Merchant Banking and

Issue Management
Quiz on Merchant Banking and
Financial Services
 The ------- has been a smooth transition from a highly regulated regime to a
market economy (Financial Sector)
 The financial reforms in the banking sector were a unique experiment undertaken
by the ------------- (RBI)
 The financial services comprise three sectors ---------------,---------- and
------- (Banking, Insurance and Real Estate)
 Basel I came into effect in December ---------- while Basel II was released in
June ------ (1992, 2004)
 -------can be defined as a managing both assets and liabilities simultaneously
for the purpose of mitigating interest rate risk (Asset Liability Management )
 ---------is the risk that some loans and investments may be repaid (Credit risk)
 ----- refers to the ability of a bank to continue its operations when it faces huge
amount of losses (Capital risk)
 The immediate impact of changes in interest rate is on the ------ (Net Interest
Income)
 -------- channelize and mobilize savings from the public into productive
investment avenues.(Merchant Bankers)
 True or False
 The broad objectives of the financial reforms
were to enhance efficiency and productivity in a
gradual and phased manner.
 A good corporate governance system is not
required for a sound financial system
 Basel II is all about 2 pillars of risk management
 An ALM process helps the banks only to remain
financially viable as economic conditions
change.
 Merchant bankers with their vast knowledge
assist the companies in raising funds from the
market by acting as intermediaries.
Merchant Bankers in India
 Public sector Merchant Bankers:
 · SBI CAPITAL MARKETS LTD
 · PUNJAB NATIONAL BANK
 · BANK OF MAHARASHTRA
 · IFCI FINANCIAL SERVICES LTD
 · KARUR VYSYA BANK LTD,
 · STATE BANK OF BIKANER AND JAIPUR
 Private Sector Merchant Bankers:
 · ICICI SECURITIES LTD
 · AXIS BANK LTD.(FORMERLY UTI BANK LTD.)
 · BAJAJ CAPITAL LTD
 · TATA CAPITAL MARKETS LTD
 · ICICI BANK LTD
 · RELIANCE SECURITIES LIMITED
 · KOTAK MAHINDRA CAPITAL COMPANY LTD
 · YES BANK LTD.
 Concept of Merchant banking
 It is a key intermediary in the financial market
 He facilitates the issuers of securities (companies)
to raise capital from the financial market by
selling the securities.
 SEBI definition
“A merchant banker is one who engage in the
business of issue management either by making
arrangements regarding selling, buying or
subscribing as manager, consultant, advisor or
rendering corporate advisory or rendering
corporate advisory services in relation to such
issue management.”
 Merchant banking vs commercial
banking
 Commercial banking has to do with accepting
deposits and lending in the forms of loans
and advances.
 Merchant banking does not involve in these

activities.
 Merchant bankers are neither merchants nor

bankers
 They neither do trading nor banking, rather

they act as a financial intermediaries.

 Merchant banking Functions
a) Service based functions:
1. Project counseling

2. Credit syndication

3. Issue management

4. Corporate counseling

5. Portfolio management

6. Stock broking and dealership

7. Joint venture abroad

8. Debenture trusteeship

b) Fund based functions

9. Bill discounting

10. Venture capital

11. Bought out deals

12. Lease financing and hire purchase

13. Factoring

14. Underwriting
 Issue Management
S.No Pre issue During the issue Post Issue
1 Prepare RHP Investor submit bid Price is finalized
forms
2 Plan ,visit and BRLM monitors the issue Updating the
discussion with prospectus
management
3 Examination of Syndicate members Allocation of shares
documents furnish the details to to QIB
BRLM
4 Appointment of Collecting the cheques Submission of the
syndicate basis of selection
members
5 Appointment of Collecting banks send Depositories to
registrars the application details to credit the account
registrar with shares
Obligations of Merchant bankers
 High standards
 Due diligence
 Dealing with competing merchant bankers
 No tall claims
 Cost effective services
 Confidentiality
 Disclosure of information
 Avoid market manipulative practices
 Restraint on advisory role
Responsibilities of Merchant bankers
 Responsibilities should be clearly defined
 Underwriting minimum is 5%
 Due diligence certificate
 Documents to SEBI
 Disclosures to SEBI
 Compliance officer
 Acquisition of shares prohibited
 Responsibility