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EXECUTIVE SUMMERY

Merchant Banking is an important service provided by a number of financial institutions that helps in the growth of the corporate sector which ultimately reflects into the overall economic development of the country. Merchant banks were expected to perform several functions like issue management, underwriting, portfolio management, loan syndication, consultant, advisor and host of other activities. SEBI was also made all powerful to regulate the activities of merchant banks in the best interest of investors and economy. Apart, merchant banking was the necessity of banks themselves which were in need of non-fund based income so as to improve their profitability margins by all means in the changed economic scenario. Now, it could be anybody's anxiety to know whether merchant banks are performing their duties honestly as they were expected to do. What duties they performs most and in what capacity. Whether merchant banking business helped banks themselves to improve their overall profitability. Does the socio, political and economic environment prevailing today sufficiently warrant, the growth of merchant banking or otherwise? An honest attempt is being made to seek answer of these questions and also to suggest remedial measures wherever possible on the basis of empirical study done.

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OBJECTIVES OF THE STUDY

 To develop the ability to study the functioning of Merchant Banking in India & learn & apply multidisciplinary concepts, tools & techniques to solve vital problems.

 To familiarize with the various services provided by Merchant Bankers.

 To compare the public & private sector company engaged in providing merchant banking services on various grounds.

 To find out the growth potential of the Merchant Banking public & private sector companies.

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LITRATURE REVIEW

INTRODUCTION

Original Definition: A Merchant Bank is a British term for a bank providing various financial services such as accepting bills arising out of trade, providing advice on acquisitions, mergers, foreign exchange, underwriting new issues, and portfolio management. The Focus Definition: A Merchant Bank can be generally described as a financial services company with a private equity investment arm offering investment banking and ancillary services as well. Because a merchant bank acts not only as an advisor and broker but also as a principal, a merchant bank has a longer term approach than a typical investment bank and is highly concerned with the viability of each investment opportunity and providing the right advice for a strong partnership with each client company. In banking, a merchant bank is a traditional term for an Investment Bank. It can also be used to describe the private equity activities of banking. This article is about the history of banking as developed by merchants, from the Middle Ages onwards. Amidst the swift changes sweeping the financial world, Merchant Banking has emerged as an indispensable financial advisory package. Merchant banking is a service-oriented function that transfers capital from those who own to those who can use it. They try to identify the needs of the investors & corporate sector & advice entrepreneurs what to do to be successful.

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The merchant banking has been defined as to what a merchant banker does. A merchant Banker has been defined by Securities Exchange Board Of India (Merchant Banker) rules, 1992, as “Any person who is engaged in the business of issue management either by making arrangements regarding selling, buying or subscribing to securities or acting as manager, consultant, advisor or rendering corporate advisory services in relation to such issue management”

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are in fact the original "banks". the colonies and their progress stem from the business of merchant banks. according to today's accepted sense of the word. The American colonies also represent the product of merchant banking. the collected large amounts of money to finance trade across parts of the world.MERCHANT BANKING HISTORY In late 17th and early 18th century Europe. Merchant banks. The East India Trading Company secured a Royal Warrant from England. However. negotiating. as evidenced by the activities of the famous Hudson Bay Company. For example. the Dutch merchant adventurers were active in what are now Indonesia. One does not typically look at these countries' economic development as having been fueled by merchant bank adventurers. along the Silk Road. Supported by wealthy groups of people and a network of overseas trading posts. providing the firm with official rights to lucrative trading activities in India. The colonies of other European countries were started in the same manner. For example. They brought with them to the grain trade ancient practices that had grown to normalcy in the middle and far east. This company was the forerunner in developing the crown jewel of the English Empire. the French and Portuguese acted similarly in their respective colonies. The English colony was started by what we would today call merchant bankers. because of the firm's involvement in financing. As the Lombardy merchants and bankers grew in stature on the back of the Lombard plains cereal crops many of the displaced Jews who had fled persecution after 613 entered the trade. the largest companies of the world was merchant adventurers. These were invented in the middle Ages by Italian grain merchants. and implementing trade transactions. for the finance of long distance 5 . now so called.

They then began to advance against the delivery of grain shipped to distant ports. In this way they could secure the grain sale rights against the eventual harvest. and set up their benches to trade in crops. They had one great advantage over the locals. The Jewish newcomers. so they entered the great trading piazzas and halls of Lombardy.goods trades. In both cases they made their profit from the present discount against the future price. 6 . This two-handed trade was time consuming and soon there arose a class of merchants. Christians were strictly forbidden the sin of usury. but did not bind the Jews. a high-risk loan at what would have been considered usurious rates by the Church. along side the local traders. could lend to farmers against crops in the field. who were trading grain debt instead of grain. The Jews could not hold land in Italy. on the other hand.

selling. and shipping of goods. In particular. the merchant banker acted as a capital sources whose primary activity was directed towards a commodity trader/cargo owner who was involved in the buying. as the term has evolved in Europe from the 18th century to today. Often. 7 .Traditional merchant banking Merchant Banking. pertained to an individual or a banking house whose primary function was to facilitate the business process between a product and the financial requirements for its development. who had the expertise to understand a particular transaction. was to arrange the necessary capital and ensure that the transaction would ultimately produce "collectable" profits. The role of the merchant banker. the merchant banker also became involved in the actual negotiations between a buyer and seller in a transaction. Merchant banking services span from the earliest negotiations from a transaction to its actual consummation between buyer and seller.

The modern European merchant bank. a management advisor. Professional merchant bankers must have: 1) an understanding of the product. and that of others.the actual sale of the product and the collection of profit. Some people might question whether or not there are many individuals or organizations that have the abilities to fulfill all three areas of expertise. Today a merchant banker is who has the ability to merchandise -. European merchant banks expanded their services. in many ways. Since the 18th century. create or expands a need -. effective skills in concluding a transaction . its industry and operational management. These skills include those inherent in an entrepreneur. the term merchant banker has. therefore.that is. 8 . been considerably broadened to include a composite of modern day skills. immediate capital need. Today.S. Most companies that come to a U.Modern merchant banking During the 20th century. a commercial and/or investment banker plus that of a transaction broker.and fulfill capital requirements. 3) and most importantly. They became increasingly involved in the actual running of the business for which the transaction was conducted. merchant banks actually own and run businesses for their own account. merchant bank are looking to increase their financial stability or satisfy a particular. reflects the early activities and breadth of services of the colonial trading companies. 2) an ability to raise capital which might or might not be one's own (originally merchant bankers supplied their own capital and thereby took an equity interest in the transaction). however.

