Merchant Banking in India

MERCHANT BANKING IN INDIA
INTRODUCTION

requires a specialized skill in handling the situation. The merchant bankers have a social responsibility to in building an industrial structure in India.

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Merchant Banking 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 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.

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Merchant Banking in India

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.

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Merchant Banking in India 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. Merchant Banking in India – Historical Perspective: Till th 18 century moneylenders. village merchants (maharanis). Over a period they extended their activities to domestic business of syndication of long term and short term finance. underwriting of new issues. negotiating agents for mergers. now is in PAKISTAN). 4 . portfolio managers. such as advice on complex financings. merger and acquisition advice (international in or domestic). JAGAT SHETH (1720-1773AD. acting as registrars and share transfer agents. & saucers performed the function of banks & merchant banks. on mortgage of lands. takeovers etc. Merchant Banking is an activity that includes corporate finance activities. Later. ornaments & other property. These were the organized merchant bankers in recent history of INDIA. BENGAL) HABIB & SONS which is now HABIB BANK (founded in 1941. moneychangers. They gave loans on mutual trust. the merchants assisted the Government of under developed countries in raising long – terms through floatation of bonds in London money market. by the and at times direct equity investments corporations banks. debenture trustees. They also issued & discounted bills of exchange (handiest) & bank draft.

The reason that businesses should develop a working relationship with a merchant bank is that they have more money than venture capitalists. Thousands of monks lost their lives. they take far greater risks than traditional banks. When the Dot Com Bubble burst in 2001. you should know something of their history. Because they do not invest against collateral. They foolishly loaned money to the French Government. scores of venture capital firms failed.Merchant Banking in India Merchant banks are private financial institution. It failed because of unsupervised trading of copper futures contracts and buybacks. Anyone considering dealing with any merchant bank should investigate the bank and its managers before seeking their help. Modern merchant banking started in Italy during the 7th Century. To avoid repaying the money. Their advice tends to be more pragmatic than venture capitalists. do not take money from the public and are international in scope. Because they are private. After the Crusades. Their secondary income sources are consulting. but France balanced its budget. To understand Merchant Banks. Mergers & Acquisitions help and financial market speculation. King Louie had the Pope declare the Order heretics. It is rare for a merchant bank to fail. Their primary sources of income are PIPE financings and international trade. The greatest merchant bank failure in history was the Knights Templar. they are not regulated. the Order became immensely wealthy controlling and funding the trade between the Middle East and Western Europe. The last major failure was Barings Bank (1992). The 5 .

Merchant Banking in India banking practices evolved from the financing structure of the Silk Road Trading that predates the Roman Empire. They accepted the risk of crop failure. Amsterdam benefited from the trade created by the Dutch East Indian Company. each offers its own specialized services. For instance. The basic financing structure was the advance payment for goods by merchant bankers at a great discount to the delivery value of those goods. merchant bankers funded Canada‘s Hudson Bay Company. the national government accepts the risk through government crop insurance. This period saw the rise of such merchant banks as Schroders. North American merchant banks have taken the form of "boutiques"whereby. In most countries today. financial and transactional. merchant banks prospered in London. 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. Today. the role of the merchant banker has been considerably broadened to include a composite of modern day skills. As the British Empire expanded in the 18th and 19th Centuries. They profited when they sold the wheat. In the case of Italy and then Germany. managerial. The merchant banks purchased the wheat soon after planting. Such skills are inherently entrepreneurial. Since the 18th century. wheat was the product. 6 . Warburgs or Rothschilds.

objective was to render State bank of India In the initial years the corporate advice and assistance to small and banking activities are organized and medium entrepreneurs. system design and also market research. nationalized banks have formed subsidiaries companies and share brokers and consultancies constituted themselves into public ltd. Some of them have equity stake of foreign merchant bankers. evaluating new projects. raising funds through borrowing and issuing equity. Co. Indian banks started banking services as a part of multiple services they offered to clients from 1972. RBI issued its first merchant banking license to grind lays started with management of capital issues. started the merchant banking division in 1972. or registered themselves as private ltd. Citibank setup its merchant banking division in 1970.Merchant Banking in India Merchant Banking in India – Post Independence: In 1967. companies. its scope includes assisting new entrepreneur. It provides management consulting services as well. production planning. Commercial banks and foreign development finance institutions have organized them through formation of division. 7 . Merchant undertaken in several forms.

and is also frequently responsible for marketing the new stock. with one being the lead underwriter . the price at which the stock will be issued. long term company loans. 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. several merchant banks may work together. A merchant bank is sometimes said to be a bank .Merchant Banking in India Merchant Bank A merchant bank deals with the commercial banking needs of international finance. The merchant bank files all the paperwork required with the . though this may be a joint effort with the company and managed by the merchant bank. and the timing of the release of this new stock. This is because merchant banks tend to deal primarily with other merchant banks and other large financial institutions. A merchant bank where one can go and open a savings or wholesale checking account . or in the business of wholesale banking . 8 . For really large stock offerings. The merchant bank determines the number of stocks to be issued. various market authorities. and stock does not have retail offices underwriting .

as there is very little similarity between retail banking and what goes on in a merchant bank. 9 . Some merchant banks specialize in a single area. such as underwriting or international finance. most people reading this article are unlikely ever to visit or deal directly with a merchant bank.Merchant Banking in India By limiting their scope to the needs of large companies. Although your life is probably affected every day in some way by decisions made in a merchant bank. The divisions are generally very separate entities. Many of the largest banks have both a retail division and a merchant bank division. merchant banks can focus their knowledge and be of specific use to such clients. Merchant banks operate behind the scenes and away from the spotlight.

