Description
Merchant banking activity was formally initiated into the Indian capital Markets in 1967.
Merchant Banking
and
Issue Management
ORIGIN
? The term merchant banking 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
? Later these merchants formed an association
which is now called ”Merchant Banking and
Securities House Association”
ORIGINATION OF MERCHANT BANKERS IN
INDIA
?
?Merchant banking activity was formally initiated into
the Indian capital Markets in 1967.
? Started with various services like management of
capital issues, production planning and system design
to market research and management consulting
services to meet the requirements of small and
medium sector rather than large sector.
? Citibank Setup its merchant banking division in
1970. The various tasks performed by this divisions
namely assisting new entrepreneur, evaluating new
projects, raising funds through borrowing and
issuing equity.
? Indian banks Started banking Services as a part of
multiple services they offer to their clients from
1972.
? State bank of India started the merchant banking
division in 1972. In the Initial years the SBI's
objective was to render corporate advice And
Assistance to small and medium entrepreneurs
Role of merchant banking in India
? The merchant banker are those financial
intermediary involved with the activity of transferring
capital funds to those borrowers who are interested
in borrowing. The activities of the merchant banking
in India is very vast in nature of which includes the
following
a) The management of the customer’s securities
b) The management of the portfolio,
c) The management of projects and counseling as well
as appraisal
d) The management of underwriting of shares and
debentures
e) The circumvention of the syndication of loans
f) Management of the interest and dividend etc
NATURE AND FUNCTIONS OF MERCHANT BANKING
?The services of merchant bank cover project
counseling, pre investment activities, feasibility studies,
project reports, design of capital structure, issue
management, underwriting, loan syndication,
mobilization of funds, foreign currency finance, mergers,
amalgamation, takeover, venture capital and public
deposits.
? Merchant banking is skill based activities and involves
serving financial need of every client.
? The depth and sophistication in merchant
banking business are improving since the
avenues for raising funds are widening and
demands for funds is increasing.
? Merchant bankers can turn to any of the
activities depending upon resources, such
as capital, foreign tie-ups for overseas
activities and skills.
NEED FOR REGULATION
•The merchant banker's regulations, which regulate
the raising of funds in the primary market, would
assure for the issuer market for raising resources at
low cost, effectively and easily, ensure high degree of
protection of investors interest.
? The regulations provide for the
merchant bankers a dynamic and
competitive market with the high
standard of professional competence,
dignity, integrity and solvency.
? The regulations promote a primary
market, which is fair, efficient, and
flexible, and inspire confidence
DEFINITION
“
According to SEBI a merchant banker as any
person who is engaged in the business of
issue management either by making
arrangements regarding selling, buying or
subscribing to securities of acting as
manager, consulting, advisor or rendering
corporate advisory services in relation to
such issue management.
BANKS PROVIDING MERCHANT BANKING
SERVICES IN INDIA
?Commercial banks
?Foreign banks like National Grindlays Bank, Citibank,
HSBC bank etc..
?Development banks like ICICI,IFCI,IDBI etc..
?SFC , SIDCs
?Private firms like JM Financial and Investment service ,
DSP Financial Consultants, Ceat Financial Services, Kotak
Mahindra, VMC Project Technologies, Morgan Stanley,
Jardie Fleming, Klienwort Benson etc…
List Of Recently Updated Merchant Banking in India
Dsp Merrill Lynch Ltd.
Merchant Banking, Stock Broking...
Prime Securities Ltd
Debit and Equity Organization....
Tata Finance Merchant
Bankers Ltd
Finance Solutions
Sicom Ltd
Merchant Banking Division
Asso...
Exta Exprots
Merchant Exporters
Expo Gas Containers P Ltd
Merchant Exporters
Everex Infotech P Ltd
Merchant Exporter
Esoffina Svcs Ltd
Merchants Banking
Erudite Capital Creation
Ltd
Merchants Banking
Emjay Enterprise
Merchant Exporters
Functions
of Merchant Banking
Corporate counseling Project Pre investment studies
Capital restructuring Credit syndication and project
finance
Issue management and
Underwriting Portfolio management
Working capital finance Acceptance credit and bills
discounting
Merger, Amalgamation
and Takeover Venture Capital
Lease financing Foreign currency finance
Fixed deposit brokering Mutual funds
Relive to sick industries Project appraisal
SERVICES OF MERCHANT BANKS
PROJECT COUNSELLING :
It includes preparation of project reports, deciding upon the
financing pattern, appraising the project relating to its
technical, commercial and financial viability. It includes filling
up of application forms for obtaining funds from financial
institutions.