-Because they do not invest against collateral.Who are merchant bankers? -Merchant banks are private financial institution. -The reason that businesses should develop a working relationship with a merchant bank is that they have more money than venture capitalists. they take far greater risks than traditional banks. they are not regulated. 9 . -Their primary sources of income are PIPE (Private Investment in Public Entities) financings and international trade. Their advice tends to be more pragmatic than venture capitalists. Mergers & Acquisitions help and financial market speculation. -Their secondary income sources are consulting. do not take money from the public and are international in scope. -Because they are private. -Anyone considering dealing with any merchant bank should investigate the bank and its managers before seeking their help.

they have a low cost strategy for taking your company public.  They do PIPE (Private Investment in Public Equities) financings. If they are unwilling to supply Investment Banking bridge loans.Functions of Merchant Bankers:  Consulting advice on going public and international business.  They are essential advisors for companies seeking to become multinational corporations 10 .  They can advise or help with a company‟s M&A strategy.  Advice and help in taking your company public.

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the total no. private merchant banks engaged in stock broking. subsidies of the commercial banks.MERCHANT BANKING IN INDIA In India Merchant Banking activities started from the year 1967. following the footsteps of similar activities in UK & USA. Currently. of merchant bankers in India are approx. 1450 with more than 930 registered with SEBI. underwriting activities & financial consultancy & investment advisory service firms. Currently Merchant Banking activity has mushroomed in the Indian capital market with both public & private sector settings up their respective merchant Banking divisions. nationalized & foreign banks.  Grindlays Banks – 1967  Citi banks – 1970 12 . The SEBI authorized Merchant Bankers Include merchant Banking divisions of All India Financial Institutions.

Merchant banker registered with SEBI: Public Sector: . finance & investment (231) The following comprise the main functions of a merchant banker in India: Management of debt and equity offerings. Banks (10). pricing the issue.1974 Merchant banking in India . allotment and refund. 13 . SBI – 1973  ICICI . registration of the offer document.International bankers (10).an overview Companies raise capital by issuing securities in the market. State Institutions (4) Private sector: . Financial Institutions (6). Merchant banking… is the financial intermediation that matches the entities that need capital and those that have capital. It is a function that facilitates the low of capital in the market. and marketing of the issue. The main areas of work in this regard include: instrument designing. He assists the companies in raising funds from the market.This forms the main function of the merchant banker. underwriting support.Commercial banks (24). listing on stock exchanges. Merchant bankers act as intermediaries between the issuers of capital and the ultimate investors who purchase these securities.

Pricing of issues is done by the companies in consultant with the merchant bankers. commercial paper to name a few. launching publicity campaign and fixing date of board meeting to approve and sign prospectus and pass the necessary resolutions. fixed deposits. Merchant banks act as an intermediary whose main job is to transfer capital from those who own it to those who need it. The institutional network consists of mutual funds. Issue Management: Management of issue involves marketing of corporate securities viz. pension funds. the amount underwritten would be subscribed by 14 . The retail network depends on networking with investors. equity shares. financial institutions etc. debt instruments. the merchant banker arranges a meeting with company representatives and advertising agents to finalize arrangements relating to date of opening and closing of issue. The distribution network of the merchant banker can be classified as institutional and retail in nature. private equity funds. foreign institutional investors. insurance products.Placement and distribution. Underwriting of Public Issue: Underwriting is a guarantee given by the underwriter that in the event of under subscription. mutual fund products. The size of such a network represents the wholesale reach of the merchant banker. After taking action as per SEBI guidelines. preference shares and debentures or bonds by offering them to public. registration of prospectus.The merchant banker helps in distributing various securities like equity shares.

In case of sick units. Financial structuring includes determining the right debt-equity ratio and gearing ratio for the client.Merchant bankers help companies in obtaining venture capital financing for financing their new and innovative strategies. Project Counseling: Project counseling includes preparation of project reports. based on which the terms of borrowings can be defined. This takes place in a series of steps. deciding upon the financing pattern to finance the cost of the project and appraising the project report with the financial institutions or banks. Banks/Merchant banking subsidiaries cannot underwrite more than 15% of any issue. Firstly they analyses the pattern of the client‟s cash flows. It also includes filling up of application forms with relevant information for obtaining funds from financial Institutions and obtaining government approval.him. Then the merchant banker prepares a detailed loan memorandum. Another area of advice is rehabilitation and turnaround management. Loan syndication.Merchant bankers arrange to tie up loans for their clients. and evaluate cheaper sources of funds. 15 . Risk management is another area where advice from a merchant banker is sought. merchant bankers may design a revival package in coordination with banks and financial institutions. which is circulated to various banks and financial institutions and they are invited to participate in the syndicate. Merchant bankers also explore the refinancing alternatives of the client. Providing venture capital and mezzanine financing. He advises the client on different hedging strategies and suggests the appropriate strategy. the appropriate capital structure theory is also framed.

loan syndication. project counseling. 16 . investment management. and operational services like purchase and sale of securities.Portfolio Management: Portfolio refers to investment in different kinds of securities such as shares. public issue management. capital restructuring. Portfolio management refers to maintaining proper combinations of securities in a manner that they give maximum return with minimum risk. fixed deposit. selection of securities. Corporate Counseling and advisory services: Corporate counseling covers the entire field of merchant banking activities viz. (a) Long term foreign currency loans (b) Joint Ventures abroad (c) Financing exports and imports (d) Foreign collaboration arrangements Non-resident Investment: The services of merchant banker includes investment advisory services to NRI in terms of identification of investment opportunities. lease financing acceptance credit. etc. Merchant bankers also offer customized solutions to their client‟s financial problems. debentures or bonds issued by different companies and government securities. Off Shore Finance: The merchant bankers help their clients in the following areas involving foreign currency. working capital.

