A PROJECT REPORT ON

“ROLE OF MERCHANT BANKING IN INDIA WITH

SPECIAL REFERNCE TO MUMBAI”

SUBMITTED BY
PATEL ZEAL UMESH PUSHPA
BACHELOR OF ACCOUTING AND FINANCE
SEMESTER VI

UNDER THE GUIDANCE OF

DR/ASST.PROF RAINA K CHANDIKA

KERALEEYA SAMAJAM (REGD) DOMBIVLI’S

MODEL COLLEGE

UNIVERSITY OF MUMBAI
MARCH 2021

A PROJECT REPORT ON
“ROLE OF MERCHANT BANKING IN INDIA WITH
SPECIAL REFERENCE TO MUMBAI”

SUBMITTED TO THE UNIVERSITY OF MUMBAI

IN PARTIAL FULFILLMENT FOR THE AWARD OF
THE DEGREE OF ACCOUNTING AND FINANCE
 BY
PATEL ZEAL UMESH PUSHPA

UNDER THE GUIDANCE OF

DR/ASST.PROF RAINA K CHANDIKA

KERALEEYA SAMAJAM (REGD) DOMBIVLI’S

MODEL COLLEGE

UNIVERSITY OF MUMBAI
MARCH 2021

TABLE OF CONTENTS

Serial Description Page

Number Number

1 CERTIFICATE I

2 DECLARATION II

3 ACKNOWLEDGEMENT III

4 LIST OF TABLES AND GRAPHS IV

5 LIST OF ABBREVIATIONS V

6 CHAPTER I: INTRODUCTION 1-44

7 CHAPTER II: RESEARCH DESIGN 45-49

8 CHAPTER III: LITERATURE REVIEW 50-53

9 CHAPTER IV: DATA ANALYSIS, INERPRETATION AND 54-67

 PRESENTATION

10 CHAPTER V: FINDINGS, CONCLUSION AND 68-70

SUGGESTIONS

11 BIBLIOGRAPHY/WEBLIOGRAPHY 71-75

12 APPENDIX VI

KERALEEYA SAMAJAM (REGD.) DOMBIVLI’s

MODEL COLLEGE
(Affiliated to University of Mumbai)
RE-ACCREDITED GRADE “A” BY NAAC

CERTIFICATE
This is to certify that Ms. / Mr.
________________________________________ has worked and duly
completed her/ his Project Work for the degree of
_________________________________________________________
under the Faculty of __________________ in the
subject____________________ and her/ his project is
entitled__________________________________________
_____________________________________________________________
____” under my supervision.
I further certify that the entire work has been done by the learner under my
guidance and that no part of it has been submitted previously for any Degree
or Diploma of any University.
It is her/ his own work and facts reported by her/ his personal findings and
investigations.
Date of submission External Examiner

Project Guide Principal

DECLARATION

I, PATEL ZEAL UMESH PUSHPA, STUDENT OF

BACHELOR OF MANAGEMENT STUDIES, OF
KERALAEEYA SAMAJAM DOMBIVLI’S MODEL COLLEGE,
HEREBY DECLARE THAT I HAVE COMPLETED THE
PROJECT ON “ROLE OF MERCHANT BANKING IN INDIA
WITH SPECIAL REFERNCE TO MUMBAI” FOR THE
ACADEMIC YEAR 2020-2021.

THE INFORMATION SUBMITTED IS TRUE AND

ORIGINAL TO THE BEST OF MY KNOWLEDGE.

PATEL ZEAL UMESH PUSHPA

BACHELOR OF MANAGEMENT STUDIES
 ACKNOWLEDGEMENT

I take this opportunity to express my profound gratitude and

deep regards to my project guide for
his/her exemplary guidance, monitoring and constant
encouragement throughout the course of this Project work.

I am also deeply indebted to , of

for providing the necessary information required for
completion of this project.

I express my sincere gratitude and appreciation to all who

helped in completion of this project work.

Patel zeal
 LIST OF TABLES AND GRAPHS

TABLE DESCRIPTION PAGE

NO NO
1 CATEGORY 17
2 UNDERWRITING COMMISSION AS PER 18
SECURITIES
3 MERCHANT BANK AND COMMERCIAL 20
BANK
 1

EXECUTIVE SUMMARY

Although merchant banking activity was ushered in two decades ago, it was only in 1992
after the formation of Securities and Exchange Board of India that it is defined and a set
of rules and regulations in place. Today a merchant banker is who has the ability to
merchandise that is, create or expand a need and fulfill capital requirements.

I have given an overview about the financial markets and the role of merchant bankers in
the growth of these markets. My project covers how the merchant banks works, rules &
regulations laid by SEBI & its impact on the merchant banking activities. Their
importance in the economy is expected to grow even further in the coming years with an
increasing proportion of household savings getting invested in corporate & other
securities. Hence, my project covers the challenges and advantages, which India will get
and is getting by merchant banking activities. I have covered several services provided by
Merchant Bankers & the role of Merchant bankers in providing those services to the
business world.

Finally, the analysis have been done to know whether people are aware of it or not
basically in Central Mumbai. Activates undertaken by them is studied and overall view is
been given on how customers think of Merchant Banking services.
 2

CHAPTER 1

INTRODUCTION

1.1 Meaning and Definition of Merchant Banking

Meaning

Financial services are an important component of financial system. The smooth

functioning of financial system depends upon the range of financial services extended by
the providers. Financial services in India have witnessed remarkable changes in the recent
past after the implementation of “Liberalization, privatization and globalization”. Funds
are tapped from the capital market to finance various mega industrial projects. In
attracting public savings, merchant bankers play a vital role as specialized agencies. The
resources raising functions remains to be the primary business of a merchant banker. The
primary market holds the key to rapid capital formation, growth in industrial productions
and exports. There has to be accountability to the end use of funds raised from the
market. The increase in the number of issues and amount raised the number of merchant
bankers. Therefore, the field became highly competitive market where it requires a
specialized skill in handling the situation. The merchant bankers have a social
responsibility to in building an industrial structure in India
Merchant bankers assist corporate in raising capital. They assist in issue of Shares,
syndicating loans, public issue of debentures. They do not provide funds. They only
assist. They also actively arrange working capital, appraisal Projects scrutinize &
persuade merger proposals.

In BRITAIN merchant bankers & investment bankers are synonymous.

In the U.S., Merchant bank means as investment bank which is well-equipped to handle
multinational corporations.

In INDIA merchant bankers is a body corporate who carries on any activity of the issue
management, which consist of preparing prospectus & other information relating to the
 3

issue. Merchant banks in India are not allowed to conduct any business other than that
related to securities market. There is no official category in investment banking.

A merchant bank is historically a bank dealing in commercial loans and investment. In

modern British usage it is the same as an investment bank. Merchant banks were the first
modern banks and evolved from medieval merchants who traded in commodities,
particularly cloth merchants. Historically, merchant banks' purpose was to facilitate
and/or finance production and trade of commodities, hence the name "merchant". Few
banks today yrestrict their activities to such a narrow scope.

In modern usage in the United States, the term additionally has taken on a more narrow
meaning, and refers to a financial institution providing capital to companies in the form
of share ownership instead of loans. A merchant bank also provides advisory on corporate
matters to the firms in which they invest. The term Merchant Banking has its origin in the
trading methods of countries in the late eighteenth and early nineteenth century when
trade-taking place was financed by bill of exchange drawn by merchanting houses. At
that time the merchants were merely financing their own activities. As international trade
grew and other lesser-known names wanted to import goods from abroad, the established
merchants ‘their names’ to the newcomers by agreeing to accept bills of exchange on
their behalf. The acceptance houses would charge a commission for this service and thus
there grew up the business of accepting bills of finance trade not merely of themselves,
but of others. Acceptance business thus became and to a degree always has been hallmark
of true Merchant Banks.

The second historical of Merchant Banks was the raising of capital for foreign
Government. In many cases, the Merchant Banks have been trading in the countries
concerned and gained the confidence of Governments and other authorities in those
countries. Thus the second principal ingredient of Merchant Banking became and still is
raising of capital through the issue of stocks and bonds. Therefore, Merchant Banks can
be accepting houses or issuing houses or both. Merchant Banking started in the beginning
of 20 the century in UK and USA. More recently, the services offered by Merchant
Banks have entered into the other areas of operations. Their role is wide-ranging and they
can now provide most of the financial services required by
 4

accompany, touching almost all aspects of establishing and running of industrial units on
sound financial footing.

Dictionary meaning of ‘merchant bank’ refers to an organization that underwrites

corporate securities and advises such clients on issues like corporate mergers, etc.
Involved in the ownership of commercial ventures. This organization may be a bank,
corporate body, firm or proprietary concern.

Definition

In banking, a merchant bank is a financial institution primarily engaged in offering

financial services and advice to corporations and wealthy individuals on how to use their
money. The term can also be used to describe the private equity activities of banking.

According to Cox, D. merchant banking is defined as, “merchant banks are the financial
institutions providing specialist services which generally include the acceptance of bills
of exchange, corporate finance, portfolio management and other banking services”.

The Notification of the Ministry of Finance defines 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 as manager, consultant, advisor or
rendering corporate advisory service in relation to such issue management”.

In short, merchant bankers assist in raising capital and advice on related issues.

1.2 History and Origin of Merchant Banking in India

ORIGIN

Merchant banking originated through the entering of London merchants in foreign trade
through acceptance of bill. Later, the merchants assisted the Government of under
developed countries in raising long – terms through floatation of bonds in London money
market. Over a period they extended their activities to domestic business of syndication
of long term and short term finance, underwriting of new issues, acting as registrars and
 5

share transfer agents, debenture trustees, portfolio managers, negotiating agents for
mergers, takeovers etc.

Merchant Banking in India – Historical Perspective:

Till 18th century moneylenders, moneychangers, village merchants (maharanis), &

saucers performed the function of banks & merchant banks. They also issued &
discounted bills of exchange (handiest) & bank draft. They gave loans on mutual trust, on
mortgage of lands, ornaments & other property. JAGAT SHETH (1720-1773AD,
BENGAL) HABIB & SONS which is now HABIB BANK (founded in 1941, now is in
PAKISTAN). These were the organized merchant bankers in recent history of INDIA.

