Merchant Banking (3)

8/6/2019 Merchant Banking (3)

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INDEX

Sr. No. Contents Page No.

1. Executive Summary 1

2. Introduction to merchant banking 33. Origin of merchant banking 34. Objective of doing this project 55. Need & importance of merchant banking in India 76. Objectives of merchant banker 87. Function of merchant bankers 98. Types of issues 109. What is IPO (initial public offering)? 13

10. Role of merchant banker in issue management 15

11. Role of merchant banker as a lead manager 1712. Regulatory framework 2213. Advantages of listing 4414. Problems of merchant bankers 4515. Scope of merchant banking services 4616. Challenges ahead 5017. Some past issues 5218. Growth of capital market 5319. Some corporate examples: 5420. Questionnaire 5621. Limitations of the project 5922. Conclusion 6023. Annexure 62

EXECUTIVE SUMMARY

In this competitive world, where banks and financial institutions are

providing traditional services, now is a scenario where they need to retain

customers by providing them some extra special services besides traditional

services.


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With the opening up of the economy, a number of private sector banks

have joined the fray & are offering a plethora of products & services.

Banking sector has made a tremendous growth in last few years. The main

achievement of bank is participation in capital market through merchant banking activities. New issues coming day by day it is necessary for the

regulator to create code & conduct for primary issues, secondary market,

thus through merchant bankers are being allowed to enter in to capital

market through

Project management.

Issue management

Portfolio management service

Counseling

Bought out deals

Venture financing

The main objective of this study is to learn new issue market activities

procedures & to know importance of merchant bankers as sponsor of

capital issues also to learn what are the duties & responsibilities of the

merchant bankers as lead managers, underwriter, bankers to an issue,

brokers to an issue, registrars to an issue and share transfer agents, debenture

trustee, portfolio managers etc.


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In todays world of competition in the banking service & products it is

essential to generate more & more income from other fund based /non fund

base activities. Also looking at todays scenario in stock market there are

many public issues which have been successfully listed with the help of merchant bankers. Today it is difficult to go for public issue without the help

of merchant banker.

But there is some legal requirements, rules & regulations to be

followed by these bankers otherwise there can be chances of default. SEBI

has made code & conduct to be followed by all the financial intermediaries

including merchant bankers.

INTRODUCTION TO MERCHANT BANKING

The Indian financial system is a vast universe. This universe is

regulated and supervised by two Government agencies under Ministry of

Finance viz., RBI, SEBI. The economic reforms, being an integrated

process, included deregulation of industry, liberalization on foreign

investment, regime, restructuring and liberalization of trade, exchange rate


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and tax policies, partial disinvestments of Government holdings in public

sector companies and financial sector reforms. Securities market in India has

frown exponential as measured in terms of amount raised from market,

number of stock exchanges and other intermediaries, the number of listedstocks, market capitalization, trading volumes and price indices.

Origin:-

The term Merchant Banking has its origin in the trading methods of

countries in the late eighteenth and early nineteenth century when trade-

taking place was financed by bill of exchange drawn by merchanting houses.

As international trade grew and other lesser-known names wanted to import

goods from abroad, the established merchants lent their names to the

newcomers by agreeing to accept bills of exchange on their behalf. The

acceptance houses would charge a commission for this service.

The second historical of Merchant Banks was the raising of capital for

foreign Government through the issue of stocks and bonds. Therefore,

Merchant Banks can be accepting houses or issuing houses or both.

The term merchant banking is used differently in different countries

and so there is no precise definition for it. In London, merchant banker refers

to those who are members of British Merchant Banking and SecuritiesHouse Association who carry on consultation, leasing, portfolio services,

assets management, euro credit loan syndication etc. In America, merchant

banking is concerned with mobilizing savings of people and directing the

funds to business enterprise.


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Dictionary meaning of merchant bank refers to an organization that

underwrites corporate securities and advises such clients on issues like

corporate mergers, etc. involved in the ownership of commercial ventures.This organization may be a bank, corporate body, firm or proprietary

concern.

Merchant banking although a nonbanking financial activity

resembles banking function. The functions of merchant banking which

originated ,& grew in Europe .the word Merchant banking originated

among the Dutch and was later on developed and professionalized in

Britain.

The need for specialized merchant banking services was felt in India

with the rapid growth in the number and size of the issue made in the

primary market. The merchant banking services were started by foreign

banks, namely the National Grindlays Bank in 1972 recommended the

setting up of merchant banking institutions by commercial banks and

financial institutions. This marked the beginning of specialized merchant

banking in India.

OBJECTIVE OF DOING THIS PROJECT

As the student of BANKING AND INSURANCE, the main aim of

this project is to know how merchant banks plays role in issues

management,

Basic objective of doing this project is to enlarge the knowledge relating to:


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How the merchant banking services originated in India?