all the commercial banks in nationalized and public sector as well as in private sector including the foreign banks in India have opened their merchant banking windows and are competing in this field. the need of merchant banking institutions is felt in the wake of huge public savings lying still untapped. With the result. All Indian financial institutions and experienced resources constraint to meet the ever increasing demands for funds from the corporate sector enterprises. Merchant banks can play highly significant role in mobilizing funds of savers to investible channels assuring promising return on investments and thus can 10 .Merchant Banking in India Importance and Need of merchant banking Important reason for the growth of merchant banking has been developmental activity throughout the country. With the growing demand for funds there was pressure on capital market that enthused the commercial banks. In the circumstances corporate sector had the only alternative to avail of the capital market services for meeting their long-term financial requirements through capital issues of equity and debentures. Notwithstanding the above facts. There has been a mushroom growth of financial consultancy firms and broker firms doing advisory functions as well as managing public issues in syndication with other merchant bankers. exerting excess demand on the sources of funds for ever expanding industry and trade. leaving a widening gap under bridged between the supply and demand of inventible funds. share brokers and financial consultant firms to enter into the field of merchant banking and share the growing capital markets. thus.

provide this service to the corporate units and advise them on such requirements to be complied with for raising funds from the capital market under different enactments viz. With the growth of merchant banking profession corporate enterprises in both public and private sectors would be able to raise required amount of funds annually from the capital market to meet the growing requirements for funds for establishing new enterprises. In view of multitude of enactments. This is evidenced from the increasing amount raised form the capital market by the corporate enterprises year after year. Merchant bankers advise the investors of the incentives available in the form of tax relief‘s. Merchant banks have been procuring impressive support from capital market for the corporate sector for financing their projects. Companies Act. with their skills. of undertaking the existing enterprises. rules and regulations. other statutory 11 . Income-tax Act. Foreign Exchange Regulation Act. updated information and knowledge. guidelines and offshoot press release instructions brought out by the government from time to time imposing statutory obligations upon the corporate sector to comply with all those requirements prescribed therein.Merchant Banking in India help in meeting the widening demand for investible funds for economic activity. This expansion/modernization/diversification reinforces the need for a vigorous role to be played by merchant banks. the need of skilled agency existed which could provide counseling in these matters in a package form. Securities Contracts (Regulation) Act and various other corporate laws and regulations. Merchant bankers.

He has to assume wider responsibilities of saving industrial units from going sick and guiding industries to be setup in industrially backward areas to eliminate regional imbalances in industrial development of the country. 12 . banker‘s dynamism lies in promptly attending to the corporate problems and suggest ways and means to solve it. and necessitating overhauling of the capital Merchant banker has to think and devise new instruments of financing industrial projects. He is always awake to renew his skills. modernizations or replacements of existing plant and machinery or other equipments putting new demands for finances structure of the firms. Role of Merchant Banker The role of merchant banker is dynamic in the wake of diverse nature of merchant banking Merchant services. Merchant banker is. diversifications. good return on investment and capital appreciation in such investment to motivate them to invest their savings in securities of the corporate sector. therefore.Merchant Banking in India relaxations. 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. The nature of merchant banking services is development oriented and promotional to help the industry and trade to grow and survive. regulations and politics affecting business conditions frequently change. dedicated to achieve this objective through his dynamism. He has to keep pace with the changing environment where government rules. where science and technology create new innovations in production processes of industries envisaging immediate renovations.

He has to watch the interest agencies. merchant bankers have very significant role to play tuning their activities to the requirements of the growth pattern of the corporate sector. He the communication gap between different sections and resolve the problem being faced in different areas concerned with the business world. He has to help the industry in different forms to ensure that it runs risk free and devoid of uncertainty by assisting the promoters with his knowledge and skills to resolve the problems being faced by them. a challenging task and to meet these challenges merchant bankers will have to be more vigorous and strategic in playing their role. To discharge the above role. along and win over the confidence of the government. In the days ahead. the industry and the economy as a whole which is. a merchant banker has to be dynamic.Merchant Banking in India He has to guide the wider section of the community possessing surplus money to invest in corporate securities and other productive investment channels. in it. the investors and the whole community. its with must the bridge entrepreneurs. 13 . They will have also to adopt new ways and means in discharging their role .

the largest foreign bank in the country. The commercial banks that followed State Bank of India were Central Bank of India. Punjab National Bank.The division took up the task of assisting new entrepreneurs and existing units in the evaluation of new projects and raising funds through borrowing and equity issues. Citibank set up its merchant banking division in 1970. Merchant bankers are permitted to carry on activities of primary dealers in government securities. Bank of India and Syndicate Bank in 1977. Following Grindlays Bank.Bank of Baroda. Standard Chartered Bank and Mercantile Bank in 1978 and United Bank of India. Canara Bank and 14 . Merchant Banking Division in State Bank of India started the In 1972. the initial years the SBI‘s small and objective was to render corporate advice and assistance to medium entrepreneurs. United Commercial Bank. Consequent to the recommendations of Banking Commission in 1972. 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. that Indian banks should offer merchant banking services as part of the multiple services they could provide their clients. Management consultancy services were also offered.Merchant Banking in India The growth of Merchant banking in India Formal merchant activity in India was originated in 1969 with the merchant banking division setup by the Grindlays Bank.

ICICI started merchant banking activities in 1973 followed by IFCI (1986) and IDBI (1991). Canara Bank. and Bank of India. (B) Banker Base 15 . subsidiary companies established by bankers like SBI. Punjab National financial Bank.Indian Overseas Bank in late ‗70s and early ‗80s. 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. Some firms are also organized by technical consultants and professionals. Among the development Merchant Banking in India banks. 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. etc. Securities bankers and Exchange Board of India has divided the merchant into four categories based on their capital adequacy. 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. 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. Each category is authorized to perform certain functions.