Merchant Banking is an activity that includes corporate finance activities, such as advice
on complex financings, merger and acquisition advice (international or domestic), and at
times direct equity investments in corporations by the banks.
Merchant banks are private financial institution. Their primary sources of income are
PIPE financings and international trade. Their secondary income sources are consulting,
Mergers & Acquisitions help and financial market speculation. Because they do not
invest against collateral, they take far greater risks than traditional banks. Because they
are private, do not take money from the public and are international in scope, they are not
regulated. Anyone considering dealing with any merchant bank should investigate the
bank and its managers before seeking their help.

The reason that businesses should develop a working relationship with a merchant bank is
that they have more money than venture capitalists. Their advice tends to be more
pragmatic than venture capitalists. It is rare for a merchant bank to fail. The last major
failure was Barings Bank (1992). It failed because of unsupervised trading of copper
futures contracts and buybacks. When the Dot Com Bubble burst in 2001, scores of
venture capital firms failed. The greatest merchant bank failure in history was the Knights
Templar. After the Crusades, the Order became immensely wealthy controlling and
funding the trade between the Middle East and Western Europe. They foolishly loaned
money to the French Government. To avoid repaying the money, King Louie had the
 6

Pope declare the Order heretics. Thousands of monks lost their lives, but France balanced
its budget.

To understand Merchant Banks, you should know something of their history. Modern
merchant banking started in Italy during the 7th Century. The banking practices evolved
from the financing structure of the Silk Road Trading that predates the Roman Empire.
The basic financing structure was the advance payment for goods by merchant bankers at
a great discount to the delivery value of those goods. In the case of Italy and then
Germany, wheat was the product. The merchant banks purchased the wheat soon after
planting. They accepted the risk of crop failure. They profited when they sold the wheat.
In most countries today, the national government accepts the risk through government
crop insurance.

As the British Empire expanded in the 18th and 19th Centuries, merchant banks
prospered in London. For instance, merchant bankers funded Canada’s Hudson Bay
Company. This period saw the rise of such merchant banks as Schroders, Warburg’s or
Rothschild’s. Amsterdam benefited from the trade created by the Dutch East Indian
Company. Since the 18th century, the role of the merchant banker has been considerably
broadened to include a composite of modern day skills. Such skills are inherently
entrepreneurial, managerial, financial and transactional.

Today, North American merchant banks have taken the form of "boutiques"- whereby,
each offers its own specialized services. The hallmarks of these merchant bank boutiques
are that they typically charge fees payable in cash and/or the client's stock for each
service rendered. You can find a merchant bank that meets any reasonable set of needs.

Merchant Banking in India – Post Independence:

In 1967, RBI issued its first merchant banking license to grind lays started with
management of capital issues, production planning, system design and also market
research. It provides management consulting services as well. Citibank setup its merchant
banking division in 1970. Its scope includes 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 offered to clients from 1972. State
 7

bank of India started the merchant banking division in 1972. In the initial years the
objective was to render corporate advice and assistance to small and medium
entrepreneurs. Merchant banking activities are organized and undertaken in several
forms. Commercial banks and foreign development finance institutions have organized
them through formation of division; nationalized banks have formed subsidiaries
companies and share brokers and consultancies constituted themselves into public ltd.
Co. or registered themselves as private ltd. companies. Some of them have equity stake of
foreign merchant bankers.

1.3Merchant Bank and its Functions

Merchant bank deals with the commercial banking needs of international finance, long
term company loans, and stock underwriting. A merchant bank does not have retail
offices where one can go and open a savings or checking account. A merchant bank is
sometimes said to be a wholesale bank, or in the business of wholesale banking. This is
because merchant banks tend to deal primarily with other merchant banks and other large
financial institutions.

The most familiar role of the merchant bank is stock underwriting. A large company that
wishes to raise money from investors through the stock market can hire a merchant bank
to implement and underwrite the process. The merchant bank determines the number of
stocks to be issued, the price at which the stock will be issued, and the timing of the
release of this new stock. The merchant bank files all the paperwork required with the
various market authorities, and is also frequently responsible for marketing the new stock,
though this may be a joint effort with the company and managed by the merchant bank.
For really large stock offerings, several merchant banks may work together, with one
being the lead underwriter.

By limiting their scope to the needs of large companies, merchant banks can focus their
knowledge and be of specific use to such clients. Some merchant banks specialize in a
single area, such as underwriting or international finance.
 8

Many of the largest banks have both a retail division and a merchant bank division. The
divisions are generally very separate entities, as there is very little similarity between
retail banking and what goes on in a merchant bank.

Although your life is probably affected every day in some way by decisions made in a
merchant bank, most people reading this article are unlikely ever to visit or deal directly
with a merchant bank. Merchant banks operate behind the scenes and away from the
spotlight.

FUNCTIONS OF MERCHANT BANKERS

Some important functions are stated below

 Raising funds for clients: Merchant banking helps clients raise funds by issuing shares,
debentures and bank loans. This helps clients raise funds both in the domestic as well as
the international market.
 Handling government consent for industrial projects: Any business requires
Government permission for starting a project. Companies also require permission for
expansion or modernization activities. Merchant banks do all this for their clients.
 Brokers in stock exchange: The merchant bankers act as brokers of a stock exchange.
These brokers buy and sell shares on behalf of their clients.
 Advice on expansion and modernization: The banks have executives who advice their
customers on the expansion and modernization of businesses. They give expert advice on
mergers and acquisitions and takeovers.
 Managing public issue of companies: Merchant bankers advice and manage public
issues of companies.
 Services to private sector units: merchant banks offer many services to public sector
units and public utilities. They help in raising long term capital, marketing of securities
and foreign collaboration and also managing long term finance.
 Special assistance to small companies: Merchant banks advice small companies on
business opportunities, government benefits, incentives and policies.
 9

 Management of interests and dividends: Merchant bankers help their clients in the
management of interest on debentures and dividends on shares. They also provide expert
advice to the client on the rate of dividend and timing.
 Money market operation: Merchant bankers deal with short term money market
instruments like commercial paper issued by large corporate firms, government bonds,
and treasury bills issued by the RBI and so on.
 Leasing services: Merchant bankers also help in leasing services where the lessor allows
the use of specific assets to the lessee for a certain period on behalf of rentals or fees

1.4 Qualities of merchant bankers:-

To be a successful merchant banker, following qualities are necessary:

Knowledge: Thorough understanding of technical issues related to business, understanding of legal

and statutory requirements, appreciation of business acumen; financial expertise is a key thing a
merchant banker must know. Delivery of his services depends on his basic understanding of these
issues.

Capital market familiarity: Merchant banker should be well versed with stock markets, their
movements. He should track imp happenings in the market on ongoing basis.

Liasoning ability: Merchant bankers are required to liaison with SEBI, RBI, the stock
exchanges, depositories and other government authorities for public issue related duties.
It is imperative that a merchant bank maintains excellent rapport with all of them and also
close relations even at informal levels. This only can see speedy and favorable clearances
by the authorities.
Innovation: Corporate may approach with unique requirements. Standard solutions and
products may not solve problems sometimes. Merchant bankers should do out of box
thinking and be able to do financial engineering. They can device new financial
instruments and get approved from the authorities. Innovation is required even to address
stringent legal requirements.
 10

Integrity: Merchant banker has valuable and confidential information of its customers.
Merchants bankers should take utmost care that the information is not leaked and also not
consumed for the purpose other than for which it was disclosed to the merchant banker.

Cooperation and friendliness:-These two characteristics are the symbols of good

leadership but it hardly needs to be stressed that cooperation and friendliness coupled
with persuasiveness are the main instruments with which a merchant banker mixes with
the people, gathers information, obtains business mandate and renders satisfactory
services to the clients. Business of an honest business merchant banker spreads with
geometrical propagation when he shares the thoughts of his clients with sympathetic
gestures and offers pragmatic suggestions without greed or favors. Very often, rude,
intemperate and indifferent disposition or blunt outburst withdrew fortunate business
opportunities forever. Friendliness and cooperation must flow as natural traits in the
merchant banker to win the trust of the clients.

Aggressive action: - Aggressiveness is a personality trait of a good leader but in

merchant banking it has a wider connotation. Aggressive merchant bankers are always
looking for new business. Once a business opportunity has been located, the merchant
banker has got to obtain the mandate for the merchant banking assignment from the
clients at once which will depend upon his own communication skills, persuasiveness and
the background of the organization to which he belongs. A good merchant banker is one
who does not allow his client to think anything outside except what has been advised.

Attitude towards problem solving: – The most important personality trait of a merchant
banker is his attitude towards problem solving. Even client coming to him has got to
return fully satisfied having consulted a merchant banker. Positive approach to
understand the viewpoints of others, their difficulties and their adverse circumstances is
possible only when a person is skilled in human relations particularly the inter-personal
and intra-personal behavior. Effective communication and proper feedback are the pre-
requisite for creating a positive attitude towards problem solving. Many persons are
effective in this trait without any training for reasons of cultivating a habit from
 11

environment in which they have been brought up at home, in school, college and office.
This is so important that it must be treated as a separate objective quality of a good
merchant banker.
Contacts: – success of merchant banker depends upon his sociable nature and the
richness of wider contacts. A merchant banker is supposed to be acquainted deeply with
all the constituents of merchant banking. The scope of contact encompasses intimate
contiguity and acquaintances within his own organization, Central and State Government
Offices where compliances under various relevant enactments are to be reported, Indian
and foreign banks, financial institutions at Central and State levels,
promoters/directors/owners and chief executives of the private and public enterprises
which would be prospective beneficiaries of merchant banking services, printers,
advertising agencies, brokers and stock exchange dealers, advocates and solicitors and
members of the press whose services are availed of in executing merchant banking
assignments. Merchant bankers should widen contacts and references and continue to
maintain them with goodness, honour and humor by meeting people.