What were the need, importance and functions of the merchant

banker?

What are the different types of issues through which money is raised

and what is the role of merchant banker in these issues?

What is the regulatory framework prescribed by Securities and

Exchange Board of India?

What are the future scope, challenges and problems faced by

merchant banker?

The main objective of doing this project is to get the knowledge regarding

how this all is practically done.

DEFINITION OF MERCHANT BANKER

According to the securities and exchange board of India (Merchant

Bankers) Rules, 1992


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A merchant banker has been defined as any person who is

engaged in the business of issue management either by making arrangements

regarding selling, buying or subscribing to securities or acting as manager,

consultant, advisor or rendering corporate advisory service in relation tosuch issue management.

A set of financial institution that are engaged in providing specialist

services, which generally include the acceptance of bills of exchange,

corporate finance, portfolio & issue management and other banking services,

are known as Merchant bankers . A merchant banker may specialize in

one activity, and take up other activities, which may be complementary or

support to the specialized activity.

NEED & IMPORTANCE OF MERCHANT BANKING IN

INDIA

1) Important reason for the growth of merchant banking has been the

developmental activity throughout the country, exerting excess


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demand on the sources of funds for ever expanding industry and trade,

thus, leaving a widening gap unabridged between the supply and

demand of investible funds.

2) All India financial institutions had experienced resource constraint to

meet the ever-increasing demand for funds from the corporate sector

enterprises.

3) With the growing demand for funds there was pressure on capital

market that enthused the commercial banks, share brokers and

financial consultancy firms to enter into the field of merchant banking

and share the growing capital market.

4) The need of merchant banking institutions is felt in the wake of huge

public savings lying still untapped

5) Merchant banks have been procuring impressive support from capital

market for the corporate sector for financing their projects. This is

evidenced from the increasing amount raised from the capital market

by the corporate enterprises year after year.

OBJECTIVES OF MERCHANT BANKER

Merchant Banker plays a vital role in the economic and financial

development of the country. As a result of economic and financial

liberalization new companies are formed and number of issues floated to

raise resources from the investor community.


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Considering the significance of the issue the Government of India

instituted SEBI in 1990 to regulate and control various market

intermediaries. SEBI issued various rules and regulations for each and everysegment of the capital market. To regulate Merchant bankers, with the twin

objective viz., investor protection and development of the capital market,

SEBI issued rules and regulations for Merchant Bankers. Subsequent

amendments also have been made to these regulations to further strengthen

this segment of the securities industry. These regulations (Merchant

Banking) specified that every company desires to float an issue to the public

should engage Merchant Banker (Registered under these regulations with

SEBI) as Lead Manager. In this context Merchant Banker gained the

importance in the Indian Securities Industry.

Having given a serious and careful thought to securities industry

reforms, SEBI has taken efforts seriously to boost the splendid endeavor of

securities market intermediaries. As a result, Merchant Bankers came into

being to look after the promotion and administration of issues. It is well

known fact that without adequate professional support of Merchant Bankers

the securities industry cannot prosper.

FUNCTION OF MERCHANT BANKERS

Among the important financial intermediaries are the merchant

bankers. The services of Merchant bankers have been identified in India

with just issue management. It is quite common to come across reference to

merchant banking and financial services as though they are distinct


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Less than or equal to one crore

rupees.

A flat charge of ten thousand rupees

(Rs.10,000/-).More than one crore rupees, but less

than or equal to five thousand crore

rupees.

0.1 per cent. of the issue size.

More than five thousand crore rupees,

but less than or equal to twenty five

thousand crore rupees.

Five crore rupees (Rs.5,00,00,000/-) plus

0.025 per cent of the portion of the issue

size in excess of five thousand crore rupees

(Rs.5000,00,00,000/-).

More than twenty five thousand crore

rupees.

A flat charge of ten crore rupees

(Rs.10,00,00,000/-).

2) Exchange issue - An exchange issue is one in which shares of one

company are exchanged for another as in case of takeover and mergers. It

does not add to funds of the company making the exchange although the

merger may result in synergy. Another form of issue that does not result in

raising new funds is the bonus issues. Bonus shares are distributed to

determine proportion to existing shareholders.

3) Right issues - Right issue is the issue of new shares in which existing

shareholders are given pre-emptive rights to subscribe to new issue. They

are issued at a premium, which is freely determined by the company making

the issue. It is when a listed company which proposes to issue fresh

securities to its existing shareholders as on a record date. The rights arenormally offered in a particular ratio to the number of securities held prior to

the issue. This route is best suited for companies who would like to raise

capital without diluting stake of its existing shareholders unless they do not

intend to subscribe to their entitlements.


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2) To finance increased working capital requirement.

3) As an exit route for existing investors.

4) For debt financing.

