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Merchantbanking 090620022736 Phpapp02
Merchantbanking 090620022736 Phpapp02
MERCHANT BANKING
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”
SERVICES OF MERCHANT BANKERS
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 certficates 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 atleast one
authorised merchant banker but not more than two.For an issue of
100 crores,upto a maximum of four merchant bankers shall be
appointed.They help in listing of shares in stock exchange,
completion of formalities under Companies Act etc..
PORTFOLIO MANAGEMENT :
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…
MERCHANT BANKING REGULATIONS :
Certificate from SEBI is a must.They are of four types:
Category I merchant bankers : Can act as Issue managers
Category II merchant bankers : can act only as co-managers
Category III merchant bankers : can act as co-managers but cannot
undertake portfolio management
Category IV merchant bankers :can merely act as consultant or
advisor to issue of capital
CAPITAL ADEQUACY NORMS :
Category I : Rs. 5 crores
Category II : Rs.50 lakhs
Category III : Rs.20 lakhs
Category IV : Nil
GUIDELINES FOR MERCHANT BANKERS :
SEBI’s authorization is a must to act as merchant
bankers.Authorisation criteria include
Professional qualification in finace,law or business management
Infrastructure like office space,equipment and man power
Capital adequacy
Past track of record,experience,general reputation and fairness in
all
transactions
Every merchant banker should maintain copies of balance
sheet,Profit and loss account,statement of financial position
Half-yearly unaudited result should be submitted to SEBI
Merchant bankers are prohibited from buying securities based on the
SEBI has been vested with the power to suspend or cancel the
authorisation in case of violation of the guidelines
Every merchant banker shall appoint a ‘Compliance Officer‘ to
monitor compliance of the Act
SEBI has the right to send inspecting authority to inspect books of
accounts,records etc… of merchant bankers
Inspections will be conducted by SEBI to ensure that provisions of the
regulations are properly complied
An initial authorisation fee,an annual fee and renewal fee may be
collected by SEBI