LKP merchant financing ltd are some of the private sector firms of merchant bankers who have taken steps to reorganize their activities. SBI capital market ltd.M financial & investment consultancy ltd. the merchant banking division of the nationalize banks have stated forming independent subsidiaries. private merchant bankers have also started reorganising their activities e. PNB Capital Market was promoted by PNB during Mid 1988.  Reorganization of private Firms: Expecting tough Competition from growing number of merchant banking subsidiary of nationalized banks. Then CAN BANK financial services ltd was set up as wholly owned subsidiary of Canara bank in 1987.g. to provide information about new 17 .  Establishment of SUA: In order to educate and protect the interest of investor. 20th century finance corporation ltd. Many more subsidiaries are being set up by another nationalize banks.. These subsidiaries offer more specialized services with professional expertise & skills. J. 1986.ORGANISATIONAL DEVELOPMENTS IN MERCHANT BANKING ESTABLISHMENTS IN INDIA  Setting up of banks Subsidiaries: In order to meet the growing demand for broad-based financial services from the corporate sector more effectively. was incorporated as the first such subsidiary of SBI on 2 July...

It would also have line of credit from public sector banks. rs 16 crores by financial institutions & 33 crores by public sector banks. to evolve a code of conduct for underwriters & to render legal & other services to members & public. Equity. 18 . underwriters. CRISIL rates various types of instruments such as debt. banks & financial institutions etc. delivery of shares & collection of sale proceeds of the securities. merchant bankers.  Discount & Finance House of India(DFHI) DFHI was incorporated as a company under the company act 1956 with an authorized & paid up capital of Rs 100 crore. & Fixed return security offered to the public. Out of this Rs 51 crores has been contributed by RBI. (SHC) SHC was set up in 1986 by the all Indian financial institutions to take care of safe custody.issues of capital market. brokers. the STOCKBROKER UNDERWRITER ASSOCIATION(SUA) was established in 1984. It help the investor in taking investment decisions. refinance facility from the RBI in order to meet the working capital requirement. The setting up of SHC is bound to affect the capital market in future.(CRISIL) CRISIL has been set up in 1987 to provide help to investors.  Credit Rating Information Services of India Ltd.  Stock-Holding Corporation of India Ltd. DFHI aims at providing liquidity in money market as it deals mainly in commercial bills.

Registration of merchant bankers in India Registration with SEBI is mandatory to carry out the business of merchant banking in India. consultant. An applicant should comply with the following norms:  The applicant should be a body corporate  The applicant should not carry on any business other than those connected with the securities market  The applicant should have necessary infrastructure like office space. manager. group company.  The applicant must have at least two employees with prior experience in merchant banking Any associate company. NETWORTH RS 1 Crore underwriter. WHICH ARE AS FOLLOW:CATEGORIES Category I ACTIVITIES To carry on the activities of issue mgt& act as advisor. equipment. portfolio management. manpower etc. 19 . subsidiary or interconnected company of the applicant should not have been a registered merchant banker  The applicant should not have been involved in any securities scam or proved guilt for any offence SEBI HAS DIVIDED MERCHANT BANKER‟S IN FOUR CATEGORIES.

portfolio management. SEBI shall consider the application and on being satisfied. 1992. issues a Certificate of registration in Form B of the SEBI (Merchant Bankers) Regulations. underwriter or Rs 20 lakh consultant to an issue Category IV To act only as advisor& consultant to an issue Nil Procedure for getting registration: An application should be submitted to SEBI in Form A of the SEBI (Merchant Bankers) Regulations. Underwriter. co-manager. 1992.Category II To act as advisor. Rs 50 lakh Category III To act as advisor. 20 . consultant .

Bank of America.. 21 . an application along with renewal Fee of 2.. Ltd. Validity period of certificate of registration is three years from the Date of issue. Leading Merchant Bankers in India  In Public Sector: SBI Capital Markets Ltd. SEBI shall consider the application and on being satisfied renew Certificate of registration for a further period of 3 years. Ltd. etc. Merchant Banking Divisions of IDBI & IFCI.  In Private Sector: ABN AMRO. Bank of Maharashtra.  Foreign Players: Goldman SACH (India) Security Pvt. Tata capital market ltd. Reliance Security Ltd. Three months before the expiry period. Axis Bank Ltd. ICICI Bank Ltd.. Citi Group Global Market Indian Pvt.. Ltd. PNB Capital Services Ltd.. 1992..Registration fee payable to SEBI: Rs.. Pvt. 5 Lakhs which should be paid within 15 days of date of receipt of intimation regarding Grant of certificate. Kotak Mahindra Capital Co. Deutsche Bank. Fedex Security Ltd. Bajaj Capital.. and DCM Financial Services Ltd etc.. Barclays Security Indian Pvt. Ltd... Yes bank Ltd. JM Financial Co.5 Lakhs should be submitted to SEBI in Form A of the SEBI (Merchant Bankers) Regulations. Morgan Stanley Indian co.

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The management of underwriting of shares and debentures. Factors responsible for changes: Globalization of Indian Economy has made the whole economy open. The management of the portfolio 3. The management of the customers securities 2. has now open up the doors of investment especially in the area of banks and insurance. Govt. which has more multinational player in the era of the financial services? This has resulted in to the emergence of the global investment in financial sector. The circumvention of the syndication of loans. 5. The management of the interest and dividend etc.Merchant Banking: 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 are very vast in nature of which includes the following 1. which leads to competitive environment for the present players. The management of projects and counseling as well as appraisal. Now they have to bring something new which is efficient and best services to live in the competitive environment. 23 . 6. Competition arising out of Private Company participation is due to liberalization of the economy. 4.

finance companies for consumer lending and mortgage finance. So Merchant bankers are required to advice them for their investment in India. A public equity or debt issue is the logical source of fund in this situation and merchant banks can tap this opportunity of growth. insurance companies for life and property cover. and a range of specialized government or government sponsored institutions.  Entry of Foreign Investors: Now India capital market directly taps foreign capital through euro issues. they require additional financial services. The areas of great scope could be. Economic development requires specialist financial skills: savings banks to marshal individual savings. greater financial sophistication and financial services are required. There is a well proven link between economic growth and financial technology.  Growth of Primary market: If the primary market grows and number of issues increases.FDI is increased in capital market. The increasing number of joint ventures also requires expert services 24 . As new units have been set up and business is expanding. the scope of merchant banking will be enhanced. agricultural banks for rural development.SCOPE FOR GROWTH OF MERCHANT BANKING IN INDIA As planning and industrial policy of the country envisaged the setting of up of new industries and technology.