(D) Private Base These merchant banking firms are originated in private sector. 16 . Private sector merchant banking firms have come up either as the sole proprietorship or public limited companies. These organizations have brought professionalism in merchant banking sector and they help their parent organization to make a presence in capital market.Merchant Banking in India These merchant bankers function as division/subsidiary of banking organization. Some foreign merchant bankers are also entering either independently or through some collaboration with their Indian counterparts. These brokers undertake merchant banking related operations also like providing investment and portfolio management services. 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. These organizations are the outcome of opportunities and scope in merchant banking business and they are providing skill-oriented specialized services to their clients. (C) Broker Base In the recent past there has been an inflow of qualified and professionally skilled brokers in various stock exchanges of India. The parent banks are either nationalized commercial bank or the foreign banks operating in India.

the types of organizations are listed below: a. Sole proprietorship b. ICICI Securities etc. Hindu Undivided Family (HUF) d. Co-operative Society 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. Partnership firm c. profitability. 2. Capital adequacy. Corporate Enterprises e. 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. However. SBI caps. 17 . Formation of the Business Organization SEBI act.Merchant Banking in India Requirements for setting up a merchant banking outfit 1. growth opportunities and current market size are some of the factors which need to be looked into. 1992 does not prescribe any specific form of business organization to carry on the activities as merchant banker.

To carry on the activity as underwriter or portfolio manager a separate certificate of registration needs to be obtained from SEBI. portfolio manager. 18 . • Category II. co- manager. that is to act as underwriter. consultant. that is to act only as adviser or consultant to an issue. and (ii) to act as adviser. • Category IV. manager. 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. to act as adviser. determining financial structure. consultant. The application can be made for any one of the following categories of the merchant banker namely:• Category I. underwriter. that is. consultant to an issue. portfolio manager. Application for grant of certificate An application for grant of a certificate needs to be made to SEBI . tie-up of financiers and final allotment and refund of the subscription. • Category III. Registration of Merchant Bankers a.Merchant Banking in India 3. adviser. underwriter.

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 19 . d. Consideration of application The Board shall take into account for considering the grant of a certificate. otherwise it may be rejected. namely: • the applicant shall be a body corporate other than a non. which are relevant to the activities relating to merchant banker and in particular the applicant complies with the following requirements. Application to conform to the requirements The application should conform to all the requirements under the SEBI guidelines.Merchant Banking in India b. The applicant or its principal officer may appear before the Board for personal representation. c. Furnishing of information. all matters. 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.

00. activities equipments. 20. 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 20 . • the applicant fulfils the capital adequacy requirement is as follows: The capital adequacy requirement should not be less than the net worth of the person making the application for grant of registration.Merchant Banking in India • the applicant has the necessary infrastructure like adequate office space. 000 Category II Rs. and manpower to effectively discharge his • 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. 00. 50. 00. The networth shall be as follows. 00. 5. Category Minimum Amount Category I Rs. his partner. 000 Category III Rs. 000 Category IV Nil • the applicant.

Where a merchant banker fails to pay the Annual fees as provided in Schedule II. On the grant of a certificate the applicant shall be liable to pay the fees as prescribed. e. 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. The Merchant Bank can commence business on acquisition of a Certificate of Registration from the SEBI after completion of the above mentioned formalities.Merchant Banking in India • the applicant has the professional qualification from an institution recognised management by the Government in finance. 21 . law or business • grant of certificate to the applicant is in the interest of investors. 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. Procedure for Registration The Board on being satisfied that the applicant is eligible shall grant a certificate.

municipality. 4.Merchant Banking in India Main Objectives Of Merchant Bankers Merchant bankers render their specialized assistance in achieving the main objectives which are presented below: 1. securities and all kinds of investments issued. underwrite. corporation. assist in the capital formation. 22 . civil body. provide standby assistance. to be issued or guaranteed by any company. manage advice. trust person. society. public authority established in India. Merchant banker‘s another objective is to set up and provide services for the venture capital technology funds. To carry on the business of merchant banking. firm. 2. The main object of merchant banker is to create secondary market for bills and discount or re-discount bills and acts as an acceptance house. They also provide services to the finance housing schemes for the construction of houses and buying of land. 3. government.

debentures. Every merchant banker must submit himself to the inspection by . They render the services like foreign exchange dealer. 2. 23 . and authorized dealer and to buy and sell foreign exchange in all lawful ways in compliance with the relevant laws of India. SEBI when required for and submit all the records. hypothecate and deal with dispose of shares. 6. Merchant bankers should not enter into any transactions on the basis of unpublished information available to them in the course of their professional assignment. Merchant banker should maintain proper books of accounts. securities and properties of any other company. 3. No merchant banker should associate with another merchant banker who is not registered in SEBI. money exchange. stocks. 4.Merchant Banking in India 5. records and submit half yearly/annual financial statements to the SEBI within stipulated period of time. They will invest in buying and selling of transfers. Obligations and Responsibilites Merchant bankers have the following obligations and responsibilities 1.

Merchant Banking in India

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 obligations, with the issuer such setting issues out with mutual rights, liabilities, to

relating to

particular

reference

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

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Merchant Banking in India

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 advise 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.

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Merchant Banking in India

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

e) The minimum application money payable should not be less than 25 per cent of the issue price. f) The company should disclose the time normally taken for the disposal of various types of investor‘s grievances. g) 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%).

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the Company should give advertisements in not less than two newspapers about the dispatch of letters of offer. in their purest forms. 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. Traditional merchant banks often expand into 27 . i) According to the guidelines. the fine lines that separate the functions of merchant banks and investment banks tend to blur. No preferential allotment may be made along with any rights issue. at least 30 mandatory collection centres should be established. in case of the public issues. In practice. k) The Company should also disclose about the fee agreed between the lead managers and the Company in the memorandum of understanding. are different kinds of financial institutions that perform different services. j) According to the SEBI guidelines regarding rights issue. The Difference between Investment banks and Merchant banks Merchant banks and investment banks.Merchant Banking in India h) The Company should disclose the safety net scheme or buy back arrangements of the shares proposed in public issue.