ADVANTAGES:

1) The IPO provides avenues for funding future needs of the

company.

2) It provides liquidity for the existing shares.

3) The reputation and visibility of the company increases.

4) Additional incentive for employees in the form of of thecompanys stocks if offered through Employees Stock Option Plans

(ESOP).

5) It commands better valuation for company.

PROCESS OF INITIAL PUBLIC OFFERINGS (IPO):

Receipt of Applications and CollectionOf A lication Mone

Issue of Prospectus

Selection of Merchant Banker


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ROLE OF MERCHANT BANKER IN ISSUE MANAGEMENT

Collection of MinimumSubscri tion

Non Collection of Minimum

Under Subscri tion

Par Subscri tion

Over Subscri tion Refund

Of Application

Money

Establish underwritersLiabilit

Rejection of someA lications

Allotment of Shares


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The public issue of securities is the core of merchant banking function. A

one time merchant banking was constructed as the sole function.

Merchant bankers were identified as issue houses

WHAT IS ISSUE MANAGEMENT?

The new issue market/activity was regulated by the controller of capital

issues (CCIs) under the provisions of the capital issues (Control) Act, 1947

and the exemption orders and rules made under it. And under act, the

protection of that interest of the investors in securities market and promotion

of the development and regulation of the market became the responsibility of the SEBI. To tone up the operations of the new issues in the country; it has

put in place rigorous measures. These cover both the major intermediaries as

well as the activities. The project focus on the lead managers, underwriters,

bankers to an issue, registrars and share transfer agents, debentures trustees,

and portfolio managers.

ISSUES MANAGEMENT

They usually render the following

services:

Pre issues management Post issues management

Issue through prospectus, offer for sale

and private placement,

Marketing and underwriting

Pricing of issues.

Dealing with stock exchange,

Collection of subscriptions,

Allotment and dispatch of shares/refund

Orders through registrar to the issue.


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1) Drafting of prospectus and getting it approves from the stock

exchanges.

2) Obtaining consent/acknowledgement from SEBI.

3) Appointing bankers, underwriters, brokers, advertisers, printers etc.4) Obtaining the consent of all the agencies involved in the public issue.

5) Holding road shows, to sell the issue. These shows are held for the

analysts, brokers & institutional investors. The purpose of these

shows is to answer queries from these people about the company and

the project for which the funds are being raised.

6) Deciding the pattern of advertising.

7) Deciding the branches where application money should be collected.

8) Deciding the dates of opening and closing of the issue.

9) Obtaining the daily report of application money collected at various

branches.

10) Obtaining subscription to the issue.

11) After the close of the issue, obtaining consent of stock

exchange for deciding basis of allotment etc.

The merchant bankers offer following services during the public issues:

1) Preparing an action plan and budget for the total expenses for the

issue. Preparation of application to SEBI and assistance in obtaining

the consent from SEBI. Drafting of the prospectus.2) Selection of underwriters. Brokers, bankers to the issue advertising

agency for publicity etc.


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ROLE OF MERCHANT BANKER AS A LEAD MANAGER

The importance of merchant bankers as sponsors of capital issues is

reflected in their major services such as, determining the composition of thecapital structure(type of securities to be issued), draft of prospectus(offer

documents)and application forms, compliance with procedural formalities,

appointments of registrars, listing of securities, arrangement of

underwriting/sub- underwriting , placing of issues, and so on. In the 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 bankers functioning as lead managers.

REGISTRATION - Merchant bankers require compulsory registration with

the SEBI to carryout their activities. Earlier they fell under four

categories.

a) Category 1 Merchant banker could carry on any activity related to

issue management, that is, the preparation of prospectus and other

information relating to the issue, determining the financial structure,

tie-up of financiers, final allotment of securities, and refund of the

securities.

b) Category 2 merchant bankers could act as advisors, consultants, co-

managers, underwriters and portfolio managers;

c) Category 3 merchant bankers could act as underwriters, advisors, andconsultants to an issue. Thus only category 1 merchant bankers could

act as lead managers to an issue. To carry on activities as underwriters

and portfolio managers, they have to obtain separate certificates of

registration from the SEBI.


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GRANT OF CERTIFICATE -The SEBI grants a certificate of registration

if

a) Merchant bankers should also be a body corporate other than a non-

banking financial company.

b) They are expected to have the necessary infrastructure like office,

space, manpower etc.

c) Have recognized professional qualification in finance, law or business

management and or their registration is in the interest of the investors.

CAPITAL ADEQUACY REQUIREMENT - The minimum net worth

requirement for each category was: Rs5 crore (category 1), Rs 0.5 crore

(category 2), Rs 0.2 crore (category 3) and nil for category.