1.5 Role of Merchant Bankers

The role of merchant banker is dynamic in the wake of diverse nature of merchant
banking services. Merchant banker’s dynamism lies in promptly attending to the
corporate problems and suggests ways and means to solve it. The nature of merchant
banking services is development oriented and promotional to help the industry and trade
to grow and survive. Merchant banker is, therefore, dedicated to achieve this objective
through his dynamism. He is always awake to renew his skills, develop expertise in new
areas so as to equip himself with the knowledge and techniques to deal with emerging
new problems of corporate business world. He has to keep pace with the changing
environment where Government rules, regulations and policies affecting business
conditions frequently change; where science and technology create new innovations in
production processes of industries envisaging immediate renovations, diversification,
modernizations or replacements of existing plant and machinery or other equipment’s
 12

putting new demands for finances and necessitating overhauling of the capital structure of
the firms.

Merchant banker has to think and devise new instruments of financing industrial projects.
He has to assume wider responsibilities of saving industrial units from going sick and
guiding industries to be set up industrially backward areas to eliminate regional
imbalances in industrial development of the country. He has to guide the wider section of
the community possessing surplus money to invest in corporate securities and other
productive investment channels. He has to help the industry in different forms to ensure
that it runs risk free and devoid of uncertainty by assisting the has to watch the interest
and win over the confidence of the Government, its agencies, along with the
entrepreneurs, the investors and the whole community. He must bridge the
communication gap between different sections and resolve the problem being faced in
different areas concerned with the business world.

To discharge the above role, a merchant banker has to be dynamic. For this reason, a
merchant banker is sometimes, called M.B i.e. Moving Bottom, i.e., one who never sits at
one place, always moving- attending meetings and meeting clients and constituents,
doing business and getting business by attending meetings and conferences, imparting
knowledge to others and acquiring new knowledge to maintain his supremacy in
possession of latest information. His role depicts a personality cult, which is unique and
envious to be followed by others.

In the days ahead, merchant bankers have very significant role to play tuning their
activities to the requirements of the growth pattern of corporate sector, the industry and
the economy as a whole, which is, in it, a challenging task and to meet these challenges
merchant bankers will have to be more vigorous and strategic in playing their role. They
will have also to adopt new ways and means in discharging their role.

Role in the market

The Securities and Exchange Board of India (SEBI) has stated that merchant bankers
must be involved more closely in the market making process as share brokers do not have
the requisite expertise to evaluate the fundamentals of the scrips before taking over the
 13

role of market makers. Further, share brokers generally being partnership; firms do not
have the financial clout which is necessary for market making activity. Resultantly, the
SEBI has suggested that any member of the stock exchange along with one merchant
banker registered with SEBI could act as a market maker.

The SEBI has felt that to ensure liquidity of scrip it was necessary to facilitate greater
movement, which could only be achieved through the institution of market makers.
Market makers would also create a market for the scrips by offering two way quotes to
the investors. A minimum of ten scrips has been proposed by SEBI for the market
makers.

1.6 Organizational setup of merchant bankers in India

In India a common organizational setup of merchant bankers to operate is in the form of
divisions of Indian and foreign banks and financial institutions, subsidiary companies
established by bankers like SBI, Canara Bank, Punjab National Bank, Bank of India, etc.
Some firms are also organized by financial and technical consultants and professionals.
Securities and Exchange Board of India has divided the merchant bankers into four
categories based on their capital adequacy. Each category is authorized to perform certain
functions. From the point of organizational setup India’s merchant banking organizations
can be categorized into four groups on the basis of their linkage with parent activity.
They are:

(A) Institutional Base

Where merchant banks function as an independent wing or as subsidiary of various

private/Central Governments/State Governments financial institutions. Most of the
financial institutions in India are in public sector and therefore such setup plays a role on
the lines of government priorities and policies.

(B) Banker Base

These merchant bankers function as division/subsidiary of banking organization. The

parent banks are either nationalized commercial bank or the foreign banks operating in
 14

India. These organizations have brought professionalism in merchant banking sector and
they help their parent organization to make a presence in capital market.

(C) Broker Base

In the recent past there has been an inflow of qualified and professionally skilled brokers
in various stock exchanges of India. These brokers undertake merchant banking related
operations also like providing investment and portfolio management services.

(D) Private Base

These merchant banking firms are originated in private sector. These organizations are
the outcome of opportunities and scope in merchant banking business and they are
providing skill-oriented specialized services to their clients. Some foreign merchant
bankers are also entering either independently or through some collaboration with their
Indian counterparts. Private sector merchant banking firms have come up either as the
sole proprietorship or public limited companies. Many of these firms were in existence
for quite some times before they added a new activity in the form of merchant banking
services by opening new divisions on the lines of commercial banks and All India
Financial Institutions.

Requirements for setting up a merchant banking outfit

1. Formation of the Business Organization

SEBI act, 1992 does not prescribe any specific form of business organization to carry on
the activities as merchant banker. However, the types of organizations are listed below:

a. Sole proprietorship
b. Partnership firm
c. Hindu Undivided Family (HUF)
d. Corporate Enterprises
e. Co-operative Society
 15

Generally it is preferred that the Merchant Banking outfit be a registered company.

Merchant Banks are generally setup as subsidiary companies of banks (Public or Private).
For example, SBI caps, ICICI Securities etc.

2. Adoption of a viable business plan

All the basic tests required to find out whether the business to be undertaken is viable or
not are also applicable to a Merchant Banking setup. Capital adequacy, profitability,
growth opportunities and current market size are some of the factors which need to be
looked into.

3. Registration of Merchant Bankers

a. Application for grant of certificate

An application for grant of a certificate needs to be made to SEBI.

The application can be made for any one of the following categories of the merchant
banker namely:-

 Category I, that is –

(i) to carry on any activity of the issue management, which will inter-alia consist of
preparation of prospectus and other information relating to the issue, determining
financial structure, tie-up of financiers and final allotment and refund of the subscription;
and

(ii) to act as adviser, consultant, manager, underwriter, portfolio manager.

 Category II, that is, to act as adviser, consultant, co- manager, underwriter,
portfolio manager;
 Category III, that is to act as underwriter, adviser, consultant to an issue;
 Category IV, that is to act only as adviser or consultant to an issue.
 16

To carry on the activity as underwriter or portfolio manager a separate certificate of

registration needs to be obtained from SEBI.

b. .Application to conform to the requirements

The application should conform to all the requirements under the SEBI guidelines,
otherwise it may be rejected.

c. Furnishing of information, clarification and personal representation

The Board may require the applicant to furnish further information or clarification
regarding matters relevant to the activity of a merchant banker for the purpose of disposal
of the application. The applicant or its principal officer may appear before the Board for
personal representation.

d. Consideration of application

The Board shall take into account for considering the grant of a certificate, all matters,
which are relevant to the activities relating to merchant banker and in particular the
applicant complies with the following requirements, namely: -

 the applicant shall be a body corporate other than a non- banking financial
company
 the merchant banker who has been granted registration by the Reserve Bank of
India to act as a Primary or Satellite dealer may carry on such activity subject to the
condition that it shall not accept or hold public deposit
 the applicant has the necessary infrastructure like adequate office space,
equipment’s, and manpower to effectively discharge his activities
 the applicant has in his employment minimum of two persons who have the
experience to conduct the business of the merchant banker
 a person directly or indirectly connected with the applicant has not been granted
registration by the Board;
 the applicant fulfils the capital adequacy requirement is as follows:
 17

 The capital adequacy requirement should not be less than the net worth of the
person making the application for grant of registration. The net worth shall be as follows

Category Minimum Amount

Category I Rs. 5, 00, 00, 000

Category II Rs. 50, 00, 000

Category III Rs. 20, 00, 000

Category IV Nil

 the applicant, his partner, director or principal officer is not involved in any
litigation connected with the securities market which has an adverse bearing on the
business of the applicant and have not at any time been convicted for any offence
involving moral turpitude or has been found guilty of any economic offence
 the applicant has the professional qualification from an institution recognized by
the Government in finance, law or business management
 grant of certificate to the applicant is in the interest of investors.

e .Procedure for Registration

The Board on being satisfied that the applicant is eligible shall grant a certificate. On the
grant of a certificate the applicant shall be liable to pay the fees as prescribed.

f. Payment of fees and the consequences of failure to pay fees

Every applicant eligible for grant of a certificate shall pay such fees in such manner and
within the period specified. Where a merchant banker fails to pay the Annual fees as
provided in Schedule II, the Board may suspend the registration certificate, whereupon
the merchant banker shall cease to carry on any activity as a merchant banker for the
period during which the suspension subsists. The Merchant Bank can commence business
 18

on acquisition of a Certificate of Registration from the SEBI after completion of the

above mentioned formalities.

1.7 Merchant Bankers Commission

As determined by the Finance Ministry, Government of India, Merchant Bankers are
eligible to charge commission / fee from their clients as detailed below:

(i) A Merchant Banker can charge 0.5% as the maximum as commission for whole of
the issue.
(ii) They can charge project appraisal fees.

(iii) A lead manager can claim a commission of 0.5% up to Rs.25 crore and 0.2% in
excess of Rs.25 crore.
(iv) Underwriting Commission.
On amount On amount
subscribed by
Type of Security Devolving on public
underwriters

1. Equity shares 2.50 2.50

2. Preference
share/debentures
2.50 1.50
(a) Up to Rs. 5 lakh
2.00 1.00
(b) Excess of Rs. 5 lakh

(v) Brokerage commission 1.5%.

(vi) Other expenses like advertising, printing, Registrar’s expenses, stamp duty etc., in
connection with the issue can be reimbursed from its clients
 19

The Difference between

Investment banks and Merchant banks

Merchant banks and investment banks, in their purest forms, are different kinds of
financial institutions that perform different services. In practice, the fine lines that
separate the functions of merchant banks and investment banks tend to blur. Traditional
merchant banks often expand into the field of securities underwriting, while many
investment banks participate in trade financing activities.