Investment banks facilitate mergers and acquisitions through share sales and provide research and financial consulting to companies. investment banks did not deal with the general public. Pure investment banks raise funds for businesses and some governments by registering and issuing debt or equity and selling it on a market. trade consulting and co-investment in projects involving trade of one form or another. investment banks focus on initial public offerings (IPO‘s) 28 . Traditionally. investment banks only participated in underwriting and selling securities in large blocks. transferring funds internationally. investment banks and merchant banks perform different functions. The current offering of investment banks and merchant banks varies by the institution offering the services.Merchant Banking in India the field of securities underwriting. while many investment banks participate in trade financing activities. but there are a few characteristics that most companies that offer both investment and merchant banking share. trade finance and international transaction facilitation. Traditional merchant banks primarily perform international financing activities such as foreign corporate investing. As a general rule. Some of the activities that a pure merchant bank is involved in may include issuing letters of credit. Traditionally. foreign real estate investment. In theory.

mezzanine financing and a number of corporate credit products. In order to bridge the gap between venture capital and a public offering. While investment banks tend to focus on larger companies. larger merchant banks tend to privately place equity with other financial institutions.Merchant Banking in India and large public and private share offerings. bridge financing. merchant banks offer their services to companies that are too big for venture capital firms to serve properly. 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 Investment banks still offer trade financing products to their clients. Merchant banks tend to operate on small-scale companies and offer creative equity financing. Merchant banks and Commercial banks 29 . often taking on large portions of ownership in companies that are believed to have strong growth potential. but are still too small to make a compelling public share offering on a large exchange.

and liaisoning with SEBI. 4) Mainly fees based business. feature. They work Being lenders. Services of Merchant Bankers In India:Merchant bankers provide services as follows: 30 . 2) Advisor not financer. running. preference shares.e. book underwriter. they are closer to the customers and get to know risks of the transaction s properly. bank deposits. Mainly fund based business 5) Being advisors. Demand deposits are the key Provide funds in the form of term loan and working capital. assess risks in lending on proposal and cannot afford to be grossly relationship based and risks shields i. mitigation measures close to the customer. 3) Do not accept chequable deposits. they are more cautions. and syndicated loan working capital instruments. 6) Most of of work they get is in about Commercial banks majority management capacity of piercing of equity issues thebusiness is of terms lending and lead manager.Merchant Banking in India Merchant banks Commercial banks 1) Assist in raising capital in the form of equity. Financing is the main business. issue.

In these circumstances. the corporate sector enterprises had the only alternative to avail themselves of 31 .Merchant Banking in India Business planning stage: Equity raising: 1)project feasibility study 2)advice on capital structuring 3)preparation of prospectus liaison with SEBI 4)pricing decisions 5)marketing in the capacity of lead managers 6)underwriters to the issue 7)post issue management and Debt raising: 8)assistance in ADR/GDR 9)management of debenture issue 10)preparation of bankable proposal Working capital raising: Strategic advice: and syndication of loan 11)assistance in arranging optimal capital finance 12)advice on acquisitions 13)corporate structuring advice mergers and 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.

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. investors to invest their saved money in sound and healthy concerns with confidence. 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 Banking in India the capital market services for meeting the long-term fund requirements through capital issues of equity and debentures. safety and expectation of higher yields. Issue Management 32 . Credit Syndication And Project Finance 4. Broadly a merchant banker can provide the following services: 1. Project Counseling And Pre-Investment Studies 3. and the the merchant bankers help industry and trade to raise funds. Corporate Counseling 2. Thus. 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.

Non-Resident Investment Counseling And Management 11.Merchant Banking in India 5. Underwriting 6. Portfolio Management 8. Venture Capital Financing 9.Relief To Sick Industries Let‘s take a brief look at each of these functions: Corporate Counseling 33 .Acceptance Credit And Bill Discounting 12. Amalgamations And Take-Over 13.Fixed Deposit Broking 15. Leasing 10.Arranging Offshore Finance 14.Advising On Mergers. Bankers 7.

portfolio management and the full range of financial engineering including venture capital.Merchant Banking in India It includes a whole range of financial services provided by a merchant banker to a corporate unit a view to ensure better performance. capital restructuring. However. pricing. fixed deposits.e. and suggests ways and means to solve those problems. which shall include organizational goals for the enterprise. etc. It covers the entire field of merchant banking activities i. acceptance credit. working capital. etc. the scope of corporate counseling is limited to suggestions and opinions leaving to the client to take corrective actions for solving its corporate problems. public issue management. Project Counseling 34 . choice of a product. lease financing.. project counseling. size of the organization and operational scales. A merchant banker finds out the problems of enterprise. maintain steady growth and create a better image among investors. loan syndication.

deciding upon the financing pattern to finance the cost of the project. appraising the project report with the financial institutions/banks. location. commercial and financial viability of the project. regulations and norms prescribed by the government or followed by the term lending financial institutions. 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. 35 . Project reports are prepared to obtain government approval of the project. technical. for planning public issues. for procuring financial assistance from financial institutions and banks. 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. etc.Merchant Banking in India Project counseling is an important merchant banking service which includes preparation of project reports. for ensuring market for the proposed product. private investors and financial institutions and in the form of debentures from the public. While rendering project counseling services. Financing the project cost is an important aspect of project counseling. Merchant banker has to decide the financing mix of the internal and external sources of funds keeping in view the rules. and external sources of funds which refers to the borrowed funds in the form of loans from banks. the merchant banker has to appraise the project considering the various aspects as to the type of the project.

