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Merchant Banking Overview
Merchant Banking Overview
Merchant banking primarily involves financial advice and services for large corporations
and wealthy individuals.
MERCHANT BANKING ACTIVITIES:
The Major Merchant Banking activities which the Bank offers to its clients are:
Issue Management - Management of Public Issues i.e. IPOs, FPOs, Right Issues,
etc. as Book Running Lead Manager
Bankers to the Issue
Payment of Dividend Warrants / Interest Warrants / Refund Orders
Debenture Trustee
Underwriting
Issuing & Paying Agent
Monitoring Agency
Besides promoting / marketing the above Merchant Banking Business in the Bank
through specialized Capital Market Services Branches, Merchant Banking Cells and
identified branches, the Merchant Banking Division also looks after the following
activities:
Marketing of Merchant Banking Business
Monitoring / Supporting Capital Market Service Branches
Refund Paid / Payable
MERCHANT BANKERS ASSIGNMENTS:
4. Underwriting:
5. Debenture Trustee:
In terms of SEBI guidelines, all debenture issues (public rights) of the companies
with the maturity period exceeding 18 months are required to have "Debenture
Trustee" and its name must be stated in the prospectus of the issue.
The necessity of creation of debenture trust is to organize the large number of
debenture holders and facilitate interaction by the companies issuing debentures
with a single entity rather than individual debenture holders. Merchant Bankers
(holding valid Registration with SEBI as debenture trustee) act as Trustees for the
debenture holders to accept security created by the company, to secure the
repayment of principal and payment of interest thereon, taking action for
safeguarding their interest and enforcing their rights in times of needs.
As per SEBI guidelines lenders cannot act as Trustees to debentures/bond the
issues of the Companies who are their borrowers. Therefore, branches of the
Bank must not obtain 'Debenture Trustee' assignments of the
parties/companies which are availing Credit facilities from our Bank.
Commercial Paper now being a stand alone product coupled with the complexity
of legal frame work and in order to protect the interest of various market players /
participants for ensuring smooth flow of the transactions in the CP market, the
Issuing and Paying Agent has been made to play a prominent role and hence made
more accountable.
7. Monitoring Agency:
In terms of SEBI (DIP) guidelines, the Company issuing the shares to public shall
make arrangements for the use of proceeds of the issue to be monitored by one of
the financial institutions, in case of issues, which exceed Rs.500 crores.
Though, in terms of SEBI guidelines, it is mandatory for the issuers to appoint
'Monitoring Agency' if the issue size is more than Rs.500 crores, on the insistence
of Merchant Bankers and Stock exchanges, the issuers of issues of less than Rs.
500 crores are also appointing monitoring agency.
Monitoring Agency is required to monitor timely implementation of project and
submit return on half yearly basis to SEBI as per the format specified by SEBI
Monitoring Agency is therefore responsible to act as under:
1.
Make arrangement to ensure the monitoring of issue proceeds.
2.
Ensure that the proceeds collected is being utilized for the project it was
raised.
3.
Where the amount is being parked/invested till utilized for the project.
4.
Cost of the project as mentioned in the offer document and revision if any to
be reported to the SEBI
5.
The source for financing the revision in the cost of the project
6.
Keep a track on the expenditure incurred from the amount collected.
7.
If total cumulative amount raised is more than the expenditure incurred on
the project, how the surplus funds are utilised/ proposed to be utilised.
8.
Reasons for delay in implementation to be reported to SEBI.
9.
To ensure that the Government/ statutory approvals related to the project as
disclosed in offer document are being complied with
10. The deviation if any, from the offer document is to be reported to the
company and the SEBI.
Since financial institutions only have been permitted to act as "Monitoring Agency",
many companies have shown interest in appointing our Bank as Monitoring Agency
though they are not offering us any other role in their issue. Bank can act as monitoring
agency provided bank is banker to the issuer. SEBI being the regulator for the Monitoring
Agency assignments, the assignment of Monitoring Agency be negotiated judiciously and
preferably with the existing clients of the Bank and try to have the proceeds of the issue
parked with us. Utmost attention is required for monitoring the proceeds, submission of
statement as per SEBI guidelines to the company reporting of defaults etc. after
acceptance of the assignment.
The guidelines to be observed before accepting assignment of Monitoring Agency are
given in respective circular available in e-circular site of the Bank.