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Merchant Bank
Merchant Bank
INTRODUCTION
What is a Merchant Bank? Financial institution that specializes in acceptance of: Bills of Exchange. Hire Purchase. Installment Buying. International Trade Financing. Long Term Loans. Investment and Portfolio Management.
ADVISORY BODY
Merchant Banks also advices on: Acquisitions. Mergers. Takeovers.
Expand into the field of Securities Participate in Trade Financing underwriting. activities.
Focus on Small Scale Companies and offer Creative Equity Financing, Bridge & Mezzanine Financing. Provide service to Small and Medium Institutes.
Focus on IPOs (Initial Public Offerings), and Large Public and Private Share Offerings. Provide service to Larger Institutes
PROJECT COUNSELING
Includes preparation of Project Reports. Deciding upon the Financing Pattern.
Appraising the Project relating to its Technical, Commercial and Financial viability. Includes filling up forms for obtaining funds from Financial Institutions.
LOAN SYNDICATION
Assistance is rendered to Raise Loans for Projects, after determining Promoters Contribution. These can also be obtained from Single Institution or a Consortium.
ISSUE MANAGEMENT
Involves Marketing of Corporate Securities i.e.: Equity Shares, Preference Shares, and Debentures. Two Main Activities in Issue Management: Pre- Issue Activities. Post- Issue Activities.
Managers Consultants or Advisers to the Issue: SEBI insists that all issues be managed by at least one Authorized Merchant Banker. For an Issue of 100 crores a max. of Four Merchant Banks are appointed. They help in Listing of Shares in Stock Exchange, Completion of Formalities under Companies Act etc.
PORTFOLIO MANAGEMENT
Refers to Investment in Shares, Debentures issued by different Companies. Careful Blend & Combination of Assets. Involves proper Combination of Securities in such a manner that they give Max. Returns. Investors are interested in Safety, Liquidity and Profitability. Merchant Banks help their Investors in choosing the Shares.
NRI INVESTMENT
NRIs have to follow lot of complicated Rules for Investing in Shares in India. Merchant Bankers help them in choosing the Shares. Also provide Expert Advice fulfilling Govt. Norms. & Regulations. Thus they provide more resources for Corporate Sector.
OFF-SHORE FINANCE
Long Term Foreign Currency Loans. Joint Ventures Abroad. Financing Exports & Imports. Foreign Collaboration Arrangement.
MERCHANT-BANKING INSTITUTES
Commercial Banks. Foreign Banks like National Grind lays Bank, Citibank, HSBC Bank etc. Development Banks like ICICI, IFCI, IDBI etc. SFC, SIDCs. Pvt. Firms like JM Financial & Investment Services, DSP Financial Consultants, CEAT, Kotak Mahindra, Morgan-Stanley etc.
GUIDELINES
Authorization from SEBI is must. Maintaining of Records like Balance Sheets, P&L A/c, Statements of Financial Position. Half-yearly un-audited result to be submitted to SEBI. Prohibition from buying Securities based on unpublished Price Sensitive info. of their Clients. Appointment of a Compliance Officer .
SEBI has the Right to send Inspecting Authority to inspect Books of Accounts, Records etc.
Initial Authorization Fee, an Annual Fee & Renewal Fee may be collected by SEBI. In case of violation of the Guidelines SEBI has the power to suspend/cancel the Authorization.
CONCLUSION
Merchant Banks and Investment Banks sound the same but are totally different. Provide advice and guidance to its various clientele. All Indian Merchant Banks are under the check of SEBI. Has evolved through the ages.
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