 Development of debt markets: If the debt market is enhanced. If more and more NRIs participate in capital market. they have to go for restructuring. merger. there will be tremendous scope for Merchant bankers. Exchanges and other regulatory authorities.  Corporate restructuring: Due to liberalization and globalization Companies are facing lot of competition. 3. there will be great demand for merchant banker services. acquisitions or disinvestments. Advising the company on Legal/ regulatory matters and interaction with SEBI/ ROC/ Stock 5. so the merchant banker services will be needed by corporate enterprise to provide expert guidance. Now NSE and OTCEI are planned to raise their fund through debt instruments. 2. Advising the company on designing of its Capital Structure. They may offer good opportunities to merchant bankers The scope could be extended to:- 1.  Changing policy of Financial Institutions: Now the lending policies of financial institutions are based on project orientation. 4. 25 . In order to compete. Pricing of the instrument.of Merchant Bankers. Advising the company on the instrument to be offered to the public.

8.6. advertising agency. printers. 7. underwriters. To coordinate the activities of various intermediaries to the share issue such as the registrar. 9. To ensure the compliance with rules and regulations governing the securities market. Assisting the company in marketing the issue. brokers etc. 26 . In channelizing the financial surplus of the general public into productive investment avenues. Bankers.

 Confidence of the people.  The economic environment of the outside world. buyers. traders. business houses. 27 .e. marketers. financial institutions etc.THE FACTORS FOR GROWTH OF MERCHANT BANKING:  Planning and industrial policy of the country i.  Competition among the existing players and the upcoming entrants. India in this case  Prevailing Economic condition of the country.  Regulatory system of the market and economy prevailing in India.

25 crores 28 .0.PROBLEMS OF MERCHANT BANKING Restriction of merchant banking activities: SEBI guidelines have authorized merchant bankers to undertake issue related activities and made them restrict their activities or think of separating these activities from present one and float new subsidiary and enlarge the scope of its activities.5% Project appraisal fees Lead Manager :.1 crore: SEBI guidelines stipulate that a minimum net worth of Rs.0.1 crore for authorization of merchant bankers.5% up to Rs. Minimum net worth of Rs.25 crores .2% more in excess of Rs.0. Non co-operation of issuing companies: Non co-operation of the issuing companies in timely allotment of securities and refund of application money is another problem faced by merchant bankers. Merchant Banker’s Commission:    Maximum :.

 Willing to accept risks. Indian economy provides an amicable environment for these firms to set up.   Underwriting fees Brokerage commission :. 29 . merchant banking in India has vast scope to develop because of lot of domestic as well as foreign businesses booming here.  Generally avoid risks. flourish and expand here.  Asset oriented.1.  MERCHANT BANKING  Deals with Equity & Equity related finance.5% Other expenses :Advertising Printing Registrar‟s expenses Stamp duty In spite of problems popping up. Difference between Commercial Banking & Merchant Banking:  COMMERCIAL BANKING  Deals with Debt & Debt related finance.  Management oriented.

 MERCHANT BANKING  Purely fee-based. 30 .  Impossible to stay aloof from international trends.Difference between Investment Banking & Merchant Banking:  INVESTMENT BANKING  Both fee-based and fund-based.  Commit their own funds.

 IDBI BANK  Kotak Mahindra 31 .BRIEF ANALYSIS OF SOME MERCHANT BANKS OF INDIA PSU BANKS  SBI  Punjab National Bank  Bank of Baroda  Union Bank of India  Canara Bank New Banks  ICICI Bank Ltd.

SBI‟s seasoned Team of professionals provides you with Insightful credit Information and helps you Maximize the Value from the transaction. the bank operates more than 13. The Reserve Bank of India owns about 60% of State Bank of India. Our Primary focus is On Indian Clients. SBI being an Indian entity has no India exposure ceiling. factoring and commercial services. and brokerage services. OUR PRODUCTS AND SERVICES  Arranging External Commercial Borrowings (ECB)  Arranging and participating in international loan syndication  Loans backed by Export Credit Agencies 32 .500 branches and over 5. The bank has other units devoted to capital markets. State Bank of India is the nation's largest bank. including multiple locations in the US (California). Canada. Tracing its roots back some 200 years to the British East India Company (and initially established as the Bank of Calcutta in 1806). fund management. where it also owns majority stakes in seven associate banks. State Bank of India has more than 50 offices in nearly 35 other countries.000 ATMs within India. We specialize in the arrangement of various forms of Foreign Currency Credits for Corporate. and Nigeria.SBI Merchant Banking Group is strongly positioned to offer perfect financial solutions to your business.

To provide Credible. Our Mission . which is the largest commercial bank in India. We began operations in August 1986 as a wholly owned subsidiary of the State Bank of India. In January 1997.  15.  First Indian Bank to take up merchant banking in 1986. SBI Group:  The largest commercial bank group in India  Position in the domestic banking sector as on 31 March 2008:  15. The distinguished parentage (with a 86.84% stake in the equity of SBICAPS.28 % of total advances. Professional and Customer Focused world-class investment banking services. Our Vision . Foreign currency loans under the FCNR (B) scheme  Import Finance for Indian corporate SBI CAPITAL MARKETS LIMITED (SBICAPS) is India's leading investment bank and project advisor. fresh equity shares were issued to Asian Development Bank (ADB) and ADB now holds 13.44% of the aggregate deposits.16% stake) together with the long standing association of an internationally renowned financial institution like the Asian Development Bank further enhances our image as a truly 'World Class Investment Bank'. 33 . assisting domestic company‟s fund-mobilization efforts for last many years.  The only Indian Bank to find a place in the Fortune Global 500 List.To be the best India based Investment Bank.