In theory, investment banks and merchant banks perform different functions. Pure
investment banks raise funds for businesses and some governments by registering and
issuing debt or equity and selling it on a market. Traditionally, investment banks only
participated in underwriting and selling securities in large blocks. Investment banks
facilitate mergers and acquisitions through share sales and provide research and financial
consulting to companies. Traditionally, investment banks did not deal with the general
public.
Traditional merchant banks primarily perform international financing activities such as
foreign corporate investing, foreign real estate investment, trade finance and international
transaction facilitation. Some of the activities that a pure merchant bank is involved in
may include issuing letters of credit, transferring funds internationally, trade consulting
and co-investment in projects involving trade of one form or another.
The current offering of investment banks and merchant banks varies by the institution
offering the services, but there are a few characteristics that most companies that offer
both investment and merchant banking share. As a general rule, investment banks focus
on initial public offerings (IPO’s) and large public and private share offerings. Merchant
banks tend to operate on small-scale companies and offer creative equity financing,
bridge financing, mezzanine financing and a number of corporate credit products. While
investment banks tend to focus on larger companies, merchant banks offer their services
to companies that are too big for venture capital firms to serve properly, but are still too
small to make a compelling public share offering on a large exchange. In order to bridge
the gap between venture capital and a public offering, larger merchant banks tend to
 20

privately place equity with other financial institutions, often taking on large portions of
ownership in companies that are believed to have strong growth potential.
Merchant banks still offer trade financing products to their clients. Investment banks
rarely offer trade financing because most investment banking clients have already
outgrown the need for trade financing and the various credit products linked to it.

Merchant banks and Commercial banks

Merchant banks Commercial banks

1) Assist in raising capital in the form of Provide funds in the form of term
equity, preference shares, and syndicated loan and working capital.
loan working capital instruments.

2) Advisor not financer. Financing is the main business.

3) Do not accept chequable deposits. Demand deposits are the key

feature.

4) Mainly fees based business. Mainly fund based business

5) Being advisors, they are closer to the Being lenders, they are more
Customers and get to know risks of the cautions, assess risks in lending
transaction is properly. They work on risks proposal and cannot afford to be
 21

shields i.e. mitigation measures grossly relationship based and close

to the customer.

6) Most of work they get is about Commercial banks majority

management of equity issues in the capacity business is of terms lending and
of lead manager, underwriter, piercing of bank deposits.
issue, book running, and liaisoning with
SEBI.

1.8 Growth of Merchant banking in India

Formal merchant banking activity in India was originated in 1969 with Merchant Banking
Division set up by the Grindlays Bank, the largest foreign bank in the country. The main
service offered at that time to the corporate enterprises by the merchant banks included
the management of public issues and some aspects of financial consultancy. Other foreign
banks like Citi Bank, Chartered Bank also assumed the merchant banking activity in
India. State Bank of India started merchant banking in 1973 followed by ICICI in 1974.
Both these Indian merchant bankers emerged as leaders in merchant banking having done
significant business during the period of 1974-1987 in comparison to foreign banks. The
early and mid-seventies witnessed a boom in the growth of merchant banking
organizations in the country with various commercial banks, financial institutions, and
broker’s firms entering in to the field of merchant banking.

The early growth of merchant banking in the country is assigned to the Foreign Exchange
Regulation Act, 1973 (FERA) where under large number of foreign companies operating
in India were required to dilute their foreign holdings in order to continue business in the
country. This had caused two-pronged effect viz. firstly, in the form of spate in ‘Foreign
Exchange Regulation Act Issues’ eliciting interest of the investors by creating massive
awareness about capital markets amongst the new class of investing public, secondly,
merchant banking activity became attractive to banks and the firms of consultants
 22

and share brokers who entered into this fields vigorously to reap the advantages of the
expanding capital markets.

Current scenario

Merchant banking is an area that we need to build and grow in the years to come. As
India forms part of the global village, it becomes increasingly necessary for us to look at
this business in a more holistic manner.

Obviously, international players with strong domestic partners such as DSP Merrill
Lynch, JM Morgan Stanley, Kotak Mahindra Capital, together with experienced
organizations like Enam and institutional backed investment bankers such as ICICI
Securities, etc., are the ones who have expertise, muscle, and placement power in a
greater measure than relatively new entrants. The red hot economy is the obvious starting
point. India is likely to end the year with GDP growth in excess of 7 percent. Companies
and private equity investors are sitting on large piles of cash. In 2006 deal activity was
largely restricted to the IT and Telecom sectors. Thus, while there is a steady flow of
deals, there is now a shortage of talent to do the job.

Merchant Banking: Indian Scenario

Merchant Banking activity was formally initiated into the Indian capital markets when
Grindlays Bank received the license from Reserve Bank in 1967. Grindlays which started
with management of capital issues, recognized the needs of emerging class of
entrepreneurs for diverse financial services ranging from production planning and system
design to market research. Apart from meeting specially, the needs of small-scale units it
provided management constancy services to large and medium sized companies.
Following Grindlays Bank, Citi Bank set-up its Merchant Banking division in 1970. The
division took up the task of assisting new entrepreneur and existing units in the evaluation
of new projects and raising funds through borrowing and issue of equity.
 23

Management consultant services were also offered. Consequent to the recommendations

of Banking Commission in1972, that Indian bank should start 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.

The economic reforms initiated by the Government since July 1991 in the files of
industry, trade and financial sector have paved the way for rapid development of the
economy. Several projects have been conceived since then and almost all the major
groups in the country that have announced their intentions to set-up mega projects in
infrastructure sector envisaging investment of thousands of crores. With several large
projects been set-up and many more on the drawing board, the demand for a complete
range of Merchant Banking services encompassing project advisory services, issue
management and financial advisory services for corporate sector has increased
considerably. This has led to a sharp growth in the Merchant Banking business in the last
2 years.

1.9 Problems of Merchant Bankers

1. SEBI guidelines have authorized merchant bankers to undertake issue related

activities only with an exception of portfolio management. These guidelines have made
the merchant bankers either to restrict their activities or think of separating these
activities from the present one and float new subsidiary and enlarge the scope of its
activities.

2. SEBI guidelines stipulate a minimum net worth of Rs.1 crore for authorization of
merchant bankers. Small but professional and specialized merchant bankers who do not
have a net worth of Rs.1 crore may have to close down their business. The entry is denied
to young, specialized professionals into merchant banking business.

3. Non co-operation of the issuing companies in timely allotment of securities and

refund of application money is another problem of merchant bankers. The guidelines
have put
 24

the responsibility on the merchant bankers. They have to seek the co-operation of the
issuing company to shoulder the responsibility.

1.10 Obligations and Responsibilities and Code of conduct

Merchant bankers have the following obligations and responsibilities.

1. Merchant banker should maintain proper books of accounts, records and submit
half yearly/annual financial statements to the SEBI within stipulated period of time.
2. No merchant banker should associate with another merchant banker who is not
registered in SEBI.
3. Merchant bankers should not enter into any transactions on the basis of
unpublished information available to them in the course of their professional assignment.
4. Every merchant banker must submit himself to the inspection by SEBI when
required for and submit all the records.
5. Every merchant banker must disclose information to the SEBI when it requires
any information from them.
6. All merchant bankers must abide by the code of conduct prescribed for them.
7. Every merchant banker who acts as lead manager must enter into an agreement
with the issuer setting out mutual rights, liabilities, obligations, relating to such issues
with particular reference to disclosures allotment, refund etc.

Code of Conduct

According to the 13 Regulation of the SEBI of 1992 (Merchant bankers), every merchant
banker should comply with following codes of conduct. They are:

a) The merchant banker must observe high integrity and fairness in all his dealings.
b) He shall render at all times high standard of services, exercise due diligence,
exercise independent professional judgement.
 25

c) If necessary, he must disclose to his clients the possible source of conflict of

duties and interests.
d) The merchant banker should not indulge in unfair practice or unfair competition
with other merchant bankers.
e) He should not make any exaggerated statement about his capacity or achievement.
f) He should always Endeavour to give the best possible advice and prompt efficient
and cost effective service.
g) He should maintain the secrecy of all the confidential information received during
the course of service to his client.
h) He should not engage in the creation of a false market or price rigging or
manipulation.

Guidelines of SEBI

After the obligations of the CCI, the place was occupied by a legal organ called as
“Securities and Exchange Board of India”. The issue of capital and pricing of issues by
companies has become free of prior approval. The SEBI has issued guidelines for the
issue of capital by the companies. The guidelines broadly covers the requirement of the
first issue by a new or the first issue of a new company set up by the existing company,
the first issue by the existing private companies and public issues by the existing listing
companies. The SEBI is the most powerful organization to control and lead both the
primary market and secondary market.

The SEBI has announced the new guidelines for the disclosures by the Companies
leading to the investor protection. They are presented below:

a) If any Company’s other income exceeds 10 per cent of the total income, the
details should be disclosed.
b) The Company should disclose any adverse situation which affects the operations
of the Company and occurs within one year prior to the date filing of the offer document
with the Registrar of Companies or Stock Exchange.
 26

c) The Company should also disclose the information regarding the capacity
utilization of the plant for the last 3 years.
d) The Promoters of the Company must maintain their holding at least at 20 per cent
of the expanded capital. The minimum application money payable should not be less than
25 per cent of the issue price.
e) The company should disclose the time normally taken for the disposal of various
types of investor’s grievances.
f) The Company can make firm allotments in public issues as follows:
 Indian mutual funds (20%),
 FIIS (24%),
 Regular employees of the company (10%),
 Financial institution (20%).
g) The Company should disclose the safety net scheme or buy back arrangements of
the shares proposed in public issue. This scheme is applicable to a limited number of 500
shares per allottee and the offer should be valid for a period of at least 6 months from the
date of dispatch of securities.
h) According to the guidelines, in case of the public issues, at least 30 mandatory
collection centers should be established.
i) According to the SEBI guidelines regarding rights issue, the Company should
give advertisements in not less than two news-papers about the dispatch of letters of offer.
No preferential allotment may be made along with any rights issue.
j) The Company should also disclose about the fee agreed between the lead
managers and the Company in the memorandum of understanding.
 27

1.11 Services of Merchant Bankers in India:-

Merchant bankers provide services as follows:

Business planning stage: 1) project feasibility study

2) advice on capital structuring

Equity raising: 3) preparation of prospectus and liaison

with SEBI

4) pricing decisions

5) marketing in the capacity of lead

managers

6) underwriters to the issue

7) post issue management

8)assistance in ADR/GDR

Debt raising: 9) management of debenture issue

10) preparation of bankable proposal

and syndication of loan

Working capital raising: 11)assistance in arranging optimal

capital finance

Strategic advice: 12) advice on mergers and acquisitions

13) corporate structuring advice

 28

SERVICES PROVIDED BY MERCHANT BANKS: (in detail)

The development activity through the country had exerted excess demand on the sources
of funds by the ever expanding industry and trade which could not be met by the All India
Financial Institutions. In these circumstances, the corporate sector enterprises had the
only alternative to avail themselves of the capital market services for meeting the long-
term fund requirements through capital issues of equity and debentures. The growing
demand for funds from capital market has enthusied many organizations to enter into the
field of merchant banking for managing the public issues.

