Post on 08-Apr-2018
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WHAT IS MERCHANTWHAT IS MERCHANTBANKING?BANKING?
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Meaning
Merchant Banking may be defined as aninstitution which covers a wide range of
activities such as Underwriting of shares,
Portfolio Management, Project Counseling,
Insurance, Issue Management etc
Dictionary meaning
An organization that underwrites corporate
securities and advises clients on issues likecorporate mergers, etc. involves in the ownership
of commercial ventures.
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ORIGIN IN INDIA
Origin of merchant banking in India National
Grindlays bank in India initiated merchantbanking services in1969
The Citibank followed it in 1970.
The state bank of India was the first Indiancommercial bank to set up a separate merchant
banking division in 1973.
ICICI followed it in 1974. both these Indian
merchant bankers emerged as leader inmerchant banking having done significant
business during the period 1974-85 in
comparison to foreign banks.
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Merchant banking began practice during the Middle Ages
in Italy and was introduced by grain merchants, making them
the original banks.
In todays world, merchant banking involves manyactivities to include, portfolio management, mergers and
acquisitions counseling, and acceptance credit, etc. Todays
merchant banks do not have the same characteristics of their
predecessors.
Modern merchant banks offer a wide range of activities,including portfolio management, credit-syndication,
acceptance credit, counsel on mergers and acquisitions,
insurance, etc
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Loan syndication.(CREDIT)
Portfolio management.
Project Counseling.
Project finance
Issue management (Pre &Post Issue)
Mergers Amalgamations and takeovers.
Off Shore Finance
Arrange for Rehabilitation of sick projects.
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It regulates the rising of fund in primary market.
It assures the issuer a market for rising resourceat low cost, effectively and easily.
Easily it ensures a high degree of protection tothe interest of the investors.
It provides for the merchant banker a dynamicand competitive market with high standard of
professional competence , integrity and solvency. It ensures fair efficient and flexible primary
market to all involved in the process of primaryissue.
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Applicant should be a body corporate
Applicant should not carry on any business other than those
connected with security markets.
Should have the necessary infrastructure
Should have at least 2 employees with experience in merchant
banking
Any associate or subsidiary company should not have been a
registered merchant banker.
The applicant should not be involved in any securities scam
or proved guilty for any offence.
Should have a min net worth of 5crores.
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Commercial banks (SBI, Canara Bank.BOB)
All india financial institutions
Private consultancy firms
Technical consultancy organizations.
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GUIDELINESGUIDELINES FORFOR MERCHANTMERCHANT BANKERSBANKERS
SEBIs authorization is a must to act as merchant bankers.
Authorization criteria includeProfessional qualification in Finance, Law orBusiness Management
Infrastructure like office space, equipment and man power
Capital adequacy
Past track of record, experience, general reputation and fairness in
all transactions.
Every merchant banker should maintain copies of balance sheet,
Profit and loss Account, statement of financial position
Half-yearly unaudited result should be submitted to SEBI
Merchant bankers are prohibited from buying securities based on the
unpublished price sensitive information of their clients
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SEBI has been vested with the power to suspend or cancel the
authorization in case of violation of the guidelines
Every merchant banker shall appoint a Compliance Officer tomonitor compliance of the Act
SEBI has the right to send inspecting authority to inspect books of
accounts, records etc of merchant bankers
Inspections will be conducted by SEBI to ensure that provisions of the
regulations are properly complied
An initial authorization fee, an annual fee and renewal fee may be
collected by SEBI
A lead manager holding a certificate under category I shall accept a
minimum underwriting obligation of 5% of size of issue or Rs.25 lakhs
whichever is less
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BANKS PROVIDING MERCHANT BANKINGBANKS PROVIDING MERCHANT BANKINGSERVICES IN INDIASERVICES IN INDIA
Commercial banks
Foreign banks like National Grindlays Bank,Citibank, HSBC bank etc..
Development banks like ICICI, IFCI, IDBI etc..
SFC, SIDCs
Private firms like JM Financial and Investmentservice , DSP Financial Consultants, CeatFinancial Services, Kotak Mahindra, VMCProject Technologies, Morgan Stanley, JardieFleming, Kleinwort Benson etc
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ListList Of Recently Updated Merchant Banking in IndiOf Recently Updated Merchant Banking in India
Dsp Merrill Lynch Ltd.
Merchant Banking, Stock
Brokin...
Prime Securities Ltd
Debit and Equity
Organisation....
Tata Finance Merchant
Bankers LtdFinance Solutions
Sicom Ltd
Merchant Banking
Division Asso...
Exta Exprots
Merchant Exporters
Expo Gas Containers P
Ltd
Merchant Exporters
Everex Infotech P LtdMerchant Exporter
Esoffina Svcs Ltd
Merchants Bankingdivn
Associat...
Erudite Capital Creation
Ltd
Merchants Banking
Emjay Enterprise
Merchant Exporters
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PROBLEMS IN MERCHANT BANKINGPROBLEMS IN MERCHANT BANKING
SEBI stipulates high capital adequacy norms for
authorization which prevents young specialized professionals
into merchant banking business
Non co-operation of the issuing companies in timely
allotment of securities and refund of application of money
etc.. is another problem
Yet merchant banking is vast but should develop adequate
expertise to provide a full range of merchant bankingservices
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REGISTRATION CHARGESREGISTRATION CHARGES
Category 1- sum of Rs. 2.5 lakh to be paid annually for
the first two year commencing from the date of initial
registration and thereafter a sum of Rs. 1 lakh to keep the
registration in force.
Category 2- A sum of Rs. 1.5 lakh to be paid annually
thereafter a sum of Rs. 50000 to keep the registration in
force.
Category 3- A sum of Rs. 1 lakh to be paid annually for 2
years there after a sum of 25000 to keep the registration
in force.
Category 4- A sum of Rs. 5000 to be paid annually for 2
years & Rs. 1000 to keep the registration in force
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FORMATION OF THE COMPANY
LOAN SYNDICATION
MAKINGOF PUBLIC ISSUE AND ISSUEMANAGEMENT
CAPITAL STRUCTURE ANDRESTRUCTURING
PREPARATIONO
F PRO
JECT REPO
RT ANDITS APPRAISAL.
MERGERS AND ACQUISITIONS
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TECHNICALASSISTANCE
MARKET SURVEY AND RESEARCH RAISING FOREIGN CURRENCYLOANS
TAX PLANNING
FINANCIALREENGINEEERING
PRODUCT MIX AND QUALITY CONTROL
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Merchant banker should have a knowledge about his
field.
Maintain high standard of profession. Ability to analyze different aspects.
Use of innovative approaches in developing capital
market instruments.
Ability to build up client relationship.
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In channelizing the financial surpluses.
To coordinate the activities of various intermediaries.
To ensure the compliance with rules and regulationsgoverning the securities market.
Facilitate people interested in stock market.
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SL
NO
COMMERCIAL BANKING MERCHANT BANKING
1. It is a banking intermediary. It is a non banking financial
intermediary.
2. Main function is accepting thedeposits and lending of funds.
Provides various functionsuch as underwriting, portfoliomanagement, mergers take-
over's etc.
3. Situated everywhere in all thestates.
They have very few branchesin selected cities.
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