MERCHANT BANKING AND FINANCIAL SERVICES

Definition: • 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 the securities as Manager, consultant, adviser or rendering corporate advisory services in relation to such issue Management”.

Merchant Banking services 1. Capital Restructuring 8. Underwriting 7. Loan syndication 4. Corporate counseling 2. Issue management 5. Pre investment studies 9. Portfolio Management 6. NRI investments. Project Counseling 3. Merger and acquisition 10. .

SEBI Regulations 1. . Procedure for action in case of Default 4. Registration of merchant Bankers 2. Procedure for Inspection 3. Code of Conduct for Merchant Bankers.

Consideration of application • • • Body of corporate Primary dealer Necessary infrastructure • • • Employment of minimum two persons Capital Adequacy Requirements Litigation connected . Furnishing of information d. Application for Grant of Certificate b.SEBI REGULATIONS 1. Conformance to Requirements c. Registration of merchant Bankers a.

000 NIL .000 Rs 50. Capital Adequacy Requirements Category Category I Category II Category III Category IV f.00.00.00.SEBI REGULATIONS • • • • Convicted Professional qualification A fit and proper person In the interest of investor e. 00. 20.000 Rs. Renewal of Certificate Minimum Amount Rs 5.

Rs 100 Crore Numbers of Lead Managers Two Three Rs.200 Crore .100 Crore . 50 Crore Rs.Rs 400 Crore > Rs 400 Crores Five Five or more  Acquisition of share Prohibited Complete information to the board .50 Crore .SEBI REGULATIONS General Obligations  Sole Function  Maintenance of Books  Submission of Half Yearly Results  Preservation of Books of Accounts.Rs 200 Crore Four Rs. records  Reports on steps taken on auditors report  Appointment of Lead Merchant Bankers  Restriction on Appointment of Lead .Managers Size of Issue < Rs.

Notice Before inspection c. Board’s Right to inspect b.SEBI REGULATIONS II. PROCEDURE FOR INSPECTION a. Obligation of merchant bankers on inspection d. Submission of Report to the Board e. Action on inspection or investigation Report f. Appointment of Auditor g. Communication of Findings .

Fails to pay the fee viii. Indulges in manipulating v. Guilty of Fraud iv. Violates the conditions of Registration ix. Financial position Deteriorates iii. Violates the Provisions ii. Fails to resolve the complaints iv. Fails to maintain Capital adequacy vii. Fail to carry out his obligations Cancellation of Registration i. Indulges in deliberate Manipulation ii. Guilty of misconduct vi. Fails to furnish any information iii. Repeated defaults .III Procedure For Action in case of Default Liability for Action in case of Default Suspension of Registration i.

IV. Code of Conduct i. Protect the interest of investor ii. High standard of integrity Prompt and ethical Adequate discloser True adequare information Copy of the prospectus No discrimination Do not Mis represent the srevice Resolve any conflict Shall not indulge in unfair competition Shall not make untrue statements Good corporate polices .

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Despatch of issue material 3. Submission of post issue monitoring reports iv. Association of resource personnel ii. Compliance obligation i. Underwriting 4. Issue of No Objection Certificate v. Redressal of investor grievances iii.SEBI GUIDELINES 1. Registration of merchant bankers vi.Imposition of penalty points . Reporting Requirements vii. Submission of offer document 2.

4. 7.SEBI GUIDELINES. Incentive 11. 9.Guidelines on Advertisement 1. Reservation 12. 3. 6. Factual and truthful Clear and Concise Promise of promise Mode of advertising Financial Data Risk factors Issue Date Subscription Issue closure 10. Availability of copies . 8. Undertaking 13. 5. 2.

Issue closure. 3. Launching the issue 12. Filling with RoC 11. Promoters contribution 13. 8. . 2. 4. 7.Pre issue Activities involved on public issue management 1. 5. Signing of MOU Obtaining appraisal note Optimum capital structure Convening meeting Appointment of financial intermediary Preparing Documents Due diligence Submission of offer document Finalization of collection centers 10. 9. 6.

