DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : MAJOR K.SIVA KUMAR
Designation : HEAD OF SECTION
Branch : Diploma in Commercial and Computer
Practice
Institute : Government Polytechnic, Srikakulam
Year/Semester : V Semester
Subject : Banking
Subject code : CCP 504 (B)
Topic : Lead Banks and Merchant Banking
Duration : 50 min
Sub Topic : Services of Merchant Bankers
Teaching Aids : PPT and Animations

CCP504(B).83 1
Services Of Merchant Bankers
Objectives:-

On Completion of this period, you would be able to:

 Understand the function of Issue Management by

Merchant Bankers

 Understand the Debenture Trusteeship by Merchant

Bankers

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Recap

In the previous class, you have learnt the following

services performed by merchant bankers in detail.
They are:
(a) Project counseling and feasibility studies

(b) Loan syndication

(c) Corporate counseling

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Known To Unknown
Questions:-

1. What is issue management?

5. Who can make public Issues?

7. What is the purpose of making public issues?

9. What they offer for public issues?

11. Have you come across the world public issue in

your two years study?

CCP504(B).83 4
Functions Of Merchant Bankers

Issue Management:-

The importance of merchant bankers as sponsorers

of capital issues is reflected in their major services/
functions.

The major services are:

 Determining the capital structure

 Drafting of Prospectus and application forms

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 Issue Management:-

 Compliance with procedural formalities

 Appointment of registrars to deal with share
application and transfers
 Listing of securities
 Arrangement of underwriting/sub underwriting
 Placing of issues

CCP504(B).83 6
 Issue Management:-

 Selection of brokers, bankers to the issue, Publicity

and advertising agents, Printers and so on.

 In view of the overwhelming importance of merchant

bankers in the process of Capital issues, it is now
mandatory that all public issues should be managed
by merchant banker(s) functioning as the lead
manager(s)

CCP504(B).83 7
 Issue Management:-

 In case of right issues not exceeding Rs.50 lakh, such

appointments may not be necessary.

 The merchant bankers also perform the function of

servicing of issues.

 Servicing of issues include the following:-

CCP504(B).83 8
 Issue Management:-

 They keep the register of shareholders and

debenture holders of their clients-companies.

 They act as paying agents for the dividends,

interest on debentures.

 They also arrange for safe custody of securities on

behalf of their clients.

CCP504(B).83 9
Debenture Trusteeship:-

 A Debenture Trustee is a trustee for a trust deed

needed for securing any issue of debentures by a
company.

 Only scheduled commercial banks, Public Financial

Institutions, Insurance Companies, and Companies
are entitled to act as debenture trustees.

CCP504(B).83 10
Debenture Trusteeship:-

The following are some of the duties of the

debenture trustees.

1. To protect the interest of the debenture holders.

2. Dispatch of interest warrants for interest due on

or before due dates.

3. Payment of money on the date of redemption of

debentures.

CCP504(B).83 11
Summary

Issue management includes the very important

functions such as:

(a) Determining the capital structure.

(b) Preparation of Prospectus and application.

(c) Appointment of banker, brokers, registrars to

the issue etc.

(d) Submitting Compliance report to the SEBI.

CCP504(B).83 12
Summary

 Appointment of merchant Bankers are necessary for all

the Public issues as per SEBI guide lines.
 Debenture Trusteeship is also another function
performed by merchant bankers.
 They protect the interests of the debenture holders.
 They help in dispatch of interest warrants on due dates
and payment on the date of redemption.

CCP504(B).83 13
Quiz

1. The following companies can raise their

capital through public issues.
(a) Private Limited Companies
(b) Public Limited Companies
(c) Government
(d) Local bodies

CCP504(B).83 14
Quiz

2. Appointment of merchant bankers is

mandatory as per

(a) SEBI Guidelines

(b) RBI Guidelines
(c) State Government
(d) Municipal authorities

CCP504(B).83 15
Quiz

3. In case of right issues not exceeding 50lakh,

appointment of merchant Bankers is.

(a) Necessary
(b) Not Known
(c) Not necessary
(d) All the above

CCP504(B).83 16
Quiz

4. Issue Management includes which of the

following.

(a) Preparation of Prospectus and application

(b) Policy guideline
(c) Routine matters
(d) Journals

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Quiz
5. Which of following institutions can act as
debenture trustees.

(a) Commercial banks

(b) Public financial institutions
(c) Insurance companies
(d) All the above

CCP504(B).83 18
Quiz

6. The main function of debenture trustees Is

(a) To sell shares

(b) To sell gold
(c) To protect the interests of debenture
holders
(d) All the above

CCP504(B).83 19
Frequently Asked Questions

1. What are the main services performed by

merchant bankers in issue management?

2. What is debenture trusteeship and what are

main duties of debenture trustee?

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