The need of merchant banker is also felt in the wake of huge untapped public savings as
merchant bankers can play a highly significant role in mobilizing funds from savers to
invest in channels assuring promising return on investments and thus narrow down the
gap between demand for and supply of investible funds.

Merchant bankers not only provide advisory services to corporate enterprises but also
advise the investors of the incentives available in the form of tax relief and other statutory
obligations. Thus, the merchant bankers help industry and trade to raise funds, and the
investors to invest their saved money in sound and healthy concerns with confidence,
safety and expectation of higher yields.

Broadly a merchant banker can provide the following services:

1. Corporate Counseling
2. Project Counseling And Pre-Investment Studies
3. Credit Syndication And Project Finance
4. Issue Management
5. Underwriting
6. Bankers
7. Portfolio Management
8. Venture Capital Financing
9. Leasing
10. Non-Resident Investment Counseling And Management
 29

11. Acceptance Credit And Bill Discounting

12. Advising On Mergers, Amalgamations And Take-Over
13. Arranging Offshore Finance
14. Fixed Deposit Broking
15. Relief To Sick Industries
16. Let’s take a brief look at each of these functions:

Corporate Counseling

It includes a whole range of financial services provided by a merchant banker to a

corporate unit a view to ensure better performance, maintain steady growth and create a
better image among investors.

It covers the entire field of merchant banking activities i.e., project counseling, capital
restructuring, portfolio management and the full range of financial engineering including
venture capital, public issue management, loan syndication, working capital, fixed
deposits, lease financing, acceptance credit, etc. However, the scope of corporate
counseling is limited to suggestions and opinions leaving to the client to take corrective
actions for solving its corporate problems.

A merchant banker finds out the problems of enterprise, which shall include
organizational goals for the enterprise, size of the organization and operational scales,
choice of a product, pricing, etc., and suggests ways and means to solve those problems.

Project Counseling

Project counseling is an important merchant banking service which includes preparation

of project reports, deciding upon the financing pattern to finance the cost of the project,
appraising the project report with the financial institutions/banks.

Project reports are prepared to obtain government approval of the project, for procuring
financial assistance from financial institutions and banks, for ensuring market for the
proposed product, for planning public issues, etc.
 30

Financing the project cost is an important aspect of project counseling. The two sources
of funds available to finance the project cost are internal sources of funds (or owners'
funds) which includes promoter's contribution and retained earnings; and external sources
of funds which refers to the borrowed funds in the form of loans from banks, private
investors and financial institutions and in the form of debentures from the public.

Merchant banker has to decide the financing mix of the internal and external sources of
funds keeping in view the rules, regulations and norms prescribed by the government or
followed by the term lending financial institutions.

While rendering project counseling services, the merchant banker has to ensure that the
application forms for obtaining the funds from financial institutions are filled in with
relevant and appropriate information and before submitting the application, the merchant
banker has to appraise the project considering the various aspects as to the type of the
project, location, technical, commercial and financial viability of the project.

Credit Syndication

Once the client company has decided about the project proposed to be undertaken, the
next step is looking for the sources wherefrom the funds could be procured to implement
the project.

Merchant banker has to locate the sources of funds and comply the formalities required to
procure the funds. This service rendered by the merchant banker in arranging and
procuring credit from financial institutions, banks and other lending and investment
organizations for financing the clients' project cost or meeting working capital
requirement is referred to as loan syndication or credit syndication.

Credit syndication in case of domestic borrowings is with the institutional lenders and
banks. Long and medium term funds are obtained from the All India Financial
Institutions like IFCI, IDBI etc., state level financial bodies like SFC, SIDC etc.,
commercial banks, mutual funds etc. Short-term funds are also required by the firm for
purchase of raw materials, payment of wages, salaries etc. Sources of financing these
 31

short term requirements or working capital needs can be from internal sources like
internal accruals from working or operations and short term loans from friends and
relatives; or from external sources like short term borrowings from banks etc.

Issue Management and Underwriting

Management of capital issues is a professional service rendered by the skilled and experienced
merchant bankers. Previously, the managing agents for a particular corporate used to manage
public issues. The abolition of the managing agency system, the growth in the public limited
companies in number and size, the imposition of new rules and regulations regarding the public
issue of securities made it necessary for merchant bankers to play a definite role in the
management of public issues.

Public issue management involves marketing of corporate securities by offering the

securities to the public, procuring private subscription to the securities and offering
securities to existing shareholders of the company.

As a manager to the public issue, the merchant banker, before the public issue has to
obtain the consent of the stock exchanges to the memorandum and articles of association,
appoint other managers, bankers, underwriters, brokers etc. ,advice the company to
appoint auditors, solicitors and board of directors, draft the prospectus and obtain consent
from the companies legal advisors, board of directors and other concerned parties, file the
prospectus with registrar, make an application for enlistment with stock exchanges and
finally advertise for the issue.

A merchant bankers post issue activities include final allotment and/or refund of
subscription amount, calculation of underwriter’s liability in case of under subscription
and complying the necessary statutory requirements for listing of securities on the stock
exchange.

Under writing of public issue

 32

A fully underwritten public issue spells confidence to the investing public, which ensures
a good response to the issue. Keeping this in view companies, which float a public issue
usually, desire a full underwriting of the issue.

Underwriting is only the guarantee given by the underwriter that in the event of under
subscription, the amount underwritten would be subscribed in proportion by the
underwriter. An underwriter of the issue gets the following benefits:

 It earns a commission of the commitment given.

 It earns the right to be appointed as bankers of that issue.
 It expands its clientele by underwriting more and more issues.

Bankers to the Issue

The merchant banker can automatically become the banker to the issue in the following cases:

 The bank is a broker to the company

 It has given underwriting commitments.
 It acts as a manger to the issue
 The function of a banker to the issue is to accept application forms from the public
together with subscription money and transfer them to the account of the controlling
branch.

Portfolio Management

Portfolio refers to investment in different types of marketable securities or investment

papers like shared, debentures and debenture stocks, bonds etc. from different companies
or institutions held by individuals firm or corporate units.
 33

Portfolio management refers to managing efficiently the investment in the securities held
by professionals to others.

Merchant bankers take up management of a portfolio of securities on behalf of their

clients, providing special services with a view to ensure maximum return by such
investments with a minimum risk of loss of return on the money invested in securities.

A merchant banker while performing the services of portfolio management has to enquire
of the investment needs of the client, the tax bracket, ability to bare risk, liquidity
requirements, etc. they should study the economic environment affecting the capital
market, study the securities market and identify blue chip companies in which money can
be invested. They should keep record of latest amendment in government guidelines,
stock exchange regulations, RBI regulations, etc.

Advisory Services Relating To Mergers and Takeovers

A merger is defined as a combination of two or more companies into a single company

where one services and other looses their corporate existence. A merger is also defied as
an amalgamation wherein the shareholders of the combining companies become
substantially the shareholders of the company formed.

A takeover is referred to as an acquisition, which is the purchase, by one company of a

controlling interest in the share capital of another existing company.

Merchant bankers are the middlemen settling negotiations between the offered and the
offeror. Their role is specific and specialized in handling the mergers and taker over
assignments. Being a professional expert, the merchant banker is apt to safeguard the
interest of the shareholders in both the companies and as such his assistance is useful for
both the companies, i.e. the acquirer as well as the acquired company.

Based on the purpose of business objective, the search of the acquirer company will start
for a merger partner company. If the objective of merger is growth oriented i.e. seeking
expansion in production and market segments, utilization of existing companies or
 34

optimum utilization of resources, then the acquirer company will select a business related
company as a merger partner.

If the objective is diversification in production line or business activities, then it will

select a non-related company as a merger partner.

Once the merger partner is proposed the merchant banker has to appraise the
merger/takeover proposal with respect to financial viability and technical feasibility. He
has to negotiate with the parties and decide the purchase consideration and mode of
payment. He has to comply with the legal formalities like getting approval from the
Government/ RBI; drafting the scheme of amalgamation; getting approval of company
Board, financial institution, high court if required; arranging for the meeting etc.

Venture Capital Financing

Financing an emerging high-risk project is called venture capital financing. Many

merchant bankers are entering into this area by also financing viable upcoming projects.
The financing is by subscription to the equity capital, while repayment is by selling the
equity through stock market when the shares are listed.

Leasing

Is there another lucrative area of financing where merchant bankers are turning? Leasing
is a viable source of financing while acquiring capital assets. The services include
arrangement for lease finance facilities for leasing companies, legal; documents and tax
consultancy.

Non Resident Investment

To attract NRI investments in the primary and secondary markets, the merchant bankers
provide investment advisory services to the NRIs in terms of identification of investment
opportunities, selection of securities, portfolio management, etc. they also take care of
operational details like purchase and sale of securities securing the necessary clearance
from RBI under FERA for repatriation of dividends and interest, etc.
 35

Acceptance Credit and Bill Discounting

Though merchant bankers world over specialize in acceptance credit and bill discounting,
these services are not currently provided by merchant bankers in India the principal
reasoning being the lack of an active market for commercial bills.

Arranging Offshore Finance The merchant bankers also help their clients in the following
areas involving foreign currency financing:

1. Financing Of Exports And Imports

2. Long Term Foreign Currency Loans
3. Joint Ventures Abroad
4. Foreign Collaboration Arrangements

The assistance rendered as in the case of financial services covers appraisals,

negotiations, compliance with procedural and legal aspects etc.