or from external sources like short term borrowings from banks etc. Long and medium term funds are obtained from the All India Financial Institutions like IFCI. the next step is looking for the sources wherefrom the funds could be procured to implement the project. commercial banks. Credit syndication in case of domestic borrowings is with the institutional lenders and banks.. Merchant banker has to locate the sources of funds and comply the formalities required to procure the funds. Short-term funds are also required by the firm for purchase of raw materials. salaries etc. banker banks in arranging other and lending procuring credit from financial for and and investment organizations financing the clients' project cost or meeting working capital requirement is referred to as loan syndication or credit syndication. payment of wages. IDBI etc.Merchant Banking in India Credit Syndication Once the client company has decided about the project proposed to be undertaken. SIDC etc. mutual funds etc. state level financial bodies like SFC. Issue Management and Underwriting 36 .. This service rendered by the merchant institutions. Sources of financing these 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.

solicitors and board of directors. . procuring private subscription to the securities and offering securities to existing shareholders of the company. bankers.advice the company to appoint auditors. the managing agents for a particular corporate used to manage public issues. before the public issue has to obtain the consent of the stock exchanges to the memorandum and articles of association. file the prospectus with registrar. appoint other managers. The abolition of the managing agency system. make an application for enlistment with stock exchanges and finally advertise for the issue.Merchant Banking in India Management of capital issues is a professional service rendered by the skilled and experienced merchant bankers. board of directors and other concerned parties. underwriters. calculation of underwriters liability in case of under subscription and complying the necessary statutory requirements for listing of securities on the stock exchange. draft the prospectus and obtain consent from the companies legal advisors. Public issue management involves marketing of corporate securities by offering the securities to the public. As a manager to the public issue. Previously. Under writing of public issue 37 . brokers etc. the merchant banker. 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. A merchant bankers post issue activities include final allotment and/or refund of subscription amount. the growth in the public limited companies in number and size.

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. An underwriter of the issue gets the following benefits: • • • It earns a commission of the commitment given.Merchant Banking in India A fully underwritten public issue spells confidence to the investing public. which ensures a good response to the issue. desire a full underwriting of the issue. It expands its clientele by underwriting more and more issues. It earns the right to be appointed as bankers of that issue. Portfolio Management 38 . which float a public issue usually. Underwriting is only the guarantee given by the underwriter that in the event of under subscription. 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. Keeping this in view companies. the amount underwritten would be subscribed in proportion by the underwriter.

etc. Advisory Services Relating To Mergers and Takeovers 39 .Merchant Banking in India Portfolio refers to investment in different types of marketable securities or investment papers like shared. Merchant bankers take up management of a portfolio of securities on behalf of their clients. etc. They should keep record of latest amendment in government guidelines. Portfolio management refers to managing efficiently the investment in the securities held by professionals to others. A merchant banker while performing the services of portfolio management has to enquire of the investment needs of the client. they should study the economic environment affecting the capital market. the tax bracket. from different companies or institutions held by individuals firm or corporate units. 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. study the securities market and identify blue chip companies in which money can be invested. debentures and debenture stocks. liquidity requirements. ability to bare risk. stock exchange regulations. bonds etc. RBI regulations.

40 . shareholders A merger of the amalgamation wherein the combining companies become substantially shareholders of the company formed. which is the purchase. 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. by one company of a controlling interest in the share capital of another existing company. the search of the acquirer company will start for a merger partner company.e. utilization resources. A takeover is referred to as an acquisition. If the objective of merger is growth oriented utilization i. then the acquirer company will select a business related company as a merger partner. Their role is specific and specialized in handling the mergers and taker over assignments.e. Based on the purpose of business objective. i. the acquirer as well as the acquired company.Merchant Banking in India A merger is defined as a combination of two or more companies into a single company where is one also services defied and as other an looses their corporate the existence. Merchant bankers are the middlemen settling negotiations between the offered and the offeror. of seeking existing expansion companies in or production optimum and market of segments. Being a professional expert.

41 . getting approval of company Board. The financing is by subscription to the equity capital. Many merchant bankers are entering into this area by also financing viable upcoming projects. He has to comply with the legal formalities like getting approval from the Government/ RBI. drafting the scheme of amalgamation. then it will select a non-related company as a merger partner.Merchant Banking in India If the objective is diversification in production line or business activities. legal. financial institution. He has to negotiate with the parties and decide the purchase consideration and mode of payment. high court if required. documents and tax consultancy. The services include arrangement for lease finance facilities for leasing companies. arranging for the meeting etc. Venture Capital Financing Financing an emerging high-risk project is called venture capital financing. Once the merger partner is proposed the merchant banker has to appraise the merger/takeover proposal with respect to financial viability and technical feasibility. 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.

Long Term Foreign Currency Loans 3. compliance with procedural and legal aspects 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. these services are not currently provided by merchant bankers in India the principal reasoning being the lack of an active market for commercial bills. etc. negotiations. 42 . Joint Ventures Abroad 4. Acceptance Credit and Bill Discounting Though merchant bankers world over specialize in acceptance credit and bill discounting. portfolio management. Arranging Offshore Finance The merchant bankers also help their clients in the following areas involving foreign currency financing: 1. selection of securities. etc. the merchant bankers provide investment advisory services to the NRIs in terms of identification of investment opportunities. Foreign Collaboration Arrangements The assistance rendered as in the case of financial services covers appraisals. Financing Of Exports And Imports 2.Merchant Banking in India Non Resident Investment To attract NRI investments in the primary and secondary markets.

terms of deposits and other related issues are also offered to the client. 5. Obtaining necessary approval for implementation the rehabilitation package from the statutory authorities. 2. environmental. Relief to Sick Industries The services offered by merchant bankers to sick industries can be summarized as follows : 1. Providing necessary assistance where the rehabilitation package of capital requirements and counseling on capital involves mergers or amalgamation. 4. Preparations of programs and packages for rehabilitation of sick units. Monitoring the implementation of the scheme of rehabilitation. merchant‘s bankers have begun to structure and mobilize fixed deposits for their corporate clients. 6.Merchant Banking in India Management of Fixed Deposits of Companies Recently. Assessment restructuring. 3. They take care of the procedural and legal aspects. 43 . and also mange the collection and subsequent servicing of the deposits. Advice with regard to the amount to be raised. Appraisal of technological. financial and other factors causing sickness. interest charges.