REGISTRATION FEE -

a) Category 1 Rs 2.5 lakh annually, for the first 2 years and Rs 1 lakh for

the 3 rd year

b) Category 2: Rs 1.5 lakh annually, for the first 2 years and Rs 50,000

for the 3 rd year.

c) Category 3: Rs 1 lakh annually, for the first 2 years and Rs 25,000 for

the 3 rd year.

d) Category 4: Rs 5000, annually, for the first 2 years and Rs 1,000 for the 3 rd year.

Since 1999, the registration fee was raised to Rs 5 lakh.


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e) To ensure that the copies of the prospectus, offer document, letter of

offer or any other related literature is made available to the investors

at the time or the offer.

f) Not to make any statement, either oral or written, this wouldmisrepresent the services that the merchant banker is capable of

performing for any client or has rendered to any client.

g) Avoid conflict of interest and make adequate disclosure of its interest.

h) Always to render the best possible advice to the clients having regard

to their needs.

i) Maintain arms length relationship between its merchant banking

activity and any other activity.

j) Not to make untrue statement or suppress any material fact in any

documents, reports or information furnished to the SEBI.

k) Maintain appropriate level of knowledge and competence and abide

by the provisions of the SEBI Act/regulation/circulars and guidelines.

l) Provide adequate freedom and powers of its compliance officer for the

effective discharge of his duties.

m) Ensure that good corporate policies and corporate governance are in

place.

n) Have internal control procedures and financial and operational

capabilities which can be reasonably expected to protect its

operations, its clients, investors and other registered entities from

financial loss arising from theft, fraud, and other dishonest act, professional misconduct or omissions


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RESTRICTION ON BUSINESS - No merchant banker, other than a

bank/public financial institution (PFI) is permitted to carry on business other

than that in the securities market.

MAXIMUM NUMBER OF LEAD MANAGERS - The maximum number

of lead managers is related to the size of the issue. For an issue of a size less

than Rs50 crore, two lead managers are appointed. for size groups of Rs 50

crore to Rs 100 crore and Rs 100 crore to Rs 200 crore, the maximum lead

managers required are 3 and 4 respectively.

RESPONSIBILITYES OF LEAD MANAGERS - Every lead manager has to enter into an agreement with the issuing companies, setting out their

mutual rights, liabilities and obligations relating to such issues, and in

particular to disclosures allotment and refund. It is necessary for a lead

manager to accept a minimum underwriting obligation of 5 per cent of the

total underwriting commitment or Rs 25 lacks, whichever is lesser.


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REGULATORY FRAMEWORK

Operational Guidelines - SEBI has pronounced the following guidelines

for compliance by the eligible merchant bankers:

1) Submission of offer document

a) The offer documents of issue size up to Rs.20 crores shall be filed by

lead merchant bankers with the concerned regional office of the board

under the jurisdiction of which the registered office of the issuer

company falls. According to the Guidelines, the draft offer document

filed with the Board shall be made by public.

b) The lead merchant banker shall make available 10 copies of the draft

offer document to the board and 25 copies to the stock exchange(s)

where the issue is proposed to be listed. Copies of the draft offer

document shall be made available to the public by the lead merchant bankers/stock exchange. The lead merchant banker and the stock

exchange(s) may charge a reasonable charge for providing a copy of

the draft offer document.

c) The lead merchant banker shall also submit to the board the draft offer

document on a computer floppy in the specified in schedule. Alongwith the floppy, the lead manager shall submit an undertaking to SEBI

certifying that the contents of the floppy are in HTML format, and are

identical to the printed version of the prospectus/ letter of offer filed


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with the Registrar of Companies/ concerned Stock Exchanges(s), as

the case may be.

d) The Lead Merchant Banker shall submit two copies of the printedcopy of the final offer document dealing offices of the Board within

three days of filing offer document with Registrar of

Companies/concerned Stock Exchange(s) as the case may be.

e) Whenever offer documents (for public/rights issues, takeovers or for

any other purposes) are filed with any Department/office of the board,

the following details certified as correct shall be given by the lead

merchant banker in the forwarding letters;

Registration Number

Date of Registration/Renewal of registration

Date of expiry of registration

If applied for renewal, date of application

Any communication from the Board prohibiting them acting as a

merchant banker

Any inquiry/investigation being conducted by the board

Period up to which registration/renewal fees has been paid

Whether any promoter/director/group and/or associate company of the

issuer company is associated with securities-related business and

registered with SEBI

If any one or more of these persons/entities are registered with SEBI,

their respective registration numbers


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Details of any enquiry/investigation conducted by SEBI at any time.

Penalty imposed by SEBI (Penalty includes deficiency/warning letter.

adjudication proceedings suspension/ cancellation/ prohibitory orders)

Outstanding fees payable to SEBI by these entities, if any

Offer documents not accompanied by the information as contained above

may be rejected. Lead Merchant bankers shall obtain similar information

from their intermediaries to ensure that they comply with these

guidelines and are eligible to be associated with a letter concerned issue. The

intermediaries shall also indicate in their letters that they have obtained such

information from other intermediaries.