Management of Fixed Deposits of Companies

Recently, merchant’s bankers have begun to structure and mobilize fixed deposits for
their corporate clients. They take care of the procedural and legal aspects, and also
manage the collection and subsequent servicing of the deposits. Advice with regard to the
amount to be raised, interest charges, terms of deposits and other related issues are also
offered to the client.

Relief to Sick Industries

The services offered by merchant bankers to sick industries can be summarized as

follows:

1. Assessment of capital requirements and counseling on capital restructuring;

2. Appraisal of technological, environmental, financial and other factors causing
sickness;
3. Preparations of programs and packages for rehabilitation of sick units;
 36

4. Providing necessary assistance where the rehabilitation package involves mergers

or amalgamation;
5. Obtaining necessary approval for implementation the rehabilitation package from
the statutory authorities;
6. Monitoring the implementation of the scheme of rehabilitation.

1.12 Banks Profile

Public sector Merchant Banks

PUNJAB NATIONAL BANK

India’s one of the Leading Nationalized Bank established in 1895, serving over 3.5crore
customers through 4520 branches and 439 extension counters is the largest amongst
Nationalized Banks. The Bank has recently been ranked 21 st among top 500 companies
and 9th among top 50 brands by the Economic Times. All the Branches of the Bank have
been computerized. The Bank has a concept of "Any Time, Any Where Banking" through
the introduction of Centralized Banking Solution (CBS) and over 2511 offices have
already been brought under its ambit. The Bank is registered with SEBI as Category – I
Merchant Banker for providing all the major Merchant Banking services. Our gamut of
Merchant Banking services includes:

 Issue Management Services – to act as Book Running Lead Manager/Lead

Manager for the IPOs /FPOs/Right issues/Debt issues

 Project appraisal
 Corporate Advisory Services
 Underwriting of equity issues
 Banker to the Issue/Paying Banker
 37

 Refund Banker
 Monitoring Agency
 Debenture Trustee
 Marketing of the issue through a strong network of QIBs/HNIEs/Corporates and
Retail investor. The Bank itself is one of the major investor in the market having a
treasury of 45000 crores.
Their Software for handling the Refund Banker is one of the best systems in the industry.
Its unique features provides online payment of the instrument by our 2470 branches in
733 centers, online status of paid instruments, 100% reconciliation at any point of time
etc. The Bank has an exclusive and specialized Capital Market Service Branch at New
Delhi for providing Merchant Banking Services to the Corporate

CANARA BANK

Track Record of Public Issues managed.

Canara Bank is one of the leading " Merchant Bankers / Investment Bankers” in India,
offering specialized services related to Capital Market to Banks, PSUs, State owned
Corporations, Local Statutory bodies, Corporate sector including MSMEs. We are SEBI
registered Category I Merchant Banker (holding permanent certificate of registration)
rendering Issue Management (Public / Rights / Private Placement Issues), Underwriting,
Consultancy and Corporate Advisory Services etc., as a Capital Market Intermediary.

We also hold SEBI Certificate of Permanent Registration to handle “Bankers to an Issue”

assignments with network of exclusive Capital Market Service Branches for handling
Collecting (Escrow) / Refund / Paying Banker assignments. We are also a Self-Certified
Syndicate Bank for extending Application Supported by Blocked Amount (ASBA)
facility through our Branches. We do undertake "project appraisals" with linkage to
resource raising plans from Capital Market/ Debt Markets and facilitate tie-ups with
Banks / Financial Institutions and Potential Investors. Our uniqueness is in extending
services through single window / “In house” concept in the following areas:
 38

Merchant Banking

Commercial Banking

Investments

Bankers to Issue - Escrow Bankers / ASBA

Underwriting

Loan Syndication

As leading Merchant Bankers in India, we have been associating with issues involving
various types of industries, banks, statutory Bodies etc. and have an edge in handling
Private Placement issues – both retail & HNIs/QIBs.

SPECTRUM OF SERVICES:

 Debt Issue Management

 Project Appraisals
 Monitoring Agency Assignments
 Security Trustee Services
 Buy Back Assignments
 Share Valuations
 Employees Stock Option Scheme - Certification
 Debenture Trusteeship
 Issuing & Paying Agent (IPA) for Commercial Paper Issues

ISSUE MANAGEMENT SERVICES:

 Project Appraisal
 Capital structuring
 DRHP/RHP- Compilation of Offer Document.
 Tie-ups (placement)
 Formalities with SEBI / Stock Exchange / ROC etc.,
 39

 Underwriting
 Promotion /Marketing of Issues
 Collecting Banker / Banker to an issue
 Post Issue Management
 Refund Bankers
 Debenture Trusteeship
 Registrar & Transfer Agency (our Subsidiary)
 ASBA-Self Certified Syndicate

Bank ONGOING ASSIGNMENTS:

 On tap Retail Private Placement Bond Issues- Arrangers/ Collecting Bankers

 Fair Market Valuation of Shares ( Involving Indian and Foreign Accounting Standards)

A S B A [Applications Supported by Blocked Amount] Enabled SCSB

Applications Supported by Blocked Amount [ASBA] is an initiative by SEBI to make the

process of Subscription to Capital Issues (Primary) more efficient. Under this system, the
application money will remain in the account of the customer, earning interest till the
allotment process is completed.

We offer this facility to our CASA account holders intending to invest in capital issues
(both public and right issues).

A hold is created in the account of the customer to the extent of value of shares applied
for in the primary market and the hold is released after the finalization of Basis of
Allotment. The blocked amount is transferred to the issuer company to match the
quantum of shares allotted. The following are the requirement for applying through the
ASBA process by the Account holder:

 Account holder / Investor should be from the approved category eligible to apply as per
SEBI guidelines.
 Should have a Savings / Current account (CASA) with us.
 Should have a Demat Account with a Depository Participant.
 40

 Should have a Permanent Account Number (PAN).

 Availability of sufficient balance in the account for creating a hold in the account to the
extent of application money required/mentioned in the ASBA application, above the
minimum balance.

The following options are available to the ASBA investor:

 A maximum of 5 applications can be submitted from a single account

 ASBA Application can be submitted at our branches.
 Option available to the investor to revise the bid/delete the bid within the bidding period.
 ASBA facility extended for internet customers. Login to Net Banking> Under Main
Menu> Services>Others>ASBA > Issues which are open will pop u

STATE BANK OF INDIA

SBI’s Merchant Banking Group is strongly positioned to offer perfect financial solutions
to your business. They specialize in the arrangement of various forms of Foreign
Currency Credits for Corporate.

They provide the resources, convenience and services to meet your needs by arranging
Foreign Currency credits through:

• Commercial loans
• Syndicated loans
• Lines of Credit from Foreign Banks and Financial Institutions
• FCNR loans
 41

• Loans from Export Credit Agencies

• Financing of Imports.

They are internationally the most Preferred Bank by Export Credit Agencies for
Guarantees in case of the Indian Clients or Projects.SBI being an Indian entity has no
India exposure ceiling. Their Primary focus is On Indian Clients. SBI’s seasoned Team of
professionals provides you with Insightful credit Information and helps you Maximize the
Value from the transaction.

PRODUCTS AND SERVICES

1] Arranging External Commercial Borrowings (ECB)

2] Arranging and participating in international loan syndication
3] Loans backed by Export Credit Agencies
4] Foreign currency loans under the FCNR (B)
scheme 5] Import Finance for Indian corporates.

PRIVATE SECTOR MERCHANT BANKS

ICICI SECURITIES

ICICI Securities Limited is a leader across the spectrum of Merchant Banking. We are
experienced in every aspect of the business from domestic and international capital
markets advisory, to M&A advisory, Private Equity syndication, Restructuring and
infrastructure advisory. Our investment banking team, based across key cities in India
and New York, London, and Singapore consists of professionals with expertise across a
range of industries.
 42

ICICI SECURITIES provide following services:

 Mergers and Acquisitions: -ICICI Securities Limited is amongst the first Indian
investment Banks to form a dedicated M&A practice and continues to be a leader
by providing innovative and unique solutions to achieve varied objectives of the
client. They offer a full range of advisory services, which include joint ventures,
mergers, acquisitions, and divestitures.
 Equity Capital Markets: - ICICI Securities Limited is at the forefront of capital
markets advisory having been involved in most major book building and fixed
price offerings over the last decade. It is amongst the leading underwriters of
Indian equity and equity-linked offerings.
 Infrastructure Advisory: -ICICI Securities Limited has a dedicated
infrastructure vertical focused on assisting clients in identifying and capitalizing
on the opportunities thrown up by the all-pervasive boom in the Indian
infrastructure sector.
 Dealing with Bulls and Bears: - ICICI Securities Limited assists global
institutional investors to make the right decisions through insightful research
coverage and a client focused Sales and Dealing team. The equity group leverages
research and distribution reach to domestic and foreign institutional investors in
case of public offerings.
Thus the quality of analysis and client servicing standards, are a testimony to the quality
of ICICI SECURITIES team.

KOTAK SECURITIES LIMITED

Kotak Securities Limited, a subsidiary of Kotak Mahindra Bank, is the stock broking and
distribution arm of the Kotak Mahindra Group. The company was set up in 1994. Kotak
Securities is a corporate member of both The Bombay Stock Exchange and the National
Stock Exchange of India Limited. Its operations include stock broking and distribution of
 43

various financial products - including private and secondary placement of debt and equity
and mutual funds. Currently, Kotak Securities is one of the largest broking houses in
India with wide geographical reach.
The company has four main areas of business:
Kotak Institutional Equities: - Kotak Institutional Equities, among the top institutional
brokers in India. It mainly covers secondary market broking and the marketing of equity
offerings, including IPOs, to domestic and foreign institutional investors.
Structured Finance (Project Finance & Advisory Business): -KMCC has developed
expertise in various vertical segments in the infrastructure sector including power, oil,
gas, ports, automobiles, steel & metals and hotels, by offering structured finance
solutions. Some of the transactions executed by this team include:
Advisor to Ford on financial closure for its Car project in India.
Advisor to one of the largest LNG projects on the Western coast of
India. Financial advisors and loan syndications to British Gas and GAIL.

