I made this as part of my LL.M project. I got Excellent Grade in my this presentation.

2.  Introduction
 Merchant Banking
 Underwriters
 Stock Brokers
 Credit Rating
 Conclusion

3.  Meaning & concept of Capital Market
 Capital Market is one of the significant
market of every financial market.
 Broadly speaking Capital Market is a market
for financial assets which have long or
identified maturity.
 Unlike Money Market Instruments the capital
market instruments become mature for the
period above one year.

4.  It is an institutional arrangement to borrow and
lend money for a long period of time.
 It consist of financial institution like IDBI,
ICICI,UTI,LIC. etc.
 These institutions play the role of lenders in the
capital market.
 Business Units and the Corporate are the
borrowers in the capital market.
 Capital Market provides long term debt and
equity finance for the government and the
corporate sector.

5.  Capital Market mainly covers four services.
 Merchant Banking
 Underwriters
 Stock Brokers
 Credit Rating Agencies

7.  Merchant Banking is a combination of
Banking and consultancy services.
 Consultancy means to provide advice,
guidance and services for fee.
 It provides consultancy to its clients, for
financial, marketing,managerial and legal
matters.
 It helps a business man to start a business. It
helps to raise finance

8.  It helps to expand and modernise the
business. It helps to restructuring of business.
It helps to revive sick business units.
 It also helps companies to register, buy and
sells shares at the stock exchange.
 In short Merchant Banking provides wide
range of services for starting until running a
business.
 It act as Financial engineer of business.

9.  The word “Merchant Banking” oriented with
Dutch and Scottish businessmen.
 Merchant Banking developed and
professionalized only in Britain.
 In the 13th century family owned firms engage
in costal trade and finance were spread
through the European Continent.
 These firms besides their commercial activity
were engaged in Banking activities also.

10.  The another activities of merchant banks was
the rising capital for foreign government.
 The merchant banks trading in countries had
gained confidence of the governments and
they entrusted with the issuing of bonds in
the London Markets.

11.  A merchant Banker has been defined by SEBI
(Merchant Bankers) Rules 1992 as “Any
person who is engaged in the business of
issuing management either by making
arrangement regarding selling, buying or
subscribing rendering corporate advisory
services in relation to such issue
management”

12.  Merchant banking was first started in India in
1967 by Grindlays Bank. It has made rapid
progress since 1970.
 The Merchant Banking activity is governed by
SEBI (Merchant Bankers) Regulations 1992.
 Registration with SEBI is mandatory to carry
out the business of Merchant Banking in
India.

13.  An applicant should comply with the
following norms:
 The applicant should be a corporate body.
 The applicant should not carry on any
business other than those connected with the
security market.
 The applicant should have necessary
infrastructure like office, space, equipment
and manpower etc.

14.  The applicant must have at least two employees
with prior experience in merchant banking.
 Any associate company, group company,
subsidiary or inter connected company of the
applicant should not have been registered a
merchant banker.
 The applicant should not have been involved in
any securities scam or proved guilt for any
offence.
 The applicant should have a minimum net worth
of Rs. 50 million

17.  Underwriting is an agreement, entered into a
company with a financial agency, in order to
ensure that the public will subscribe for the
entire issue of shares or debentures made by
the company.
 The financial agencies known as
“Underwriter” and it agrees to buy that part
of the company issues which are not
subscribed to by the public in consideration
of a specified underwriting commission.

18.  The underwriting agreement, among others
must provide for the period during which the
agreement is in force, the amount of
underwriting obligations, the period within
which the underwriter has to subscribe to the
issue after being intimated by the issuer, the
amount of commission and details of
agreements.

19.  The underwriting commission may not exceed
5% on shares and 2.5% in case of debentures.
 Underwriters get their commission
irrespective of whether they have to buy a
single security or not.

20.  According to Mr. A.K.Sur, underwriting had its
beginning in India only in 1912.
 When M/S O.Batliwala and Karni underwrote the
shares of the Central India Spinning and Weaving
co. ltd. It was only after world war 1 when a few
firms took up underwriting job.
 Underwriting gained popularity after 1955
particularly after the setting of the ICICI in
January 1955.
 In the year of 1964 two financial institutions IDBI
and UTI were formed.

21.  Purchase of securities
 Distribution of securities
 Supplying information of companies
 Exchange in securities

22.  Underwriter under 2(g) has been defined
SEBI (underwriters) rules and regulations
1993 as, “an agreement with or without
conditions to subscribe to the securities of a
body corporate when the existing
shareholders of such body corporate or the
public do not subscribe to the securities
offered to them.”

23.  Application for grant of certificate (sec.3)
 Furnishing of further information, clarification etc. (sec. 4)
 The Board, If require the applicant to appear before the
board (Sec.4(b))
 Application to confirm the requirements (sec. 5)
 Capital Adequacy of underwriters should be exceed Rs. 20
Lakhs (Sec.5(d)
 Consideration of application (sec.6)
 Grant of certificate of initial registration (sec. 8)
 The board issued certificate in one month 8(1)
 Validity of initial Certificate is 5 years 8(2)
 Applicant has to apply for Permanent Certificate 8(4)
 Grant of certificate of permanent registration (sec. 8A)

24.  Syndicate Underwriting:- is one in which, two
or more agencies or underwriters jointly
underwrite an issue of securities. Such an
arrangement is entered into when the total
issue is beyond the resources of one
underwriter or when he does not want to
block up large amount of funds in one issue.