2) Dispatch of issue material - Lead merchant bankers shall ensure that

whatever there is a reservation for NRIs, 10 copies of the prospectus

together with 1000 application forms are dispatched in advance of the issue

opening date, directly along with a letter addressed in person to Advisor

(NRI). Twenty copies of the prospectus and application form shall be

dispatch in advance of the issue opening date to the various Investors

Associations.

3) Underwriting - While selecting underwriters and finalizing underwriting

arrangements, lead merchant bankers shall that the underwriters do not

overexpose themselves so that it becomes difficult to fulfill their underwriting commitments. The overall exposure of underwriter(s)

belonging to the same group or management in an issue shall be assessed

carefully by the lead merchant banker.


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4) Compliance obligations - The merchant banker shall ensure compliance

with the following post-issue obligations:

a) Association of resource personnel - In case of oversubscription in

public issues, a Board nominated public representative shall be

associated in the process of finalization of the basis of allotment. The

lead merchant banker shall intimate to the person so nominated the

date, time, venue etc regarding the process of finalization of the basis

of allotment.

b) Redressal of investor grievances - The merchant bankers shall

assign high priority to investor grievances, and take all preventive

steps to minimize the number of complaints. The lead merchants

banker shall set up a proper grievance monitoring and redressal

system in coordination with the issuers and the registrars to issue.

They shall take all necessary measures to resolve the grievance

quickly. They shall actively associate with post-issue refund and

allotment activities, and regularly monitor investor grievance arising

thereform.

c) Submission of post issue monitoring reports - The concerned lead

merchant banker shall submit, its duplicate, the Post Issue

Monitoring Reports within 3 working days from the due dates, either


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by registered post or deliver them at the respective regional

offices/head office. Where the offer documents have been dealt with

by any of the regional offices of the board, a copy of the report shall

be sent to the Boards Head office, Mumbai. The Lead MerchantBanker(s) shall inform the Board on important development about the

particular issues being lead managed by them during the period

intervening the reports.

d) Issue of NO objection certificate (NOC) - In accordance with

Listing Agreement of the Stock Exchanges, the issuer companies shall

deposit 1% of the amount of securities offered to the public and/or to

the holders of the existing securities of the company, as the case may

be, with the regional Stock Exchange. The securities can be released

by the concerned Stock Exchange only after obtaining an NOC from

the board. An application for NOC shall be submitted by the issuer

company to the Board in the format specified in the guidelines.

e) Registration of merchant bankers - Application for renewal of

certificate of registration shall be made by the merchant bankers

according to regulation 9 of SEBI (Merchant Bankers) Rules and

Regulations, 1992. While filing the renewal application for the

certificate of registration as merchant banker, it shall provide a

statement highlighting the changes that have taken place in the

information that was submitted to the Board for the earlier registration, and a declaration stating that no other changes besides

those mentioned in the above statement have taken place.


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Merchant Bankers, while forwarding the renewal application in form A of

the SEBI (Merchant Bankers) Rules and Regulations, 1992, shall also

forward the additional information as specified in Schedule. Registered

Merchant Bankers shall inform the Board of their having become a member of AMBI, with the relevant details.

f) Reporting requirements - Penalty points may be imposed on the

merchant banker for violation of any of the provision for operational

guidelines. The report referred shall be submitted twice a year, on

March 31 and September 30, and it should reach the Board within

three months from the close of the period to which it relates.

g) Imposition of penalty points - Penalty points may be imposed on the

merchant banker for violation of any of the provision for operational

guidelines. The merchant banker, on whom penalty points of four or

more has been imposed, may be restrained from filing any offer

document or associating or managing any issues for a particular

period.

The Board may initiate action under the SEBI (Merchant Bankers)

Regulation against the merchant bankers, irrespective of whether anyPenalty point is imposed or not. Imposition of penalty point is not a

precondition for initiation of proceeding against the merchant banker under

the SEBI Regulations.


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a copy of the MOU is submitted to the Board along with the draft offer

documents.

In case a public or rights issue is managed by more than one Merchant banker,

the rights obligations and responsibilities of each merchant banker shall be

demarcated as specified in schedule

In case of under-subscription of an issue, the lead merchant Banker,

responsible for underwriting arrangements, shall invoke underwriting pay the

amount of development. The same shall be incorporated in the inter-se

allocation of responsibilities (Schedule II) accompanying the due diligencecertificates submitted by the lead merchant banker to the Board.

b) Due diligence certificate - The lead merchant banker shall furnish to the

Board a due diligence certificate along with the draft prospectus. Besides, the

lead merchant banker shall also certify that all amendments, suggestions or

observations made by the Board have been incorporated in the offer

document. They have to furnish a fresh due diligence certificate at the timeof filing the prospectus with the Registrar of companies in the format

specified, furnish a fresh certificate, immediately before the opening of the

issue has opened but before it close for subscription.

c) Certificate signed by professionals - The lead merchant banker shall

furnish the following certificates duly signed by the company secretaries or

Chartered Accountants along with the draft offer documents.