 SBICAP Trustee Company Ltd SERVICE’S: Project Advisory & Structured Finance SBICAP has built a formidable presence in the area of Project Finance Advisory and Funds Syndication with several prestigious mandates in almost every sector of the industry to its credit. managed 700+ issues (since 1989 – source Prime Database). 1 in IPO‟s.  No. Our product portfolio includes:  Project Appraisal 34 .  SBICAP Securities Ltd. Subsidiary:-  SBICAPS Ventures Ltd. Rating by Thomson Project Finance International.  SBICAPS (UK) Ltd.  The only Indian Merchant Banker in the Global 10. 1 in Asia – Pacific for Project Advisory.SBI Capital Markets Limited:  No.  Pioneer in Privatization. Thomson Project Finance International 2007.

mezzanine debt and equity. Structured Finance and Syndication  Infrastructure Project Advisory  Securitisation  Debt & Equity Syndication  Capital Markets Capital Markets Group handles transactions in the capital markets space across multiple instrument structures. and equity offerings completed as a private placement. be it the traditional or the structured formats  Qualified Institutional Placements  Open offers.  Private placement of bonds  Capital restructuring advisory services 35 . Buyback and Delisting of securities  Offerings of convertible securities  Public offering of Corporate structured bonds  Arranging Private Equity to include growth capital. Our product and solutions bouquet includes:  Managing Initial Public Offerings and Follow-on Public offerings and Offers-forSale  Managing Rights Offering. private investments in public equity (PIPES). pre-IPO convertibles.

Indian Depository Receipts. Advisory and arrangement services for products such as AIM Listing. ADR/GDR and other off-shore equity or bond listing options  M&A and Advisory The M & A product portfolio includes:  Mergers & Acquisitions  Private Equity  Foreign Currency Convertible Bonds (FCCB)  Corporate Advisory 36 .

0M Net income: $322. non-resident Indians. and multinational companies.Punjab National Bank (PNB) is one of India's largest nationalized banks with some 4. and export finance. The bank was established in Lahore in 1895 -. The financial institution offers services in personal and corporate banking. small and mid-sized businesses. and education. agricultural.315. PNB's diverse client list includes Indian conglomerates. Its personal lending services include loans for housing.before the country was partitioned into India and Pakistan in 1947.28 bil Assets $24.79 bil Employees 58.500 branches or service counters.1M PNB's Financial Numbers      Sales $2. including industrial. as well as international banking.300 37 .32 bil Profits $.12 bil Market Value $2. autos. Key Sale: numbers for fiscal year ending 2008: $2.

Birla.G. Thakersey. Sir Sayajirao Gaekwad III. M. Walchand Hirachand. transmission and deposit of money and a powerful factor in the development of art. BOB was amongst the first few banks to venture overseas by opening a branch at Mombassa in 1953. The founder strongly believed that. Unlike other state-owned bank. "a bank of this nature would prove to be a beneficial agency for lending. BOB could maintain its unique identity and established a strong national presence even before independence. 38 . Today it has significant international presence with a network of 72 offices in 25 countries. Parikh and others. R.M.D. Chokshi. N. serving generation after generation around the globe. 1908 in the princely state of Baroda by the great visionary. Bank of Baroda has 100 years of glorious performance and an uninterrupted profit record.Bank of Baroda (BOB) was established on 20th July. industries and commerce of the state as also of adjoining territories". to all corners of the country. The Bank was led by eminent personalities and great bankers like Shri V.D.

We are shortly commencing Broking/E-broking Business. BOBCAPS is one of the Investment Banking Companies in India and is a SEBI registered Category I Investment Banker. Private Placement of Debt. (BOBCAPS) is a wholly owned subsidiary of Bank of Baroda. Corporate Restructuring. Project Appraisal and Loan Syndication. BOBCAPS offers the entire spectrum of financial services that includes Initial Public Offerings. Business Valuation. Mergers & Acquisitions. BOBCAPS also undertakes advisory services on Securitization and Structuring of Debts. Singular Strengths  Patronage of Bank of Baroda  Excellent association with Banks and Financial Institutions  Good relationship with fellow market intermediaries  Large client base consisting of blue chip and midcap companies  Good rapport with regulatory authorities 39 .BOB Capital Markets Ltd.

 Experienced & qualified professionals wholly devoted towards their key areas.Strengths  Patronage of over 101 years old "Bank of Baroda" having more than 3000 branches across India and 70 branches overseas. SERVICES: Investment Banking  IPO / Rights Issue / FPO  Mergers & Acquisition  Private Placement of Debt / Equity  Private Equity Advisory  Corporate Advisory Services  Project Appraisal / TEV Studies  Debt Syndication  Business Valuation 40 .  Excellent rapport with the concerned regulatory authorities.  Strong pool of clients consisting of Blue chip and mid cap companies.  Good liaison with Banks and Financial Institutions.  Strong relationship with fellow Market Intermediaries.

Fidelity. HDFC. Reliance. UTI. (BOBCAPS). and Franklin Templeton. a wholly owned subsidiary of Bank of Baroda is into Mutual Fund Distribution and Advisory Services. 41 . As a distributor we are empanelled with 28 SEBI Registered Mutual Funds in India including SBI. Retail Broking  Online Trading  Call n Trade  Applying IPOs Online  Applying MFs Online  Institutional Broking  Institutional Equity Broking Services  Equity Research  F & O Dealing and Sales  Mutual Fund Distribution  BOB Capital Markets Ltd.

Recent Offerings Business Valuation Business Valuation for a Project crossover M&A Deal Valuation Appraisal and Valuation of shares Capital Issues – Equity Lead Manager to the Initial Public Lead Manager to the Lead Manager to the Rights Offering of Issue Size INR 750 Issue Size INR 180 Million Million Capital Issues – Debt Arranged Issue of NCDs on Private Placement Arranged Issue of NCDs on Private Arranged the Issue of Placement basis worth INR 500 various Bond series for 42 .

43 .Basis worth INR 3250 Million Million Tier I and Tier II capital requirements INR 20 aggregating Billion 2009 from 2007- Mergers & Acquisitions Advisor to the Takeover Deal.

The bank has earned a reputation for being techno-savvy--more than 600 branches of Bank are networked and powered with a centralized technology platform.Union Bank of India has been around for more than 88 years. st st 44 . Individuals and Others. 8758 crore as on st 31 March 10 as compared to Rs.1923 crore as on 31 March‟09. Union Bank is a Public Sector Unit with 55.43% Share Capital held by the Government of India. the bank also manages close to 395 networked ATMs. Financial performance(as on 31st march 10)  The Bank‟s Net Worth increased by 25.76% and stood at Rs.  st Net Profit Increased by 27.57 % of Share Capital is presently held by Institutions. Gross NPA level increased to Rs. Presently 44. 2002 and Follow on Public Offer in February 2006.2671 crore as on 31 March‟10 from Rs. The Bank came out with its Initial Public Offer (IPO) in August 20.6964 crore in the previous year.47% and stood at 594 crore as on 31 March 10 as compared to   466 crorecrore in the previous year.