Mergers & Acquisitions: -In the area of Mergers & Acquisitions, we provide our clients
expertise and a comprehensive set of services that help them achieve their strategic and
financial objectives. Our spectrum of services include:
 Divestments
 Spin-Offs / Restructuring & Joint Ventures / Strategic Alliances

CITIGROUP

Citigroup Corporate and Investment Banking achieve the extraordinary for our clients
around the world. No financial institution is more committed to advancing the goals of its
clients—our diverse and talented staff in more than 100 countries advises companies,
governments and institutions on the best ways to realize their strategic objectives. We
create solutions for and provide the broadest possible capital and market access to
thousands of issuer and investor clients. And no institution better executes the
 44

increasingly complex payment and cash management solutions required in today's global
economy. The features Citigroup are as follows: -

 Over the years, Citigroup has established a track record of outstanding business
milestones such as Cash Management, pioneered by Citigroup in 1986 and utilized by
over 900 Corporates with through-puts totaling around $ 35 billion (8% of India's
GDP).
 It is India's largest foreign bank in the FX (foreign exchange) market with a 14 per
cent market share.
 As the leading custodian, Citibank has over $22 billion of custody assets under
management.
 45

CHAPTER NO. 2
RESEARCH METHODOLOGY

Research methodology, also known as the research paradigm, is the way one thinks
about research, how one collects and analyses the data and the way in which one
writes the dissertation. Two types of research have been identified; namely,
qualitative and quantitative research. Qualitative research is concerned with
qualities and non-numerical characteristics while quantitative research is all about
data that is collected in a numerical format. Phenomenological research tends to
produce qualitative data and positivistic research tends to produce quantitative data
.The main advantage of a quantitative approach to data collection is the ease and
speed with which the data can be collected. In this research it is possible to use large
samples while in a qualitative study the sample size may be small. For example, a
case study may consist of one respondent. A qualitative data collection method can
be time consuming and costly, although it can be argued that qualitative data
provides a more real basis for interpretation and analysis. The research project will
follow a mixed research approach which is a combination of qualitative and
quantitative approaches.
As the nature of the study relates to finance performance of merchant banks and
how much people are aware of it the main part used was secondary data but
people’s response was collected through google forms which can be said as primary
data because it was one kind of interview. It includes information related to
merchant banks in India and services provided by merchant bankers. The present
study is based upon primary and secondary data. The sources of primary data is
the survey conducted through google forms about merchant banking to the normal
customers The secondary sources of the data include various articles about
merchant banking published

2.1 Research Design

 46

Research design is a blue print of the study conducted, which includes steps of data
collection, sample selection, process of data and finally interpretation of the data.
The period of study is important in collecting the secondary data
2.2 Objectives of Research

The following are the main objectives of my research study:

 To study and understand how the merchant banking is functioning in India

 To study whether common people are aware of merchant banking.
 To study that which sector do people prefer more for merchant banking
 To study the services of merchant banking in detail and which service is
considered as best by the customers
 To find out which sector is best for merchant banking
 To study whether merchant banking helps in development of capital market
 To study whether the clients are satisfied by the services provided by merchant
bankers

2.3 Scope of Research

.The project entitled “Merchant Banking in India” been done as a completion part of
B.Com in Accounting and Finance program. The nature of the project is to study &
analyze the functioning of merchant banking services in India and its nature.

Scope of the project includes

 to create awareness among people about merchant banking and its benefits
 analysis has been done so that it can be understood that which sector is preferred
most
 current economy leds to more business to the merchant bankers hence the future
of merchant banking is assumed
 Commercial banks and Merchant banks are differentiated on broad basis
In this project, I worked upon the analysis of the awareness about merchant
banking with respect to customer’s attitude through personal contact, interview
and questionnaire
 47

2.4. Limitations of the Research

 Individual surveys generally do not provide strong evidence of cause and effect
 The lack of time to carry out a survey
2.5 Significance of the Research

Merchant banking services is important for high net worth organizations as well as those
who undertake these services who are common people. The study is significant because it
helps to know the various services provided by the merchant bankers. And the growth of
merchant banking in future. The study is essential for both gaining knowledge as well as
to know which sector is preferred most and why. Merchant bankers charge on the basis of
services provided but them so it is important to know all the aspects before undertaking
any service from them Merchant bankers advise the investors of the incentives available
in the form of tax reliefs, other statutory relaxations, good return on investment and
capital appreciation in such investment to motivate them to invest their savings in
securities.
Thus, the merchant bankers help industry and trade to raise funds, and the investors to
invest their saved money in sound and healthy concerns with confidence, safety and
organizations for higher yields. With the growth of merchant banking profession
corporate enterprises in both public and private, sectors would be able to meet the
growing requirements for the funds for establishing new enterprises, undertaking
expansion/modernization/diversification of the existing enterprises.

2.6 Area of study and sample size

As the topic is very vast and deep to study it is very tough to collect and evaluate. Thus I
have selected my area of study as CENTRAL MUMBAI. I have received 106 responses
from various age groups and residents from different areas of central Mumbai majority of
which belong to age group 15 to 25

2.7 Data collection

Data refers to information or facts. It is not only refers numerical figures but also
includes descriptive facts. While deciding about the method of data collection to
 48

be used for the study. The researcher should keep in mind about two types of data,
such as primary data and secondary data.

PRIMARY DATA:

- Questionnaire

A set of questionnaire related to research topic was formulated and it was distributed
among various people for getting response using google documents. The questionnaire
prepared was forwarded to people using various online techniques like mailing and social
media. Also printed copies were passed to collect responses.

SECONDARY DATA:-
Secondary data means data that are already available in the organization. The
researcher has to look into sources for the data from where he can obtain data. The
secondary data may either be published or unpublished.
Published data will be available in
• Magazines
• Journals, books
• Reports by management, scholars, economist etc...
The secondary data for conducting the study has been taken from articles published
and the information provided by the merchant bankers. The information from these
publications has been searched assembled & interpreted in
the best possible manner. The project is based on the assumption that public sector
merchant banks provide more services at an ease to the customers rather than the
private sector merchant banks

2.8 Research Tool

The instrument which was used in the research was questionnaire and it was like
the questionnaire was started with open ended question so that respondents get a
 49

feel of the whole questionnaire and then question slowly move on to the close
ended questions

2.9 Summary and Data Analysis

According to the survey it is seen that majority of the people do prefer private
sector merchant banking services than public sector merchant banking services.
Majority of people do take financial services from the bank and from the survey it
is concluded that the position of public sector merchant banking is good than that
off private sector merchant banking. All the services of merchant banking is not
known by the common people and people do think there is risk in using merchant
banking services. Majority of the people do think non-financial institutions depend
upon merchant banking. Majority of people do think that Investment banking and
Merchant banking are not similar.
 50

CHAPTER 3

LITERATURE REVIEW

1. The Merchant Bankers by Joseph Wechsberg

This fascinating chronicle of the world's great financial families offers candid profiles of
the personalities behind seven legendary banking houses: Hambros, which now survives
in name only; Barings, the oldest British banking dynasty; the Rothschild’s, who amassed
the largest private fortune in modern history; the Warburg’s, a German dynasty of
Venetian origin dating from the sixteenth century; the venerable Hermann Josef Abs,
long-time chairman of Deutsche Bank; Lehman Brothers, formerly the oldest continuing
partnership in American investing; and the eccentric and culturally savant financier
Raffaele Mattioli, who headed Banca Commerciale Italiana.
Focusing on figures of late-nineteenth-century London, this chronicle marks the
distinctions between the cloistered Old World aristocracy and the rise of the high-stakes
investors of Wall Street. Written by a longtime correspondent for the New Yorker, this
fascinating account of daring financial adventures and their merchant banker
orchestrators provides a wealth of context for understanding the evolution of modern
investment banking. A new Foreword has been written specially for this edition by
Christopher Kobrak, Wilson/Currie Chair of Canadian Business and Financial History at
the Rotman School of Management, University of Toronto.

2. Morgan Grenfell 1838-1988;

The Biography of a Merchant BankKathleen BurkClarendon This is the arresting 150-

year story of one of the oldest and most illustrious merchant banks and of the men who
made it. Founded in 1838 by an American, George Peabody, Morgan Grenfell quickly
became the most important American banking house in London, and by the turn of the
century held an unrivalled position as part of the most powerful investment bank in the
world. The book chronicles its role in financing the overseas purchases of Britain and her
allies during the First World War, in taking the lead amongst the private London bankers
in reconstructing Europe during the 1920s, and in pioneering the new field of corporate
finance.
 51

Based on a wide range of original sources, this book is unmatched as a banking history no
other book combines the unrestricted access to the bank's archives afforded to the author
with a narrative of events up to the 1980s.

3. The Rise of Merchant Banking10 NOV 2005

This is the first serious history of merchant banking based on the archives of the leading
houses and the records of their activities throughout the world. It combines scholarly
insight with readability, and offers a totally new assessment of the origins of one of the
most dynamic sectors of the City of London money market, of the British economy as a
whole and of a major aspect of the growth of international business.

Dr. Chapman has researched new material from the archives of Rothschild’s, Barings,
Kleinwort Benson and other leading houses together with a wide range of archives and
published work in Europe, America and South Africa to trace the roots of British
enterprise in financing international trade, exporting capital, floating companies,
arbitrage, and other activities of the merchant banks.