That all refund orders of the previous issues were dispatched within the

prescribed time and in the prescribed manner.


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That all security certificates were dispatched to the allottees within the

prescribed time and in the prescribed manner.

Those securities were listed on the stock exchanges, as specified in

offer documents.

d) Undertaking - The issuer shall submit an undertaking to the Board to the

effect that transactions in securities by the promoter, the promoter group

and the immediate relatives of the promoters during the period between the

date of filing the offer documents with the Registrar of Companies or Stock

Exchanges as the case may be and the date of closure of the issue, shall be

reported to the stock exchanges concerned within 24 hours of the transaction.

e) List of premium Group - The issuer shall submit to the Board a list of

persons who constitute the Promoters Group and their individual

shareholdings.

3. Appointment of intermediaries

a) Appointment of merchant bankers - A merchant banker who is

associated with the issuer company, as a promoter or a director, shall

not lead-manage the issue of the company. The lead merchant banker

holding the securities of the issue company may lead-manage the

issue if the securities of the issue company, are listed, or proposed to

be appointed, as specified in the offer document.

b) Appointment of co-manager -The lead merchant banker shall ensure

that the number of co-managers to an issue does not exceed the

number of lead merchant banker to the said issue, and that there is

only one advisor to the issue.


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c) Appointment of other intermediaries -The lead merchant shall

ensure that the other intermediaries being appointed are duly

registered with the Board, wherever applicable. Before advising the

issuer on the appointment of other intermediaries, the lead merchant banker shall independently assess the capability and the capacity of

the various intermediaries to carry out the assignment.

The lead merchant banker shall ensure that the issuer companies enter

into a Memorandum of Understanding with the intermediary(ies) concerned,

whenever required. The lead merchant banker shall ensure that Bankers to

the issue are appointed in all the mandatory collection centres as specified.

The lead merchant banker shall not act as a Registrar to an issue in which it

is also handling the post issue responsibilities.

The Lead Merchant Bankers shall that the Registrars to Issue

registered with the Board are appointed, in all public issues and right issues.In cases where the issuer company is a registered Registrar to an issue, the

issuer shall appoint an independent outside Registrar to process its issue.

The lead merchant banker shall ensure that the Registrars to an issue

which is associated with the issuer company as a promoter or a director shall

not act as Registrar for the issue company. Where the number of application

in a public issue is expected to be large, the issuer company, in consultation

with the lead merchant banker, may associate one or more Registrars

registered with the Board for the limited purpose of collecting the

application forms at different centers and forward the same to the designated


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Registrar to the Issue, as mentioned in the offer document. The designated

Registrar to the Issue shall be solely responsible for all the activities

assigned to them for the issue management.

4. Underwriting

The lead merchant banker shall satisfy themselves about the ability of

the underwriters to discharge their underwriting obligations. In this respect,

the lead merchant banker shall incorporate a statement in the offer document

to the effect that in the opinion of the lead merchant banker, the

underwriters assets are adequate to meet their underwriting obligations.They would have to obtain underwriters written consent before including

their names as underwriters in the final offer document.

In respect of every underwritten issue, the lead merchant banker(s)

shall undertake a minimum underwriting obligation of 5% of the total

underwriting commitment, or RS. 25Lacs, whichever is less. The

outstanding underwriting commitments of a merchant banker shall notexceed 20 times the net worth at any point of time. In respect of an

underwritten issue, the lead merchant banker shall ensure that the relevant

details of underwriters issue, the lead merchant banker shall ensure that the

relevant details of underwriters are included in the offer document.

5. Offer documents to be made public - The draft offer documents filed

with the Board shall be made public for a period of 21 days from the

date of filing the offer document with the Board. The lead merchant

banker shall simultaneously file copies of the draft offer document

with the stock exchanges where the securities offered through the


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issue are proposed to be listed, and make copies of the offer document

available to the public. Lead merchant banker or stock exchanges may

charge an appropriate sum for a copy of offer documents.

6. Dispatch of issue material - The lead merchant banker shall ensurethat public issue offer documents and other related materials are

dispatched to the various stock exchanges, brokers, underwriters,

bankers to the issue, investors associations, etc in advance. In the case

of rights issues, the lead merchant banker shall ensure that the letters

of offer are dispatched to all shareholders at least one week before the

date of opening of the issue.