Trade Finance.Transfer of Funds/Bills/Limits/Currency.RetailLoans.Cards.Demat)  NRI Banking(Remittance. MSME Banking)  Internet Banking(Account Information. Savings & Deposits. Financial &NonFinancial enquiries) 45 . Insurance. Payments)  Corporate Banking(CMS. Loan & Services. E-Tax. loans Syndication.Insurance&Investment.Products and Services  Personal Banking (Accounts &Deposits.

involving various types of industries. It have associated with issue ranging from 1 crore to 1500 crore. and State owned corporation.  Agriculture Consultancy Services  Corporate Advisory Services  Merger & Acquisition 46 .CANRA BANK is also one of the leading merchant bankers in India. & corporate sector. PSUs. Corporate advisory services. offering specialize services to banks. private placement). SPECTROM of Services: Equity Issue (Public/ Right) management. banks . & have an edge in handling Private Placement issue. Underwriting Consoltancy. right. statutory Bodies etc.  Debt Issue management. Local statutory bodies.Both Retail & HNIs. It is SEBI register with CAT I Merchant banker to carry on issue management (public.  Private Placement  Project appraisal  Monitoring agency assignments.

a Subsidiary of Canara Bank was incorporated and accredited as a Primary Dealer (PD) in 1996 in the name of „Gilt Securities Trading Corporation Limited. The On Line Trading (OLT) in Equity and FNO is a product added by CBSL to Financial Super Market of Canara Bank. Share valuation & Buy back Assignment. About PROMOTERS/ACTIVITY The Company.  IPO funding Security Trustee Services. The name of the Company has been changed as „Canara Bank Securities Ltd. 2007 and the Company is focusing on capital market related activities mainly into equity broking and distribution of Financial Products. (CBSL)‟ in 2009. This facilitates seamless trading in stock market by 47 . The Primary Dealer activity of the Company was taken over by the parent Bank in February.100 Crores. (GSTCL)‟ with a paid-up capital of Rs.

 To provide Trading Convenience by way of:   Efficient and Speedy On-Line Service Prompt Settlement Transparency in operation ORGANIATIONAL SETUP As per SEBI guidelines the Company has functional separation for.  To develop a Retail Equity market with broader investor base by offering enhanced trading facility to the equity instruments and hassle-free & speedy service using state of the art technology in the market. Liquidity to the instrument and transparency in dealing. assure prompt settlement.  Trading (Front Office)  Settlement accounting and Reconciliation(Back Office and Accounting)and  Monitoring and Control (Middle Office) Similarly.investor clients of the Bank at their comfort and convenience. PRINCIPAL OBJECTIVES  To provide a viable and efficient institutional platform for competitive trading in equities. there is a separation of transactions relating to Proprietary trads. Institutional accounts and Constituents‟ accounts.  To create an active secondary market for Equities. 48 .

ICICI's retail banking group offers lending and deposit services to small businesses and individuals. Other ICICI offerings include online banking. Foreign operations. who are on deputation from Canara Bank.The Company is Board managed. as well as services related to international trade finance and expatriate Indians. Day to day affairs are overseen by the Managing Director. which offers finance services and treasury products. 2008: $5.871 Employee growth: 37. fall under the international banking group.200 ATMs nationwide. with more than 600 branches and 2. asset management. ICICI Bank is India's #2 bank (after State Bank of India).796.3M 49 . Key Sale: numbers for fiscal year ending March. assisted by the executives heading the departments and supported by competent and experienced staff.2% You see. Larger businesses are served by the corporate banking group. and insurance. NEW BANKS Employees:41. ICICI's rural and government banking unit offers micro-loans and agricultural banking.

S. can engage in permitted activities in the U. These activities include Dealing in Securities and Corporate Advisory Services in the United States and providing research and investment advice to US investors. Institutional Equities.1M ICICI Advice on Wide Varity of Product:  Private Equity Financing  Secondary sale transactions  pre IPO deals ICICI Securities Ltd is the largest equity house in the country providing end-to-end solutions (including web-based services) through the largest non-banking distribution channel so as to fulfill all the diverse needs of retail and corporate customers. ICICI Securities Inc. ICICI Securities (I-Sec) has a dominant position in its core segments of its operations Corporate Finance including Equity Capital Markets Advisory Services.4% year income: growth: 99. Retail and Financial Product Distribution. securities markets. Inc.1% $524. 50 . the step-down wholly owned US subsidiary of the company is a member of the National Association of Securities Dealers.. ICICI Securities Inc. As a result of this membership. (NASD).One Net Income growth: 167.

UK (FSA) and the Monetary Authority of Singapore (MAS). The group has a net worth of over Rs. The Group services around 6. 51 . Dubai. offering complete financial solutions that encompass every sphere of life.is a SEBI Registered CAT-1 Merchant banker. 7. to stock broking. From commercial banking. to investment banking. to life insurance. franchisees. ICICI Securities Inc. Mauritius and Singapore.5 million customer accounts. Technology  IDG India's CIO magazine has recognized ICICI Securities as a recipient of 2009 CIO 100 award  Indian Bank's Association Business Technology Awards for Best Online Trading Platform in 2006 and 2007 The Kotak Mahindra Group Kotak Mahindra is one of India's leading financial conglomerates. representative offices and satellite offices across cities and towns in India and offices in New York. is also registered with the Financial Services Authority. to mutual funds. San Francisco.100 crore and has a distribution network of branches. London. the group caters to the financial needs of individuals and corporates.

Since the inception of the erstwhile Kotak Mahindra Finance Limited in 1985, it has been a steady and confident journey leading to growth and success.

Kotak Group Products & Services:

Kotak Securities

Kotak Securities Ltd. 100 % subsidiary of Kotak Mahindra Bank is one of the oldest and largest broking firms in the Industry. A subsidiary of Kotak Mahindra

bank.Reconstruction from a private company to a public limited company effective from June 13, 2003. Act as a lead manager to several (IPO‟s) & help in Client in accessing the public & private equity market. It is also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). Kotak Securities Limited has Rs. 2300 crore of Assets Under Management (AUM) as of

52

31st March, 2010.