3.Merchant Banking in India Qualities of merchant bankers:To be a successful merchant banker. Delivery of his services depends on his basic understanding of these issues. This only can see speedy and favorable clearances by the authorities. their movements. It is imperative that a merchant bank maintains excellent rapport with all of them and also close relations even at informal levels. 2. 44 . Knowledge: Thorough understanding of technical issues related to business. understanding of legal and statutory requirements. Capital market familiarity:Merchant banker should be well versed with stock markets. appreciation of business acumen. He should track imp happenings in the market on ongoing basis. depositories and other government authorities for public issue related duties. the stock exchanges. RBI. following qualities are necessary: 1. financial expertise is a key thing a merchant banker must know. Liasioning ability: Merchant bankers are required to liaison with SEBI.

Innovation: Corporate may approach with unique requirements. 45 . Innovation is required even to address stringent legal requirements. Integrity: Merchant banker has valuable and confidential information of its customers. They can device new financial instruments and get approved from the authorities. Standard solutions and products may not solve problems sometimes.Merchant Banking in India 4. 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. 5. Merchant bankers should do out of box thinking and be able to do financial engineering.

46 . I. Industry is not well organized and all the players do not play the same tune. Corporate like to use merchant bankers for malafide intentions. multiple use of same talent is not possible.e. This gives growth to more boutique fly-by-day firms. Malafide practices: India corporate culture is bettering. Professional qualification focused on merchant banking is not available. money-lending. This is specifically evident in comparison with insurance industry and mutual funds industry. Giant professional or multinational merchant bankers are cautions in their approach to Indian market. So the same promoters have to setup different companies for different purposes. Regulations: though regulations are much better now. and portfolio management. there is still scope for further improvement.Merchant Banking in India Problems and hurdles:Not many but some problems are faced by Indian merchant bankers. hire purchase. but still many corporate have excessively friendly approach. Industry compartmentalization : company which is in merchant banking business would have expertise in underwriting. Management cost increases and expertise pooling i. Merchant bankers can be made more accountable and responsible. III. But RBI does not permit merchant banking firms to get into these activities. Favored allotment of shares. tampering with project appraisal report to bankers is common. leasing. II.

FDI. merchant bankers work has increased many folds. Size and dynamics of the market :Indian market is growing. Obviously. Restrictions-liberalization :more liberal the market is. Some countries allow commercial bankers to get involved in IPO‘s. 1. 2. Lots of new and green fried projects are happening. placement of debentures. They should setup a subsidiary for the purpose. 47 . Merchant bankers assist in decision making and hence their scope increases. Indian scenario is favorable to merchant bankers. restriction-liberation. Banking policies :RBI prefers that commercial banks do not indulge in merchant banking business directly. In fact India is one of the largest emerging markets. upon size of the and market. corporate dynamics. With significant market freedom. 3. This limits scope of commercial banks and gives space to merchant bankers. debt raising are on rise. etc. Merchant bankers have lots space to contribute. corporate culture. more the things left to be decided by the corporate.Merchant Banking in India Scope for merchant banking in India:Scope for merchant banking banking depends policies. public issues. This policy also results in fair business practices.

active money market are all providing better business prospectus to merchant bankers. strategic restructuring in house as well. then the corporate prefer third-party only they will engage merchant bankers. Mergers. 5. new Greenfield projects. Corporate dynamics:more happening in business takeover gives more opportunities to merchant bankers. fund raising for government institutions. apparently prefers and is happy with merchant bankers work. India inc.Merchant Banking in India 4. Otherwise merchant banker‘s role is only statutory as in issue management. 48 . If independent assessment. acquisition. Corporate culture: corporate can do project appraisal.

all merchant bankers registered with SEBI under four different categories include 50 commercial banks.Merchant Banking in India Progress of Merchant Banking in India:Upto 1970. infrastructure Leasing and Financial Services Ltd.. Thus. In addition. by the end of the end of 1980‘s there were 33 merchant bankers belonging to three major segments viz. and private merchant bankers. and private Merchant firms. there were only two foreign banks which performed merchant banking operations in the country. The number of merchant banks increased to 115 by the end of 1992-93 300 by the end of 1993-94 and 501 by the end of August. banking functions of these institutions was related only to management of new capital issues. 6 all Indian financial institutions – ICICI. As a result of buoyancy in the capital market in 1980‘s some commercial banks set – up their subsidiaries to operate exclusively in merchant banking industry. a number of large stock broking firms and financial consultants also entered into business. IFCI. Merchant banking industry which remained almost stagnant and stereotyped for over two decades. IDBI. Tourism Finance corporation of India. In addition to Indian Merchant Bankers. 49 . IRBI. a large number of reputed international Merchant Bankers like Merrill Lynch. witnessed an astonishing growth after the process of economic reforms and deregulation of Indian economy in 1991. commercial banks. Morgan Stanley. SBI was the first Indian commercial bank and ICICI the first financial institution to take up the activities in 1972 and 1973 respectively. all India financial institutions. 1994.

it said. As a result of proliferation. The use of debit cards at POS terminals at different merchant establishments has been steadily increasing. this facility will be available for all debit cards issued in India. Morgan Stanley makes i-banking comeback The joint venture between JM Financial and Morgan Stanley was inked in 1997 and formalized in 1999. customers can now also withdraw cash up to Rs1000 from terminals at different merchant establishments. are operating in India under Merchant authorization of SEBI." RBI said in a statement issued here. To start with. it has been decided to permit cash withdrawals at POS (point of sale) terminals. Indian Bankers are faced with severe competition not only among themselves but also with the well developed global players. the Reserve Bank. This facility is available only against debit cards issued in India. up to Rs1000 per day. The JV had investment banking operations 50 . At present cash withdrawal facility using plastic cards is available only at Automatic Teller country at This Machines (ATMs) with the number of ATMs in the 44.70.Merchant Banking in India Goldman Sachs. As a further step towards enhancing the customer convenience in using the plastic money. There are 4.237 POS terminals in the country. may be made available at any merchant establishment facility designated by the bank and would be available whether the card holder makes a purchase or not. CURRENT AFFAIRS RBI allows cash withdrawal from merchant banker terminals Besides ATMs.857. Jardie Fleming Kleinwort Benson etc.