7. No complaints certificate After a period of 21 days from the date

the draft offer documents is made public, the lead merchant banker

shall file a statement with the Board giving a list of complaints

received by it a statement by it whether it is proposed to amend the

draft offer document or not, and highlight those amendments.

8. Mandatory collection centers The minimum number of collection

centers for an issue of capital shall be the four metropolitan centers

situated at Mumbai, Delhi, and Chennai, and in addition, all such

centers where stock exchanges are located in the region in which the

registered office of the company is situated. The issuer company shall

be free to appoint as many collection centers as it may deem fit in

addition to the above minimum requirements.


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9. Authorised collection agents - The issuer company can also appoint

authorized collection agents in consultation with lead merchant

banker, subject to necessary disclosures including the names and

address of such agents made in the offer document. The modalities of selection and appointment of collection agents can be made at the

discretion of the lead merchant banker. They shall ensure that the

collection agents so selected are properly equipped for the purpose,

both in terms of infrastructure and manpower requirements.

The collection agents may collect applications that are accompanied

by payment through cheques, draft and stock invests. The Authorised

collection agent shall not collect the application money in cash. The

collected application shall be deposited in the special share application

account with the designated scheduled bank either on the same date or latest

by the next working day.

The application forms, along with duly reconciled schedules, shall be

forwarded by the collection agent to the registrars to the Issue after

realisation of cheques, and after weeding out the invalid applications, within

period of 2 weeks from the date of closure of the public issue.

The application forms, along with duly reconciled schedules, shall be

forwarded by the collection agent to the registrars to the issue after

realisation of cheques, and after weeding out the invalid application, within

period of 2 weeks from the date of closure of the public issue.


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The application accompanied by stock-invests shall be sent by the

collection agent directly to the Registrars to the issue along with the

schedules, within one week from the date of closure of the issue. The offer

documents and application forms shall specifically indicates that theacknowledgement of receipt of application money, given by the collection

agents, shall be invalid and binding on the issuer company and any other

person connected with the issue.

The investors from places other than where the mandatory collection

agents are located, can forward their applications along with the stock

invests to the Registrars to the issue directly by registered post with

acknowledgement due. The Registrars shall deal with the applications

received through registered post to the issue in the normal course.

10. Advertisement for rights post issues - The lead merchant banker

shall ensure that in the case of rights issue, an advertisement giving

the date of completion of dispatch of offer letters, shall be released in

a least one English National Daily with wide circulation, one Hindi

National Paper, and a Regional language daily circulated at the placewhere registered office of the issuer company is situated, at least 7

days before the date of opening of the issue.


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The advertisement shall indicate centers other than registered office of

the company where the shareholders or other eligible persons may obtain

duplicate copies of the composite application forms in case the original

application forms are not received even within a reasonable time after theopening of the rights issue.

If the shareholder have neither received the original composite

application forms nor are they in a position to obtain the duplicate forms,

they may make application to subscribe to the rights on plain paper. The

advertisement shall also contain a format to enable the shareholders to make

the application on a plain paper containing the necessary particulars like

name, address, ratio of rights issue, issue price, number of shares held,

ledger folio numbers, number of shares entitled and applied for, additional

shares if any, amount to be paid along with the application, particular of

cheques, etc.

The advertisement shall further mention that application by the

shareholder can be directly sent through registered post, along with the

application money, to the companys designated official address as given in

the advertisement. The advertisement may also invite the attention of the

shareholder application made other than on the standard form shall not be

entitled to renounce their rights and shall not utilize the standard form for

any purpose including renunciation, even if it is received subsequently, If the

shareholder makes an application on plain paper and also in standard form,

both the applications may be rejected.

11. Appointment of compliance officer- An issuer company shall

appoint a compliance officer who shall directly with the Board


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regarding compliance with various laws, rules, regulations and other

directives issued by the Board, besides matter related to investors

complaints. The name of the compliance officer so appointed shall be

intimated to the board.

12.Abridged prospectus-

The lead merchant banker shall ensure the following:

a) Every application form distributed by the issuer company, or anyoneelse, is accompanied by a copy of the abridged prospectus.

b) The application form may be stapled to form part of the abridged

prospectus. Alternatively, it may be a perforated part of the abridged

prospectus.

c) The abridged prospectus shall not contain matters which are

extraneous to the contents of the prospectus.

d) The abridged prospectus shall be printed at least in point 7 size, with

proper spacing.

e) Enough space shall be provided in the application form to enable the

investors to fill in various details like name, address, etc.

13. Agreement with depositories - The lead manager shall ensure that the

issuer company has entered into agreements with all the depositors for dematerialization of form through any of the depositories.