Large Presence: At present Kotak in 331 cities with 843 offices all over the country. Services :-

 stock broking through the branch and Internet,  Investments in IPO,  Mutual funds  Portfolio management service,  Currency Derivatives,  Insurance. Finance Asia Award (2004)- India's best Equity House Prime Ranking Award (2003-04)- Largest Distributor of IPO's

53

IDBI Capital Market Services Ltd., (IDBI Capital) is a wholly owned subsidiary of IDBI Bank Ltd and is a leading Investment Banking & Securities Company.

IDBI Capital offers a full suite of products and services to Corporate, Institutional and Individual clients. The range of services include:           Investment Banking Capital Market Products Private Equity Corporate Advisory Services Mergers & Acquisitions Project Appraisals & Debt Syndication Stock Broking - Institutional & Retail Distribution of Financial Products Debt Placement and Underwriting Fund Management (Managing Clients' Assets-Pension/PF Fund Managers) Research Group

IDBI Capital is highly regarded for safety and trust and enjoys a credit rating of “AAA”

54

by CARE for its medium-term borrowings and P1+ by ICRA for its short-term borrowings.

 Fund Management

IDBI Capital Market Services Ltd. (ICMS) is a leading Fund Manager in the country for Provident, Pension and Retirement Benefit Funds. The Company is a SEBI registered Portfolio Manager and manage its Client‟s assets under both discretionary and nondiscretionary mandates. These services are provided to various public and private sector undertakings and their provident, pension, retirement benefit and surplus funds. The Company‟s client base includes leading pension and provident funds in the country.

IDBI capital has been advising institutions, banks and corporate for their investment in Debt, Mutual Funds and Equities over several years. Its services include managing Client Assets--Pension & Provident Funds, Surplus fund Management, Equity Portfolio Management and Mutual Fund Advisory.

The funds have continuously yielded superior returns, which are significantly higher than the benchmark.

ISO Certification 9001:2000 Keeping in view the importance of standardized processes and service levels, the Company has gone in for ISO Certification for Fund Management, and is the only

55

1993. of IDBI Capital is INP000000209. These activities would be governed by Securities and Exchange Board of India (Portfolio Managers) Rules and Regulations. SEBI Registration No.company to have done so in this sector. Service’s: Retail Broking & Distribution  Online Investing  IPO Distribution  Capital Markets  IPO / FPO / Right Issues  Take Over  Buyback of Securities  Qualified Institutional Placement  Private Equity  Investment Banking  Financial Advisory  Project Advisory 56 . Being a public sector. valid till the year 2010. Regulatory Approval IDBI Capital is a registered Portfolio Manager with Securities and Exchange Board of India (SEBI) since 1998 and is authorized to undertake Funds Management activities (Debt & Equity) for clients. the Company is also audited by Comptroller and Auditor General (CAG) office and follows transparent practices.

 Corporate Advisory  Mergers &Acquisitions  Strategic Advisory  Institutional Broking & Distribution  Equity Sales & Dealing  Equity Research  Mutual Fund Sales & Dealing  Mutual Fund Research 57 .

PRESENT SCENARIO OF INDIAN MERCHANT BANKING U. Debt Financing is not the answer for SME`s. Meanwhile smaller Indian companies seeking to 58 . Feb 17 08 /PR Newswire/ Emissary Capital. LLC A merchant bank based in New York City and specializing in Indian Companies. but it is India‟s fast growing manufacturing sector. SMEs are dynamic force in India fall under this category. There seems to an across the board consensus that Indian SME`s have not been able to fully tap their potential and keep pace with India‟s growth because of their inability to access greater sources of financing. is a pioneer firm leading the charge for Indian Companies to obtain stock market listings in the U. The avg. driven by approximately three million SME`s in sectors ranging from auto components to industrial goods. size of Indian IPO rose to approximately $100 million in 2008-09. India‟s strength in Information Technology sector is well known.75% to 13. the high domestic interest rate regime (prime rate of 12.S public company with the prestige and capability to raise money from U.S and European investors in conjunction with a U. The Indian stock markets including the BSE & NSE have essentially ignored robust Indian SMEs. Focus on small and medium enterprises (SMEs). Furthermore. This turns a fast growing Indian company into U. For vast majority of Indian SME`s.Growing Indian Companies: An innovative financing Option New York.S Stock Market Listings of Fast. No IPO boom for Indian SMEs in Indian stock markets.25%) continues to be a substantial hindrance. the ability to raise debt financing outside India (typically referred to as External Commercial Borrowings (ECBs) is strictly regulated by RBI. that is rapidly India a leading global manufacturing hub.S public company with market listing.S and European institutional investors.

where the majority of SMEs would list themselves if possible.25 million to $2.5 million to $125 million in March 2008 fiscal year. face stiff competition from India‟s two major stock exchanges BSE & NSE.5 million to $125 million in March 2007 fiscal year. as the work required for a small IPO compared to a large IPO is relatively the same. Emissary Capital Ltd. only 52 companies have been able to raise funds in the range of $2.S stock market listings as well as identifying and advising on mergers & acquisitions transactions for such companies. Finally. Also the regional stock exchanges.5 million range since April 2007. No companies have raised money in the $1. 59 .raise funds of less than that amount have found it increasingly difficult to raise funds through Indian Stock Markets listings. Is a full service merchant banking firm which specializes in assisting fast growing Indian companies in obtaining financing and U. There are few smaller Indian IPOs because Indian merchant bankers prefer to work on bigger IPOs that earn them bigger. According to SEBI only 104 companies raised capital in the range of $2.

After comparison it would be find out which category has more growth potential in present scenario as well as in future. 60 . The study would have information and details of Merchant Banking of public sector and private sector companies and then an analysis will be done on the collected information and finally a comparison between these two categories will be done.FOCUS OF THE STUDY The main focus of the study would be on functioning of the Merchant Banking companies.

Some companies have built their strong image and some are still in process to leave their mark in the international market. New players are entering in this field day by day. 61 .CONCEPTUALIZATION OF THE STUDY Amidst the swift changes sweeping the financial world. So many companies in India are trying their hands in this field. They try to identify the needs of the investors & corporate sector & advice entrepreneurs what to do to be successful. Merchant Banking in India has a great demand over the globe. Merchant Banking has emerged as an indispensable financial advisory package. Merchant banking is a service-oriented function that transfers capital from those who own to those who can use it.