" said PNB Chairman and Managing Director K C Chakrabarty. JM Financial acquired the investment banking company together with its subsidiaries. he had said. The Indian partner sold its 49% holding in JM Morgan Stanley Securities (JMSPL). which were engaged in fixed income. ICICI Bank to oversee mergers and acquisitions 51 . the institutional equity broking company to Morgan Stanley for $ 445 million. advisory and distribution businesses of $ 20 million. thrust on recovery. wealth management. wealth management and advisory and securities distribution operations. Bulge bracket investment banking major. after parting ways with JM Financial — its former Indian partner. focus on customers and financial inclusion. aims to provide investment consultancy and three PNB Investment Services merchant banking services and would be operational in the next months. PNB aims profit of 7. Currently. who is charge of Deputy Governor of RBI. The growth driver would be better asset liability management.500 crore by 2013. the bank plans to open new line of businesses in the current fiscal including merchant banking subsidiary.500crore by 2013 The country's second largest public sector lender Punjab National to double its profit to Rs7. Besides. equity broking. these operations are run by a division of the bank. Post the split.Merchant Banking in India other than equity broking. "The bank has set a target to expand total business to Rs10crore and earn net profit of Rs7. Morgan Stanley has re-entered investment banking business on its own. research.500 crore in the next Bank aims four years.

both the bank and its subsidiary have been vying for deals. ―Since a predominant number of people. also look for acquisition finance. The agreement goes on to define an M&A deal as one which involves change in management control. who wish to be advised on M&A.Merchant Banking in India ICICI bank and its merchant banking arm. have entered into an agreement. Birla Capital and Financial Services gets SEBI merchant banking license Birla Capital & Financial Services Ltd has been granted a merchant-banking license by the Securities and Exchange Board of India.‖ ICICI Bank had initially entered the investment banking space in 2006. it was decided that the business should be housed in the bank. ―Now. The license will enable the company to offer a wide range of on-shore investment banking advisory and underwriting services in the Indian market. will initially concentrate on regulated services like initial public offerings. The new deal has taken into effect between both the entities from April 1. whereby all M&A deals will be done out of ICICI Bank. where the transfer of controlling interest takes place. the deal will be done by ICICI Bank. which is a part of the Yash Birla conglomerate.‖ I-Sec MD Madhabi Puri Buch told ET. if a corporate is seeking a sell mandate or a buy mandate. The company. 52 . takeover. Over the past couple of years. This arrangement replaces the earlier practice of both I-Sec and ICICI Bank working together on M&A deals. ICICI Securities (I-Sec).

Nomura launches its investing banking operations in India 53 .24 per cent in 2007.44 per cent of the issue size had a great bearing on this trend. affects merchant bankers’ wallet The recent slowdown in the primary market has impacted not only investors but merchantbankers as well.6 crore. M&A Advisory and other corporate advisory. amounting to 0. textiles & chemicals and power & electrical. indicating a drop of 57.21 per cent so far this year from 2. delisting and valuations. Birla Capital & Financial Services Ltd.563 crore during this year with the merchant banking fee of Rs 50. the merchant-banking arm of brokerage firm SMC Global Securities. Reliance Power IPO of Rs 11. "There is a clear drop in the merchant banking fees to Rs 216crore in comparison to Rs.9 per cent on annualized basis. education & IT. as there has been a significant decline of nearly 60 per cent in their percentage fees so far this year.Merchant Banking in India buybacks. the report added. It also offers non-regulated services like PE Syndication.000-crore Yash Birla Group that has diversified interest in sectors like auto & engineering. is part of the 3. Merchant bankers are those who advise the issuer about the public offer and manage the issue. 771crore for the calendar year 2007. Primary market slowdown. The average percentage fees has declined to 1." Nexgen Capitals.

a global investment bank.Merchant Banking in India Nomura Financial Advisory and Securities (India) Private limited ('Nomura India'). securities underwriting and advisory services. Nomura. and teams. By integrating the former Lehman Brothers India franchise and obtaining its merchant banking licence and stock exchange memberships. equity research. 54 . including the equities sales and trading. has launched its equity sales and trading and investment banking operations in India. investment banking fixed income liquid markets sales and trading. ('Nomura'). Nomura India said in a statement it has significantly expanded its capabilities in India through a wide range of onshore financial solutions spanning securities brokerage . a wholly-owned subsidiary of Nomura Holdings. acquired the majority of Lehman Brothers' employees in India. In October 2008. Inc.

AMBI is dormant at present. ARTICLES:- AMBI-SEBI talks on SRO ENS ECONOMIC BUREAU MUMBAI. Training and awareness programs are also expected from AMBI. Because of lack of support from the members and non-initiative from SEBI/government.Merchant Banking in India Association of merchant bankers in India (AMBI): Association of merchant bankers in India is a professional non-profit company setup to represent the industry. It is expected to set code of ethics and facilitate dialogue between the industry and regulatory bodies. May 8: The Association of Merchant Bankers of India (AMBI) is proposing to have an exhaustive dialogue with the Securities and 55 .