25.  Sub-Underwriting:- is one in which an
underwriter gets a part of the issue further
underwritten by another agency. This is done to
diffuse the risk involved in underwriting.
 Firm Underwriting:- is one in which the
underwriters apply for a block of securities.
Under it, the underwriters agree to take up and
pay for this block of securities as ordinary
subscribers in addition to their commitment as
underwriters. The underwriter need not take up
the whole of the securities underwritten by him.

27.  A stockbroker is an individual who is
especially trained and certified to participate
in the securities markets on behalf of clients.
 The stock broker has a dual role, that of
principal and agent.
 When stockbroker acts as an agent for the
buyers and sellers of the securities,
 A commission is charged for this service.

28.  As an agent, the stock broker does not own
the securities but is merely performing a
service for the investor.
 This means that the broker will buy for the
buyer and sell for the seller, each time making
sure that the best price is obtained for the
client.
 In the capacity as the principal, the
stockbroker owns the securities and trade
from this stock.

29.  India infoline
 ICICI direct
 Share Khan
 India bulls
 Angel Broking
 HDFC
 Reliance Money
 Religare etc….

30.  Under, (Stock broker & Sub brokers) (2nd
Amendment) Regulations 2006 stockbroker
has been defined under sec 3(gb) as
“stockbroker” means a member of a stock
exchange and stock exchange has been
defined under clause (ga) “stock exchange”
means a stock exchange which is for the time
being recognized by the central government
or by the board.

31.  Under Sec. 4 of the Securities Contract
(Regulation) Act 1956 (42 of 1956)
stockbroker is a member of recognised stock
exchange who buys or sells or deals in
securities.
 To work as a stockbroker registration with
SEBI is mandatory.
 SEBI is empowered to imposed conditions
while granting the certificate of registration.

32.  Application for registration of stockbroker (Sec. 3)
 Furnishing of information, clarification (Sec.4)
 Consideration of Application (Sec.5)
 Eligible to be admitted as a member of stock exchange
5(1)
 Conditions of registration (Sec.6A)
 Member of stock exchange 6(1)
 He shall be abide by rules & regulations of stock exchange
which are applicable to him 6(2)
 Change in constitution sec 6 (3) then prior permission from
stock exchange is required by paying prescribed fees sec6
(4)
 Conditions of registration of sub broker (Sec.11)
 Get certificate from stock exchange Sec 11(1)

34.  The term “Credit Rating” comprise two
words.”Credit” and “Rating”.
 “Credit” is trust in a person’s ability and
intention to pay or reputation of solvency and
honesty.
 “Rating” means estimating worth or value of; or
to assign value or to classifying person’s position
with reference to particular subject matter.
 Credit rating is a symbolic indicator of the
current opinion of the ability of the issuer to the
service debt obligations in a timely fashion with
reference to the instrument being rated.

35.  Credit rating had its origin in the financial crisis
of the U.S in 1837.
 The first mercantile agency was set up in 1841 in
New York to rate the ability of merchants to pay
financial obligations.
 In 1916, Poor’s publication published their first
rating. This was followed by standard statistics
company in 1922.
 These two were merged in 1941 to form
“Standard & Poor’s” which was subsequently
taken over by “McGrow Hill” in 1966.

36.  A number of Credit Agencies were set up in
1970s.
 These included the Canadian Bond Rating
Services. Thompson Bankwatch, Japanese
Bond Rating Institute, McCrathy Cristani and
Maffei.

37.  CRISIL, Credit Rating Information Services of
India Ltd. From a pioneering step taken in 1987,
to playing an integral role in India’s
Development Milestones.
 CRISIL has emerged as India’s Leading Ratings,
Research Risk and Policy Advisory company.
 CRISIL has rated over 750 debt instrument issued
by 557 companies.
 It has started rating the debt instruments of
banks and has already rated four public sector
banks and one private sector bank, IDBI & EX-IM
bank

38.  CARE, Credit Analysis & Research Ltd. (CARE)
incorporated in April 1993, is a Credit Rating,
Information & advisory services company
promoted by IDBI, Canara Bank, UTI and other
leading banks and financial services companies.
 ICRA, Investment Credit Rating Agencies of
India Ltd.(An Associate of Moody’s investor’s
service) was incorporated in 1991 as an
ideppendent and professional company.It also
rates long term and short term instruments.

39.  Application for grant of certificate (Sec.3)
 Promoter of credit rating agency. (Sec.4)
 Eligibility criteria (Sec.5)
 Furnishing of information, clarification and
personal representation (Sec.7)
 Grant of certificate of initial registration (Sec.8)
 Grant of certificate of Permanent registration
(Sec.8A)
 Conditions of certificate and validity period
(Sec.9)

40.  After discussing the main capital market services and
their regulations its concluded that the capital market
services played significant role in driving economic of
our country and made our presence felt in
international arena.
 Our regulatory framework has effectively controlled
the functions of intermediaries like Merchant
Banking, Underwriters, Stock Brokers and CRA
through transparent procedure.
 The market structure of our country is very vibrant
and is founded on strong economic principles. This
has enabled us to find a place of respect in
International Market.