loans Syndicated loans Lines of Credit from Foreign Banks and Financial Institutions FCNR loans Loans from Export Credit Agencies Financing of Imports. We are internationally the most Preferred Bank by Export Credit Agencies for Guarantees in case of the Indian Clients or Projects. SBI being an Indian entity has no India exposure ceiling. Our Primary focus is On Indian Clients. SBI’s seasoned Team of professionals provides you with Insightful credit Information and helps you Maximize the Value from the transaction. 2.1 Our Products and Services 1. Arranging External Commercial Borrowings (ECB). 2. Arranging and participating in international loan syndication. 3. Loans backed by Export Credit Agencies. 4. Foreign currency loans under the FCNR (B) scheme. 5. Import Finance for Indian corporate. 277 | P a g e III. PROFILE OF SBI CAPITAL MARKET LTD SBI Capital Markets Ltd. (SBICAP), India’s largest domestic Investment Bank, began its operations in August 1986 and is a wholly owned subsidiary and investment banking arm of State Bank of India (SBI), the largest commercial bank in India. SBICAP offers the entire bouquet of Investment Banking and corporate advisory services. The service bouquet includes the full range of financial advisory services under one umbrella covering Project Advisory and Loan Syndication, Structured Debt Placement, Capital Markets, Mergers and Acquisitions, Private Equity and stressed Assets Resolution. As a complete solutions provider to clients in investment banking and corporate advisory, SBICAP offers them advice, innovative ideas, and unparalleled execution across all stages in their business cycle ranging from venture capital advisory, project advisory, buy and sell-side advisory, accessing financial markets to raise capital and even restructuring advisory in their turn-around phases. SBICAP is a global leader in the area of Project Loan Syndication and has lent crucial support to the Indian infrastructure sector. SBICAP is known for its astute professionalism and business ethics. The team of execute The merchant banking services help the entrepreneurs to come up with industrial setups in these areas. Besides, the merchant banks help the entrepreneurs to explore the joint venture opportunities in the foreign markets. Qualified and dedicated professionals with vast experience in the fields of Project Advisory, M&A Advisory, Corporate Strategy or Business Restructuring Advisory, arranging of Private Equity/Structured Finance, Equity, Debt and Hybrid Capital rising. Headquartered in Mumbai, SBICAP has 6 regional offices across India (New Delhi, Kolkata, Hyderabad, Chennai, Bangalore and Ahmedabad), 2 branch offices (Pune and Guwahati) and 5 subsidiaries – SBICAP (Singapore) Limited. The regional offices are located strategically at major business hubs in the country and closely liaise with clients at those and nearby centres. SBICAP also offers services in the broad areas of mergers and acquisitions, project advisory, Structural finance, and capital markets. Equity Broking and Research, Security Agency and Debenture Trusteeship and Private Equity Investment and Asset Management through its wholly- owned subsidiaries SBICAP Securities Limited, SBICAP Trustee Co. Ltd. and SBICAP Ventures Limited, respectively. The SBI Capital market Ltd. incomes following heads:- 1. Merchant Banking and Advisory Fees. 2. Income from Securities. 3. Lease and Hire Purchase income and other income. The SBI Capital market Ltd. Expenditures