While mindful of the subtleties of international financial connections, this book assumes
no previous acquaintance with the jargon of banking, economics and sociology. It will
therefore prove equally interesting to students of history, business and finance, and offers
a 'good read' to anyone interested in the City of London and the international economy.
The jargon of banking, economics and sociology. It will therefore prove equally
interesting to students of history, business and finance, and offers a 'good read' to anyone
interested in the City of London and the international economy

4. The Merchant Bank Mystery by Rev John Waddington-Feather

Published July 30th 2015 by Createspace Independent Publishing Platform

There was an air of anticipation in Keighworth Police Station, and a good deal of
apprehension. It was time for a change and the station awaited its new head,
Superintendent Arthur Donaldson. When he arrived they were all in for a shock and his
 52

arrival caused as much upset as if a hurricane had hit the place. He'd no experience in
street crime for he'd specialized in office management and traffic control; so when he is
confronted with the murder of two widows, he is completely thrown. They were the
wives of a local very wealthy merchant banker, Robin Wilkins, quickly befriended by
Donaldson when he arrived in Keighworth. Fortunately, he has veteran Detective
Inspector Blake Hartley and the younger Detective Sergeant Ibrahim Khan at hand to
help him. They are experienced police officers who solve both murders - and more - in a
case which takes Sgt Khan to Pakistan and its wild tribal border with Afghanistan.
Meanwhile, Inspector Hartley cracks an art forgery racket and discovers how the two
widows died. Set in the Pennine country of West Yorkshire and Karachi and the
borderlands of Pakistan, "The Merchant Bank Mystery" examines the current British
banking underworld as part of the wider social scene

5. The Greed Merchants: How the Investment Banks Played the Free Market Game
By

Philip Augar Published April 21st 2005

Are investment bankers the responsible guardians of free-market capitalism that

they would have us believe? Or are they something more sinister altogether . . .
necessary but dangerous players in our free-market economy?

“Greed,” said Gordon Gekko in Wall Street, “is good.” But how good is it for
capitalism if the major investment banks are basically an oligopoly, keeping their
risks low and their profits artificially high? How good is it for companies that listen
to their value-destroying advice? And how good is it for the average shareholder, who
pays a huge price through portfolios that underperform and have a raft of hidden
charges?

Philip Augar worked in investment banking for more than twenty years and has since
become a gadfly to the industry on both sides of the Atlantic. His new book reveals
exactly how the investment banks make their money by acting simultaneously for
buyers, sellers, and themselves while carefully avoiding fee-based competition with
one another.
 53

Their cushy role in the financial world has finally been challenged by New York
Attorney General Eliot Spitzer in the wake of the dot-com bubble. But only a former
insider like Augar can go beyond the headlines to reveal how the system really works
and why it matters to anyone who owns stock
 54

CHAPTER 4

DATA ANALYSIS AND INTERPRETATION

Interpretation – The responses received are majorly from the age group 15 to 25 which is
79.2% and 14.2% is received from the age group 26 to 45 and the least response is
received from age group of 45& above which is 6.6%
 55

Interpretation: - The majority of the response are received from Females which is 54.7%

And the rest of the response are received males which is 45.3%
 56

Interpretation- The majority responses are received from the students which is 66%.The
response received from business man is 6.6% and the other responses are below 10% of
housewife, others and 10.4% employed.
 57

Interpretation – Majority of people know about merchant banking which is 67% and
people don’t know about merchant banking are 33%
 58

Interpretation : Majority of people do take financial service from banks which is 61.3%
and the rest 38.7% people don’t take any financial service from bank
 59

Interpretation: 62.3% people are provided services from other banks. 14.2% people are
been provided by ICICI banking services and 11.3% people are provided services from
SBI the rest CANARA BANK, PUNJAB NATIONAL BANK do provide service to the
customers below 12% of the total response
 60

Interpretation: According to the survey the position of merchant banking in private

sector is 54.7% normal 44.3% good and the rest is bad
 61

Interpretation: Majority of people prefer private sector which is 58.5% and 41.5% people
prefer public sector for merchant banking
62
 63

Interpretation: Majority of people are aware about portfolio management services which
is 42.5%.loan syndication service is known by 17.9% people. Issue management service
is known by 12.3% people. 14.2% people are aware of underwriting and the least 13.2%
people are aware about project counselling
 64

Interpretation: People satisfied by the services provided by banks are 6 4 . 2 % the people
whose opinion is may be are 32.1% and rest is not satisfied.
 65

Interpretation: People who think there is risk in merchant banking

services are 17% which is least of all 23.6% people don’t think there
is risk and the majority people which is 59.4% do think that there
might be risk
 66

Interpretation; According to the survey financial institution depend

upon merchant banking is agreed by 63.2 % and people disagreeing
on it are 36.8%
 67

Interpretation; According to the survey the future of merchant banking in India is

positive by 49.1% it is neutral by 46.2% and rest of them consider as negative
 68

Interpretation: Merchant banking and Investment banking are similar is agreed by 47.2%
people and it is disagreed by 52.8% people
 69

CHAPTER 5

FINDINGS

According to the survey it is studied that:

 Not all the people are aware of merchant banking and its benefits
 All the services are not known to the customers. Many
customers are unaware of majority of the services
 People do prefer private sector merchant banking rather than
public sector merchant banking in Mumbai.
 Customers do think there is risk in using merchant banking services.
 Not all the customers do feel that the future of merchant
banking in India is good but the case is merchant banking
sector is emerging in India rapidly.
 70

SUGGESTIONS

 Awareness should be created in the society about merchant banking

 Investment banking and Merchant banking are two different concepts
 Future of Merchant banking services is 100% positive due to emerging new
organizations and exerting excess demand on the sources of funds forever
expanding industries and trade.
 You can have currency exchanges managed for your company through Merchant
banks
 India have opened their merchant banking windows and are competing in this
field, and also doing advisory functions as merchant bankers as well as managing
public issues in syndication with other merchant bankers.
 Merchant bankers advise the investors of the incentives available in the form of
tax reliefs, other statutory relaxations, and good return on investment and capital
appreciation in such investment to motivate them to invest their savings in
securities.
 Merchant banks have been procuring impressive support from capital market for
the corporate sector for financing their projects.
Thus, the merchant bankers help industry and trade to raise funds, and the investors to
invest their saved money in sound and healthy concerns with confidence, safety and
organizations for higher yields
 71

CONCLUSION

The merchant banker plays a vital role in channelizing the financial surplus of the society
into productive investment avenues. Hence before selecting a merchant banker, one
must decide, the services for which he is being approached. Selecting the right
intermediary who has the necessary skills to meet the requirements of the client will
ensure success.

It can be said that this project helped me to understand every details about Merchant
Banking and in future how it’s going to get emerged in the Indian economy. Hence,
Merchant Banking can be considered as essential financial body in Indian financial
system.

Market development is predicted on a sound, fair and transparent regulatory framework. To

sustain the growth of the market and crystallize the growing awareness and interest into a
committed, discerning and growing awareness and interest into an essential to remove the
trading malpractice and structural inadequacies prevailing in the market, and provide the
investors an organized, well regulated market

According to the survey it is concluded that majority of the people do prefer private
sector merchant banking services rather than public sector merchant banking services.
Majority of people do take financial services from the bank and from the survey it is
concluded that the position of public sector merchant banking is good than that off
private sector merchant banking. But the most preferable sector for merchant banking
services is private sector, so the public sector do need to work hard and maintain its
position in the market.

All the services of merchant banking is not known by the common people, so it is very
necessary to create awareness about all the services of merchant banking in the mind of
people. Small portion of the survey do think that there is risk in using merchant banking
services but these misconception should be proven wrong. The future of merchant
banking is considered positive by only 49.1% of the total survey but the case is due
to
 72

Emergence of new organizations, expanding industries and trade the growth of merchant
banking is 100% positive. Only 52.8% of merchant banking do think that Merchant
Banking is not similar to Investment Banking .
 73

BIBLOGRAPHY
BOOKS REFFERED

 The Merchant Bankers by Joseph Wechsberg

 Morgan Grenfell 1838-1988
 The Biography of a Merchant Bank Kathleen BurkClar
 The Rise of Merchant Banking10 NOV 2005

 The Greed Merchants: How the Investment Banks Played

the Free Market Game by Philip Augar Published April
21st 2005

WEBSITES

 www.google.co.in
 www.yahoo.com
 www.economictimes.com
 www.sebi.com
 www.canara.com
 www.icici.com
 www.sbi.com
 www.pnb.com
 www.kotakmahindra.com
 74

ANNEXURE
*Required

1. NAME*

2. AGE*

a) 15-25

b) 26-45

c) 45&above

3. OCCUPATION *

a) STUDENT

b) BUSSINESSMAN

d) HOUSEWIFE

e) OTHERS

f) EMPLOYED

g)ADVOCATE

4. GENDER *

a) MALE b)

FEMALE

5. . DO YOU KNOW ABOUT MERCHANT BANKING?

a) Yes

b) No
 75

6. . DO YOU TAKE ANY FINANCIAL SERVICE FROM BANKS? *

a) Yes

b) No

7. . WHICH BANK PROVIDES YOU MAXIMUM SERVICES? *

a) PUNJAB NATIONAL BANK

b) ICICI BANK

c) CANARA BANK

d) SBI BANK

e) OTHERS

8. WHAT IS THE POSITION OF MERCHANT BANKING IN PRIVATE SECTOR? *

a) GOOD

b) BAD

c) NORMAL

9. WHICH SECTOR DO YOU PREFER FOR MERCHANT BANKING? *

a) PUBLIC SECTOR

b) PRIVATE SECTOR
 76

10 WHICH MERCHANT BANKING SERVICE IS WELL KNOWN TO YOU? *

a) PORTFOLIO MANAGEMENT SERVICE

b) ISSUE MANAGEMENT SERVICE

c) PROJECT COUNSELLING

d) UNERWRITING

e) LOAN SYNDICATION

11ARE YOU SATISFIED WITH SERVICES PROVIDED BY YOUR BANK? *

a) Yes

b) No

c) Maybe

12. DO YOU THINK THERE IS RISK IN USING MERCHANT BANKING

SERVICES? *

a) Yes

b) No

c) Maybe

13. DOES NON FINANCIAL INSTITUTION DEPEND UPON MERCHANT

BANKING? *

a) AGREE

b) DISAGREE

14. FUTURE OF MERCHANT BANKING INSTITUTIONS IN INDIA? *

 77

a) POSITIVE

b) NEGATIVE

c) NEUTRAL

15. IS MERCHANT BANKING AND INVESTMENT BANKING SIMILAR? *

a) AGREE

b) DISAGREE
78