LOAN SYNDICATION :
Assistance is rendered to raise loans for projects after
determining promoter’s contribution. These loans can be
obtained from a single institution or a consortium.
ISSUE MANAGEMENT :
Management of issues involves marketing of corporate
securities ie…equity shares, preference shares and debentures
by offering them to public.
?Pre-issue activities:- They prepare copies of prospectus and
send it to to SEBI and then file them to Registrar of Companies
They conduct meetings with company representatives and
advertising agencies to decide upon the date of opening issue,
closing issue, launching publicity campaign etc..
They help the companies in fixing up the prices for their issues
?Post-issue activities:- It includes collection of application forms,
screening of applications, deciding allotment procedure, mailing
of allotment letters,, share certificates and refund orders
UNDERWRITING OF PUBLIC ISSUES :
Underwriting is an insurance to the company which makes
public issues. Raising of external resources is easy for the
issues backed by well known underwriters.
MANAGERS,CONSULTANTS OR ADVISERS TO THE
ISSUE :
SEBI insist that all issues should be managed by at least one
authorised merchant banker as given below
Upto 50 corers – Two merchant bankers
50 corers to 100 corers – Three
100 corers to 200 corers – Four
200 corers to 400 corers – Five
More then 400 corers –Five or More
PORTFOLIO MANAGEMENT :
Portfolio refers to investment in different kinds of securities
such as shares, debenture issued by different companies. It is
a combination of assets but a carefully blended asset
combination.
Portfolio management refers to maintaining proper
combination of securities in a manner that they give
maximum return
Investors are interested in safety, liquidity and profitability
of his investment but they cant choose the appropriate
securities. So merchant bankers help their investors in
choosing the shares. They conduct regular market and
economic surveys.
NRI INVESTMENT :
NRIs has to follow lots of complicated rules for investing in the
shares in India. Merchant bankers help them in choosing the
shares and offer expert advice fulfilling government regulations
thus mobilising more resources for corporate sector.
ADVISORY SERVICE RELATING TO MERGERS AND
TAKEOVERS :
Merger is a combination of two or more companies into a singe
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
Merchant banker acts as middlemen between offeror and
offeree, negotiates mode of payment and gets approval from
government.
OFF SHORE FINANCE :
Merchant bankers help their clients in :
?Long term foreign currency loan
?Joint venture abroad
?Financing exports and imports
?Foreign collaboration arrangement
Primary Market
? The new issue market which brings
together the “supply and demand” or
“sources of uses” for new capital funds.
? In this market the principal source of funds
is the domestic savings of individual and
business; other suppliers includes foreign
investor and government.
There are three ways by which a
company may raise capital in a primary
market. They are:
? Public Issue
? Rights issue – (Issue of additional
shares to existing shareholders)
? Private placement – selling of
securities privately to a small group of
investors.
Public Issue
? Issued by listed company
? Issued by unlisted company
? Exemption from Eligibility Norms
? Banking companies
? Infrastructure Company
? Listing companies;
Types of Public Issue
? Initial Public Offer
? Follow on Public Offer
? Past track issue
Investors
? Qualified institutional investors
? Non institutional investors
? Retail investors
Intermediaries
? Lead Manager
? Other transfer agent
? Bankers of the issue
? Underwriter
? Stock brokers and sub brokers
? Depositories
Placement of the issue
? Prospectus
? Offer of sales
? Private placement
? Book building
? Qualified institutional placement
Green shoe Option
? If the issue is over subscribed, the
issuing company can allocate up to 15
per cent shares over and above the
original issue size.
? The details of green shoe option should
be disclosed in the prospectus .
Issue Management
Issue management activities involves
? Structuring of instruments
? Preparation of offer document
? Due diligence certificate
? Appointment of intermediaries
? Submission of offer document
? Management of book built issue
? Post issue management reports
Thank You
doc_431791706.pdf
Merchant banking activity was formally initiated into the Indian capital Markets in 1967.
