Brief information about merchant banking institutions in india, meaning, Origin, capital adequacy requirement, category of merchant banks, merchant bank services etc...

1. Merchant
Bankers
By Babu

2. 1 Meaning
2 Definition
3 Origin
4 Registration
Agenda
5 Category
6 Capital Adequacy Requirement
7 Services

3. Welcome All !!
Lets start
Merchant Banking Institutions

4. • It is an Intermediary channel
• between issuer an ultimate purchaser of securities in primary security market
• Providing managerial, advisory and non-banking services
• To help existing unit for expansion of new Venture
Merchant Banks are financial institutions that provide specialised services in
corporate finance, portfolio management, issue management and banking
services.

5. As Investopedia defines it,
A Merchant Bank is a company that deals mostly in international
finance, business loans for companies and underwriting. These
banks are experts in international trade, which makes them
specialists in dealing with multinational corporations
A Merchant Banker means 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/ advisors or rendering corporate advisory
service in relation to such issue”.

6. The origin of Merchant Banking is Italy
The Italian grain merchants provided funds for commodity traders
and cargo owners
Later on, the center of merchant banking operations was shifted
from Italy to Amsterdam and thereafter to London.
There after the merchant bankers formed a association which is
now called “Merchant Banking and Security House Association”

7. Commercial Bank
Financial Services With
Savings Accounts, Loans
Credit Cards Brokerage…
Earn On Loans And
Mortgage Etc.
Involved In Debt Related
Process
Risk Avoiders
Merchant Bank
Financial Consultancy
And Advisory Services
Earning As Profit From
Fees For It’s Services
Involved In Equity
Related Process
Risk Takers

8. Application For
Grant of
Certificate
Information
Furnishing.
Clarification &
Personal
Representation
Application
Consideration
Granting the
Certificate
Payment of Fee
Registration of Merchant Bankers with the SEBI is compulsory to carry out their activities. With effect
from 9/12/1997 SEBI registers only category I merchant Bankers. A separate certificate of Registration
from SEBI is required to carry on activities as portfolio managers

9. Category 1
• Issue Management
• Advisor
• Consultant
• Co-Managers
• Underwriter
• Portfolio
Management..Etc...
Category 2
• Advisor
• Consultant
• Underwriter
• Portfolio
Management
• Co-Managers
Category 3
• Advisor
• Consultant
• Underwriter
Category 4
• Advisor
• Consultant

10. Specified Under SEBI (Merchant Bankers) Regulations. 1992
• Rs 5,00,00,000Category 1
• Rs 50,00,000Category 2
• Rs 20,00,000Category 3
• NilCategory 4
Net worth Category wise Should Be
Net Worth means “The Sum of Paid-Up Capital and free reserve of the applicant
at the time of making application under sub-registrar (1) of Regulation 3.”

11. 1. Corporate Counseling
2. Project Counseling
3. Pre investment studies
4. Capital Restructuring
5. Credit Syndication and Project Finance
6. Issue Management and underwriting
7. Portfolio Management
8. Working Capital Finance
9. Acceptance of credit and bill
discounting
10. Merger, Amalgamation and Takeover
11. Venture capital
12. Lease Financing
13. Foreign Currency Financing
14. Fixed Deposits Broking
15. Mutual Funds
16. Relief to sick industries
17. Project appraisal

12. 1. Portfolio Management
Portfolio management is making investment decisions in marketable securities
for maximizing returns with minimum risk
• ➢ Providing advice on selection of investments.
• ➢ Carrying out a critical evaluation of investment portfolio.
• ➢ Collecting and remitting interest and dividend on investment.
• ➢ Undertaking investment in securities.
• ➢ Safe custody of securities in India and overseas.
• ➢Undertaking review of Provident fund investment, Trust investment, etc.

13. 2. Issue Management and underwriting
Issue management and underwriting is concerned with the activities of
management of the public issues of corporate securities, viz. equity shares,
preference shares, and debentures of bonds to procure money from the
capital market. The activities and SEBI guidelines in this regard are discussed
later elaborately in this unit.
Preparation of prospectus
Preparation of a budget
Preparation of (Controller of Capital Issues)CCI application
Selection of issue house
Appointment of registrar, broker and bankers to issue
Advertising and arranging publicity agency for post and pre-issue.
Selection of institutional and broker underwriters .
Compliance of listing requirements of stock exchange etc.

14. 3. Corporate Counseling
A set of activities undertaken to ensure the efficient running of a corporate
enterprise is known as corporate counseling
1. Diversification based on the Government’s economic and licensing policies.
2. Appraisal of product lines, analyzing their growth and profitability and
forecasting future trends.
3. Diagnosing sick units, assessing revival prospects for rehabilitation by way
of modernization and diversification, suggesting suitable strategy for
improving their production technology and financial structure.
Free of charge service to a corporate units
Render advise
Help to improve performance and build better image among investors.
Counseling is provided in the form of opinions, suggestions.

15. 4. Project Counseling
A set of activities undertaken to ensure the efficient running of a corporate
enterprise is known as corporate counseling
• Development and or review of an project idea/project profile
• Preparation of project report
• Estimation of cost of project
• Deciding means of financing the project
• Studying the procedural aspects of project implementation
• Provide assistance in obtaining Government consent.

16. 5. Capital Restructuring Services
• Determination of optimum capital structure conforming to legal requirements.
• Getting consent of controller of Capital issues for capitalization of reserves by
way of issuing bonus shares.
6. Credit Syndication
Credit syndication refers to activities connected with credit procurement and
project financing, aimed at raising Indian and foreign currency loans from
banks and financial institutions
Estimation of total cost on project
Preparation of financial plan to meet total cost of project
Assistance of clients in preparation of loan application
Making selection of institutions
Follow up of the term loan application with financial institutions.
Helping in expediting legal documentation formalities
Help in estimating working capital requirements
Arrange bridge finance.

17. 7. Pre investment studies
It is a detailed feasibility study to evaluate alternative avenues of capital
investment in terms of growth and profit prospects
1. ➢ Analyzing environment and regulatory factors
2. ➢ Identification of raw material sources
3. ➢ Estimation of demand
4. ➢ Estimation of financial requirements

18. 8. Venture Capital Financing
Venture capital is the seed capital in the form of equity financing for high-risk
and high-reward projects
1. ➢ Analyzing environment and regulatory factors
2. ➢ Identification of raw material sources
3. ➢ Estimation of demand
4. ➢ Estimation of financial requirements

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