 Sample Size Sample size would be 7-8 public & private sector merchant banking companies.  For carrying out my research work I would follow Exploratory cum Descriptive research design. 62 . Here in this study universe and survey population sampling would be all the public & private sector companies of India engaged in Merchant Banking operations.  A sample design is a definite plan for obtaining a sample from a given population.RESEARCH METHODOLOGY RESEARCH DESIGN:  A research design is an arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy ion procedure.  Universe and Survey Population Sampling All the items under consideration in any field of inquiry constitute a “universe” or “population”.

Methods of Data Collection  Primary Data usually consists of the data that are collected afresh for the first time and thus is original in character. Secondary Data that used in the study are  Newspapers  Websites  Books Analysis Pattern  Statistical Tools.graphs & charts  Cross Tabulation Of Data 63 . Primary Data that used in the study  Questionnaire In my Questionnaire There are 10 Questions  Secondary Data consists of data that is collected from some existing literature. It has been already analyzed by someone else earlier and is derived from that source.

No. 36 44 80 Percentage 45 55 64 . 1 2 Service Yes No Total Financial Nos.Analysis & Interpretation Q 1 Do you take any financial services from bank? Take Sr.

32 48 80 Percentage 40 60 65 . 45% respondents have taken Financial Service and rest 55% respondents have not taken the Financial Service. No.GRAPH Take Financial Service 45% 1 Yes 2 No 55% Interpretation Out of total respondents. Q 2 Do you Know about Merchant Banking? Know Sr. 1 2 Merchant Yes No Total about Nos.

60 60 50 40 30 20 10 0 Nos. No.25 100 66 . 40 1 Yes 2 No Interpretation Out of total respondents. 1 Yes.75 56. 35 45 80 Percentage 43. 40% respondents Know about merchant banking and rest 60% respondents don‟t know about merchant banking.Know about Merchant 2 No. Q 3 Are you satisfied with the services provided by your bank? Sr. 1 2 Satisfied Yes No Total Nos.

43.25 1 Yes 2 No Interpretation Out of total respondents. Q4 Are you satisfied with services offered by banks? Sr. no 1 2 3 4 5 Bank ICICI SBI PNB BOI Other Percentage 20 35 20 15 10 67 . 56. 43.75 Percentage.75% respondents Satisfied and rest 60% respondents don‟t Satisfied.60 50 40 30 20 10 0 Percentage Percentage.

of companies takes financial services from SBI.no 1 2 3 Position Good Normal Bad Total Percentage 50 35 15 100 68 . Q 5 What is the position of Merchant Banking in Private Sector? sr.40 35 30 25 20 15 10 5 0 icici sbi pnb boi any other icici sbi pnb boi any other Interpretation  Large no.

Q 6 What is the position of Merchant Banking in Public Sector? sr.no 1 2 3 Position Good Normal Bad Total Percentage 40 55 5 100 69 . 50% respondents Say Good. 35% Say Normal and rest 15% respondents say bad.Position Bad 3 15% Normal 2 35% Good 1 50% 1 Good 2 Normal 3 Bad Interpretation Out of total respondents.

4.) Gold Land Papers Third person security Total: Nos.No. Type of Security Bank Security (F. Q7 What type of security have you deposited/you will deposit with the banks ? Sr. 18 0 50 12 80 Percentage 22. 2. 1. 3.D.5 0 62. 40% respondents Say Good.Position 5% 40% 1 Good 2 Normal 3 Bad 55% Interpretation Out of total respondents.5 15 100 70 . 55% Say Normal and rest 5% respondents say bad.

Yes No Total: 64 16 80 80 20 100 71 . 2.50 45 40 35 30 25 20 15 10 5 0 bank sec. gold land paper third person Q 8 Are you satisfied by Security margin of bank? Sr.No. Percentage 1. Satisfaction Margin by Security Nos. gold land paper third person bank sec.

56 24 80 Percentage 70 30 100 72 . Q 9 Are you satisfied with timely services provide by banks? Sr. 80% respondents Satisfied and rest 20% respondents don‟t Satisfied. No.B Yes No Total Nos.70 60 50 40 30 20 10 0 Yes No Yes No Interpretation Out of total respondents. 1 2 Depends on M.

1 2 Difference Yes No Total Nos.Depends on M. Q10 Will it differ from investment banks? Sr. 75% respondents Say that They are timely heared and rest 25% say that They are not timely served by merchant banking. 60 20 80 Percentage 75 25 100 73 .B 56 1 Yes 2 No 1 Yes 24 2 No Nos. Interpretation Out of total respondents. No.

74 .60 50 40 30 20 10 0 Yes No Yes No Interpretation Out of total respondents.75% respondents Think that It is differ and rest 25% respondents don‟t Think so.

COMPARISION BETWEEN PUBLIC & PRIVATE SECTORS Public Sector is the pioneer in providing Merchant Banking services in India. Public sector merchant banking companies facing stiff competition from the private sector companies. Market Share Public Sector= 66% Private Sector= 34% 70% 60% 50% 40% 30% 20% 10% 0% public sector private sector Series1 75 . But due to liberalization of economy the scenario has changed many private Merchant Banking companies have entered in the industry since then.

and with rigorous follow-up mechanisms.  SMEs are facing stiff competition from large scale companies.Findings & Conclusions  Longstanding client relationships  Strong positions in high-growth client and product niches.  Growth is controlled by a sound Risk Management System and disciplined cost management. 76 .  Multiple revenue growth initiatives are in place with detailed and concrete action plans.  Small & Medium scale enterprises SMEs need immediate attention from merchant bankers to get access to finance.

LIMITATIONS OF THE STUDY  Sample size to be taken may not be the true representative of the population. 77 .  Due to paucity of time only limited information can be collected.  There can be a possibility of “individual biasness” on the part of respondents.  Study would be confined to only 7 public & 3 private sector merchant banking companies.

sebi. Gupta.com http://www.icicisecurities.canmoney.pnbindia.BIBLIOGRAPHY i. Financial Institutions & Market By Shashi K.com http://www.R Kothari Scibd. v. vii.bobcapitalmarkets.in/subsidiaries http://www. vi. ix.com www.in http://www.kotaksecurities.emissarycapital. x.com http://www. ii.gov. NishaAggarwal Research methodology by C.com www. iii. viii.in 78 . iv.

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