This was also demanded without consulting/informing AMBI. Then there was the issue of asking all merchant bankers to furnish details of employees to SEBI. The association has already made its disappointment clear to SEBI and the proposed dialogue is reportedly being undertaken to clear all misunderstandings. A committee has subsequently been set up by AMBI to go into the matter. 56 . This follows a feeling among AMBI members that it is being sidestepped when decisions relating to merchant bankers are being taken. AMBI was given SRO status in 1995. but it has not really been officiating as one.Merchant Banking in India Exchange Board of India (SEBI) on its functioning as a self-regulatory organization (SRO). AMBI feels that the member should have been given a fair hearing and also feels that AMBI as the SRO should have been informed about the decision. Recently the association was really piqued when SEBI asked one of its members to stop taking up further assignments without so much as giving it any notice.

State owned Corporations. offering specialized services to Statutory bodies and Banks. Its SEBI registered Category I Merchant Banker / Underwriter to carry on Issue Management (Public / and Rights / Private Placement Services Issues). etc. Consultancy Corporate Advisory They also hold SEBI registration Certificate to act as "Bankers to an Issue" with network of exclusive Capital 57 Market Service Branches to handle . Local sector. corporate PSUs. Underwriting.Merchant Banking in India EXAMPLE:- MERCHANT BANKING SERVICES INTRODUCTION Canara Bank is also one of the leading Merchant Bankers in India.

1crore to Rs. Their uniqueness is extending services under single window concept covering the following areas: 1. Commercial Banking 3.1500 crores.Escrow Bankers 5. Underwriting 6. Merchant Banking 2. Bankers to Issue . Loan Syndication As leading Merchant Bankers in India. statutory Bodies etc. Investments 4. and have an edge in handling Private Placement issues – both retail & HNIs. 58 . Merchant Banking in India They undertake "project appraisals" with resource raising plans from Capital Market/ Debt and Markets Potential and facilitate tie-ups with Banks / Financial Institutions Investors. they have associated with issues ranging from Rs. banks.―Capital Market" related assignments. involving various types of industries.

9. 59 . 12. Project Appraisal Capital structuring 2. ISSUE MANAGEMENT SERVICES:1. 4. 13. 8. 6.Merchant Banking in India SPECTRUM OF SERVICES:1. 3. 11. 10. 5. Equity Issue (Public/Rights) Management Debt Issue Management Private Placements Project Appraisals Monitoring Agency Assignments IPO Funding Security Trustee Services Agriculture Consultancy Services Corporate Advisory Services Mergers and Acquisitions Buy Back Assignments Share Valuations Syndication 2. 7.

5.Merchant Banking in India 3. Preparation of offer document Tie Ups (placement) Formalities with SEBI / Stock Exchange / ROC etc. 11.. 7. 9. 6. 2. If not already profitable. visibility to profitability within a 12-month period. 60 . Having weathered the start-up process and established a core business model that is sustainable. 3. 12. 8. 10. Underwriting Promotion /Marketing of Issues Collecting Banker / Banker to an issue Post Issue Management Refund Bankers Handling of Dividend Warrant/Interest Warrant Payments Debenture Trusteeship 4. Proven management team. Investment Criteria:A wide range of later stage opportunities are considered. Targeted companies include the following characteristics: 1.

Technology or business that is scalable with global applications.Merchant Banking in India 4. Significant barriers to entry. They provide the resources. Having established business partnerships that give it a major position in a market space. STATE BANK OF INDIA SBI’s Merchant Banking Group is strongly positioned to offer perfect financial solutions to your business. and 6. They specialize in the arrangement of various forms of Foreign Currency Credits for Corporate. convenience and services to meet your needs by arranging Foreign Currency credits through: 61 . They look for opportunities for synergistic consolidation and/or companies that are on the verge of extraordinary growth. 5.

They are internationally the most Preferred Bank by Export Credit Agencies for Guarantees in case of the Indian Clients or Projects.• Commercial loans • Syndicated loans Merchant Banking in India • Lines of Credit from Foreign Banks and Financial Institutions • FCNR loans • Loans from Export Credit Agencies • Financing of Imports. 62 . 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. Their Primary focus is On Indian Clients. SBI being an Indian entity has no India exposure ceiling. SBI‘s seasoned Team of professionals provides you with Insightful credit Information and helps you Maximize the Value from the transaction.

The Bank has recently been ranked 21 st among top 500 companies and 9 th among top 50 brands by the Economic Times.Merchant Banking in India PUNJAB NATIONAL BANK India’s one of the Leading Nationalized Bank established in 1895. Any Where Banking" through the introduction of Centralized Banking Solution (CBS) and over 2511 offices have already been brought under its ambit. All the Branches of the Bank have been computerized.5crore customers through 4520 branches and 439 extension counters is the largest amongst Nationalized Banks. The Bank has a concept of "Any Time. 63 . serving over 3.

The Bank has an exclusive and specialized Capital Market Service Branch at New Delhi for providing Merchant Banking Services to the Corporate 64 . Their Software for handling the Refund Banker is one of the best systems in the industry.The Bank is registered with SEBI as Category – I Merchant Banker for Merchant Banking in India providing all the major Merchant Banking services. online status of paid instruments. Its unique features provides online payment of the instrument by our 2470 branches in 733 centers. 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 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. 100% reconciliation at any point of time etc.

Merchant Banking in India CONCLUSION The merchant banker plays a vital role in channelising the financial surplus of the society into productive investment avenues. Merchant Banking can be considered as essential financial body in Indian financial system. To sustain the growth of the market and crystallize 65 . one must decide. 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. the services for which he is being approached. Hence before selecting a merchant banker. Market development is predicted on a sound. fair and transparent regulatory framework. Hence. Selecting the right intermediary who has the necessary skills to meet the requirements of the client will ensure success.

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. 66 .Merchant Banking in India the growing awareness and interest into a committed.