Merchant Banking
and
Issue Management
ORIGIN
? The term merchant banking 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
? Later these merchants formed an association
which is now called ”Merchant Banking and
Securities House Association”
ORIGINATION OF MERCHANT BANKERS IN
INDIA
?
?Merchant banking activity was formally initiated into
the Indian capital Markets in 1967.
? Started with various services like management of
capital issues, production planning and system design
to market research and management consulting
services to meet the requirements of small and
medium sector rather than large sector.
? Citibank Setup its merchant banking division in
1970. The various tasks performed by this divisions
namely assisting new entrepreneur, evaluating new
projects, raising funds through borrowing and
issuing equity.
? Indian banks Started banking Services as a part of
multiple services they offer to their clients from
1972.
? State bank of India started the merchant banking
division in 1972. In the Initial years the SBI's
objective was to render corporate advice And
Assistance to small and medium entrepreneurs
Role of merchant banking in India
? The merchant banker are those financial
intermediary involved with the activity of transferring
capital funds to those borrowers who are interested
in borrowing. The activities of the merchant banking
in India is very vast in nature of which includes the
following
a) The management of the customer’s securities
b) The management of the portfolio,
c) The management of projects and counseling as well
as appraisal
d) The management of underwriting of shares and
debentures
e) The circumvention of the syndication of loans
f) Management of the interest and dividend etc
NATURE AND FUNCTIONS OF MERCHANT BANKING
?The services of merchant bank cover project
counseling, pre investment activities, feasibility studies,
project reports, design of capital structure, issue
management, underwriting, loan syndication,
mobilization of funds, foreign currency finance, mergers,
amalgamation, takeover, venture capital and public
deposits.
? Merchant banking is skill based activities and involves
serving financial need of every client.
? The depth and sophistication in merchant
banking business are improving since the
avenues for raising funds are widening and
demands for funds is increasing.
? Merchant bankers can turn to any of the
activities depending upon resources, such
as capital, foreign tie-ups for overseas
activities and skills.
NEED FOR REGULATION
•The merchant banker's regulations, which regulate
the raising of funds in the primary market, would
assure for the issuer market for raising resources at
low cost, effectively and easily, ensure high degree of
protection of investors interest.
? The regulations provide for the
merchant bankers a dynamic and
competitive market with the high
standard of professional competence,
dignity, integrity and solvency.
? The regulations promote a primary
market, which is fair, efficient, and
flexible, and inspire confidence
DEFINITION
“
According to SEBI a merchant banker as any
person who is engaged in the business of
issue management either by making
arrangements regarding selling, buying or
subscribing to securities of acting as
manager, consulting, advisor or rendering
corporate advisory services in relation to
such issue management.
BANKS PROVIDING MERCHANT BANKING
SERVICES IN INDIA
?Commercial banks
?Foreign banks like National Grindlays Bank, Citibank,
HSBC bank etc..
?Development banks like ICICI,IFCI,IDBI etc..
?SFC , SIDCs
?Private firms like JM Financial and Investment service ,
DSP Financial Consultants, Ceat Financial Services, Kotak
Mahindra, VMC Project Technologies, Morgan Stanley,
Jardie Fleming, Klienwort Benson etc…
List Of Recently Updated Merchant Banking in India
Dsp Merrill Lynch Ltd.
Merchant Banking, Stock Broking...
Prime Securities Ltd
Debit and Equity Organization....
Tata Finance Merchant
Bankers Ltd
Finance Solutions
Sicom Ltd
Merchant Banking Division
Asso...
Exta Exprots
Merchant Exporters
Expo Gas Containers P Ltd
Merchant Exporters
Everex Infotech P Ltd
Merchant Exporter
Esoffina Svcs Ltd
Merchants Banking
Erudite Capital Creation
Ltd
Merchants Banking
Emjay Enterprise
Merchant Exporters
Functions
of Merchant Banking
Corporate counseling Project Pre investment studies
Capital restructuring Credit syndication and project
finance
Issue management and
Underwriting Portfolio management
Working capital finance Acceptance credit and bills
discounting
Merger, Amalgamation
and Takeover Venture Capital
Lease financing Foreign currency finance
Fixed deposit brokering Mutual funds
Relive to sick industries Project appraisal
SERVICES OF MERCHANT BANKS
PROJECT COUNSELLING :
It includes preparation of project reports, deciding upon the
financing pattern, appraising the project relating to its
technical, commercial and financial viability. It includes filling
up of application forms for obtaining funds from financial
institutions.
