ppt on merchant banking

1. Presentation
regarding

2. DefinitionS :
• “A kind of financial institution which
provides a variety of services such as
investment, banking, management of
customers securities, portfolio,
acceptance of bills etc is known as
MERCHANT BANKING.”
• ORIGIN :
 The term Merchant banking is
originated from the london who started
financing foreign trade through
acceptance of bills.
 Later they helped government of under
developed countries to raise long term
funds.

3.  Later those merchants formed an association
which is now called “Merchant banking and
securities house association.”
Services of merchant bankers :
 Project counseling
 Loan syndication

4. • types of merchant banking

5. • Issue management :
Management of issues
involves marketing of
corporate securities i.e.
equity shares, preference
shares and debentures by
offering them to public.
Pre-issue activities :-
 They prepare copies of
prospectus and send it to
SEBI and then file them to
registrar of companies.
 They conduct meetings with
companies, represent
activities and advertising
agencies

6. to decide upon the date of
oppening issue, closing issue,
launching publicity campaign
etc.
Post issue activities :
 It includes collection of
application forms, screening of
application, deciding allotment,
procedure, mailing of allotment
letters, share certificates and
refund orders.

7.  underwriting is an insurance
to the company which make
public issues, raising of
external resources is easy for
the issues backed by well
known underwriters.
 Managers consultants or
advisors to the issue :
SEBI insist that all issue
should be managed by at least
one authorized merchant
banker but not more then two.
For an issue of 100 crores upto

8. maximum of four merchant bankers shall
be appointed. They help in listing of
shares in stock exchange, completion of
formalities under companies act etc.
Portfolio management :
portfolio refers to investment in
different kinds of securities as shares,
debenture issued by different companies.
It is a combination of assets but a
carefully blended asset combination.

9.  investors are interested in
safety, liquidity and profitability
of his investment but they cant
choose the appropriate securities.
So merchant banking help their
investors in choosing the shares.
They conduct regular market and
economic surveys.
 NRI INVESTMENT :
NRI has to follow lots of
complicated rules for investing in
the shares in INDIA. Merchant
banking help them in choosing the
shares and offer expert advice
fulfilling government regulations
thus mobilizing more

10.  Advisory service relating to
mergers and takeovers :
Merger is a combination of
two or more companies into
a single company where one
survives and other loses its
existence.
Takeover is the purchase
by one company acquiring,
controlling interest in the
share capital of another
company.

11.  merchant banker acts as a
middle man between offeree
and offerrer, negotiates mode of
payment and gets approval
from government.
 Offshore finance :
 merchant banker help their
clients in long term foreign
currency loan.
 Joint venture abroad
 Financing exports and imports
 Foreign collaboration
arrangement

12. banks providing merchantbanks providing merchant
banking services inbanking services in INDIAINDIA
 Commercial banks
 Foreign banks like national
grind lays {1967}, Citibank
{1970}, HDFC bank, SBI etc
 Development banks like
ICICI, IFCI, IDBI etc
 SFC, SIDC.
 Private firms like JM
financial & investment,
kotak mahindra, ceat
financial services, VMC
project technologies, morgan
stanley etc…

13. Merchant bankingMerchant banking
regulationsregulations
 Certificate from SEBI is a
must. There are four types:
I. Category I merchant bankers :
can act as issue managers.
II.Category II merchant bankers:
can act only as co-managers.
III.Category III merchant
bankers :can act as co-
manager but cannot
undertake portfolio
management.
IV.Category IV merchant
bankers :

14. Can merely act as consultant or advisor to
issue of capital.
Capital adequacy norms :
Category I : 5 crore
Category II : 50 lakhs
Category III : 20 lakhs
Category IV : nil

15. SEBI’s authorisation is a must to act
as merchant bankers,
authorisation certificate include :
o Proffessional qualification in
finance law or business
management.
o Infrastructure like office space,
equipment & manpower
o Capital adequacy
o Past track of record, experience
general reputation & fairness in
all transaction.

16.  Every merchant banker should
maintain copies of balance
sheet, p/l account & statement
of financial position.
 Half yearly unaudited result
should be submitted to SEBI
 Merchant bankers are
prohibited from buying
securities based on unpublished
price sensitive information of
their clients.
 SEBI has been vested with the
power to suspend or cancel the
authorities in case of violation
of guidelines.

17.  Every merchant banker shall
appoint a compliance officer to
monitor compliance act.
 SEBI has the right to send inspecting
authority to inspect books of
accounts, records etc of merchant
banking.
 An initial authorization fee, an
annual fee & renewal fee may be
collected by SEBI.
 A lead manager holding a certificate
under category I shall accept a
minimum underwriting obligation of
5% of size of issue or of rest 25 laths
whichever is less

18.  Merchant banker make all
efforts to protect the
interest of investors
 Should fulfill all obligations
in a professional & ethical
manner
 Should ensure that
prospectus letter of offer etc
is available to investors @
the time of issue .
 Should render best possible
advice to its clients
 Should not create false
market

19.  Some problems of merchant banking :
 Non co-operation of the issuing companies in
timely allotment of securities & refund of
application of money etc is another problem.
 Yet merchant banking is a vast but should
develop adequate expertise to provide a full range
of merchant banking services……

21. Powerpoint presentation by :-
BHARATH.C