Finalization of Basis of Allotment Despatch of share Certificates Advertisement. despatch of security certificates/ refund orders are completed and securities are listed . 4. 5. 2. Processing of applications c) other matters till the basis of allotment is finalized . Audited financial statements in the offer document The merchant banker should ensure that i) The information contained and ii) the particulars Audited financial statements in the offer document are not more than 6 months old from the issue opening date. 3. to monitor a) Flow of applications from the collecting bank branches b). Coordination with intermediaries Maintain close coordinatation with Registrar to the issue and depute its officers to the offices of the various intermediaries at regular intervals after the closure of the issue.Post issue Activities 1. .

. in case of absence of definite information about subscription figures.Post issue Activities 5. for the required number of days to avoid any dispute at a later date by the underwriters in respect of their liability. Other Responsibilities  The despatch of refund orders / allotment letters /share certificates is by registered post /certificate of posting.  Payment of interest to the applicants for delayed despatch of all allotment letters / refund orders and as so on is made as per disclosure in the offer document  Issue is kept open .

Against Society nomenclature c. Restrictive b. 4. Dis advantages Advantages a. Relevant Guide lines issued by SEBI 1. 3. Advantage to share holder . 6. Record date 2. Easy b. 7. 5. Economy a. Issue period No complaints certificate Reservation for employees Utilization of funds. Listed companies Underwriting Letter of offer and application form. 8.Right Issue Issues of additional shares to existing shareholders at a price which is generally below the market price at the time of issue.

6. Maintaining offer records Intimation about aggregate orders Bid analysis 7. 8.runners Drafting Prospectus Circulating drafting Prospectus 4. 5. Book –building process involves the following steps 1. 2.building “ method.Book Building A method of marketing the shares of a company whereby the quantum and price of the securities to be issued will be decide on the basis of the ‘bids’ received from the prospective shareholders by the lead merchant bankers is known as “Book. Collection of completed applications . 3. Appointment of book. 9. Mandatory Underwriting Filling with ROC Bank accounts 10.

Reduction in the duration between allotment and listing. 3. Quick listing in stock exchange possible. 4. Payment schedule and listing 13. No price Manipulation. Under.subscription Advantages 1. Allotment of securities 12. . 2. Reliable allotment Procedure.Book Building 11.

 Intermediaries  Issues to Limited numbers of subscribers  Exempt from public discloser and regulations  No need of underwriters  No prospectus  Instrument covered  Issuer  Investors  Negotiation  Popular instrument  Market size. .Private Placement A method of marketing of securities where by the issuer makes the offer of sale to individuals and institutions privately without the issue of prospectus is known as private placement.

Private Placement Advantages  Cost Effective  Time effective  Structure Effectiveness  Access Effective Disadvantages  Concentration of securities in a few hands  Depriving the common investors of an opportunity to subscirbe to the issue. Issues of Securities on private placement basis  Qualified Institutional Placement (QIP)  Preferential Issues .

Private Placement Qualified Institutional Placement (QIP)        Issuing company Pricing Shareholder Resolution Placement Document Number of Allottees Obligation of merchant Bankers Issuer Certificate .

is known as ‘Depository Receipt’ Types of Depository Receipts American Depository Receipts ( ADR) Global Depository Receipts ( GDR) European Depository Receipts (EDR) International Depository Receipts (INDR) Indian Depository Receipts (IDR) .Deposit Receipts A receipt issued by a ‘Depository’ of a country against the deposit of shares issued by a domestic company which is eligible for issue to foreign investors and eligible for trading on an oversea stock exchange .

American Deposit Receipts It is a stock that trades in the United States but represents a specified number of shares in a foreign corporations. Working Mechanism Benefits   To the company For the investor .

4. 7. 8. 2. Holding road shows . A GDR issue by an Indian firm takes the following steps 1. Convening Board Meeting Appointment of syndicate member Constitution of task force Oversee listing Indian listing Preparing offer circular Offer analysis Deciding on timing 9. 5.Global Depository Receipt It is an instrument in the form of a depositary receipt or a certificate issued by the overseas depository bank and issued outside the country to non residents against ordinary shares of the issuing company. 6. 3.

GDR allotment 13. Report to government . Discovering issue price 10. Issue closer 12.Investor information 14.Global Depository Receipt 9.

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