LOAN SYNDICATION :
Assistance is rendered to raise loans for projects after
determining promoter’s contribution. These loans can be
obtained from a single institution or a consortium.
ISSUE MANAGEMENT :
Management of issues involves marketing of corporate
securities ie…equity shares, preference shares and debentures
by offering them to public.
?Pre-issue activities:- They prepare copies of prospectus and
send it to to SEBI and then file them to Registrar of Companies
They conduct meetings with company representatives and
advertising agencies to decide upon the date of opening issue,
closing issue, launching publicity campaign etc..
They help the companies in fixing up the prices for their issues
?Post-issue activities:- It includes collection of application forms,
screening of applications, deciding allotment procedure, mailing
of allotment letters,, share certificates and refund orders
UNDERWRITING OF PUBLIC ISSUES :
Underwriting is an insurance to the company which makes
public issues. Raising of external resources is easy for the
issues backed by well known underwriters.
MANAGERS,CONSULTANTS OR ADVISERS TO THE
ISSUE :
SEBI insist that all issues should be managed by at least one
authorised merchant banker as given below
Upto 50 corers – Two merchant bankers
50 corers to 100 corers – Three
100 corers to 200 corers – Four
200 corers to 400 corers – Five
More then 400 corers –Five or More
PORTFOLIO MANAGEMENT :
Portfolio refers to investment in different kinds of securities
such as shares, debenture issued by different companies. It is
a combination of assets but a carefully blended asset
combination.
Portfolio management refers to maintaining proper
combination of securities in a manner that they give
maximum return
Investors are interested in safety, liquidity and profitability
of his investment but they cant choose the appropriate
securities. So merchant bankers help their investors in
choosing the shares. They conduct regular market and
economic surveys.
NRI INVESTMENT :
NRIs has to follow lots of complicated rules for investing in the
shares in India. Merchant bankers help them in choosing the
shares and offer expert advice fulfilling government regulations
thus mobilising more resources for corporate sector.
ADVISORY SERVICE RELATING TO MERGERS AND
TAKEOVERS :
Merger is a combination of two or more companies into a singe
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
Merchant banker acts as middlemen between offeror and
offeree, negotiates mode of payment and gets approval from
government.
OFF SHORE FINANCE :
Merchant bankers help their clients in :
?Long term foreign currency loan
?Joint venture abroad
?Financing exports and imports
?Foreign collaboration arrangement
Primary Market
? The new issue market which brings
together the “supply and demand” or
“sources of uses” for new capital funds.
? In this market the principal source of funds
is the domestic savings of individual and
business; other suppliers includes foreign
investor and government.
There are three ways by which a
company may raise capital in a primary
market. They are:
? Public Issue
? Rights issue – (Issue of additional
shares to existing shareholders)
? Private placement – selling of
securities privately to a small group of
investors.
Public Issue
? Issued by listed company
? Issued by unlisted company
? Exemption from Eligibility Norms
? Banking companies
? Infrastructure Company
? Listing companies;
Types of Public Issue
? Initial Public Offer
? Follow on Public Offer
? Past track issue
Investors
? Qualified institutional investors
? Non institutional investors
? Retail investors
Intermediaries
? Lead Manager
? Other transfer agent
? Bankers of the issue
? Underwriter
? Stock brokers and sub brokers
? Depositories
Placement of the issue
? Prospectus
? Offer of sales
? Private placement
? Book building
? Qualified institutional placement
Green shoe Option
? If the issue is over subscribed, the
issuing company can allocate up to 15
per cent shares over and above the
original issue size.
? The details of green shoe option should
be disclosed in the prospectus .
Issue Management
Issue management activities involves
? Structuring of instruments
? Preparation of offer document
? Due diligence certificate
? Appointment of intermediaries
? Submission of offer document
? Management of book built issue
? Post issue management reports
Thank You
doc_431791706.pdf