14. Books of Account/Record/Documents - A banker to an issue is

required to maintain books of accounts/records for a minimum period of


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three years, in respect of applications received, the names of investors, he

time within which applications received were forwarded to the issuing

company/registrar to an issue and dates and amounts of refund money to

investors.

Post-Issue Obligation

1. Post - issue monitoring reports - Irrespective of the level of

subscription, the post-issue lead merchant banker shall ensure

the submission of the post-issue monitoring reports. These

reports shall be submitted within 3 working days from the due

dates.

Following are the reports to be submitted with regard to Public Issues:

3-day post-issue monitoring report - The due date for this report

shall be the 3 rd day from the date of closure of subscription of the issue.

78-day post-issue monitoring report - The due date for this

report shall be the 78 th day from the date of closure of subscription of the

issue.

Following are the reports to be submitted with regard to Rights Issues:


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3-day post-issue monitoring report - The due date for this shall be

the 3 rd from the date of closure of subscription of the issue.

50-day post-issue monitoring report -The due date for this report

shall be the 50 th day from the date of closure of subscription of the issue.

2. Redressal of investor grievances - The post-issue lead merchant banker

shall actively associate with post-issue activities namely, allotment,

refund, allotment, refund and dispatch and shall regularly monitor

redressal of investor grievances arising thereform.

3. Coordination with intermediaries The Post-Issue lead merchant

banker shall maintain close coordination with the Registrar to the issue,

and arrange to depute its officers to the offices of the various

intermediaries at regular intervals after the closure of the issue in order to

monitor the flow of applications from the collecting bank branches,

processing of the applications including those accompanied by stock-invest and other matters until the basis of allotment is finalized, dispatch

security certificates an refund orders completed and securities listed. Any

act of omission or commission on the part of any of the intermediaries

noticed during such visits shall be duly reported to the board.

4. Stock-invest - The lead merchant banker shall ensure compliance withthe instruction issued by RBI or handling of stock invests any person

including Registrars.


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5. Underwriters - If the issue is proposed to be closed at the earliest closing

date, the lead merchant banker shall ensure that the issue is fully

subscribed before announcing closure of the issue. In case there is no

definite information about subscription figures, the issue shall be keptopen for the required number of days to take care of the underwriters

interest and to avoid any dispute, at a later date, by the underwriters in

respect of their liability.

In case there is a development on underwriters, the lead merchant

banker shall ensure that the underwriters honor their commitments within 60

days from the date of closure of the issue. In case of under-subscribed issues,

the lead merchant banker shall furnish information in respect of underwriters

who have failed to meet their underwriting development to the board.

6. Banker to an issue - The post-issue lead merchant banker shall

ensure that the money received pursuant to the issue and kept in

a separate bank (i.e. Bankers to an issue), in accordance with

the provisions of section 73(3) of the companies Act 1956, is

released by the said bank only after the listing permissions

under the specific Section has been obtained form all the stock

Exchanges where the offer document is proposed for the

securities to be listed.

7. Post-issue advertisements The post-issue lead merchant

banker shall ensure that in all issues, the advertisement giving

details relating to oversubscription, basis of allotment, number,

value and percentage of applications received, along with stock


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invest, number, value and percentage of successful allottees

who have applied through stock-invest, date of completion of

dispatch of refund orders, date of dispatch of certificates and

date of filing listing applications, is released within 10 daysfrom the date of completion of the various activities, in at least

one English National Daily with wide circulation, one Hindi

National Paper and a Regional language daily circulated at the

place where the registered office of the issuer company is

situated.

The post-issue lead merchant banker shall ensure that the issuer

company/advisors/brokers or any other agencies connected with the issue do

not publish any advertisement starting that the issue has been

oversubscribed, or indicating the investors response to the issue, during the

period when the public issue is still open to the public. Advertisement

stating, The subscription to the issue has been closed may be issued after

the actual closure of the issue.

8. Basis of allotment - In a public issue of securities, the

Executive Director/Managing Director of the Regional Stock

Exchange, along with the lead merchant banker and the

Registrars to the Issue, shall ensure that the basis of allotment is

finalized in a fair and proper manner.

9. Reservation for small individual applicants - The above

proportionate allotments of securities in an issue that is


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oversubscribed shall be subject to reservation for small

individual application as described below:

a) A minimum of 50% of the net offer of securities to the public shall

initially be made available for allotments to individual applications

who have applied for allotment equal to, or less than, 10 marketable

lots of shares or debentures or securities offered, as the case may be.

If the category of individual applicants applying for up to 10

marketable lots were entitled to 70% of the public offer in accordance

with proportionate formula, the category should get 70%. If the

category is entitled to get only 30% then there should be reservation

of a minimum of 50% of the net public offer.

b) The balance net offer of securities to the public shall be made

available for allotment to individual applicants who have applied for

allotment of more than 10 marketable lots of shares, or debentures or the securities offered, and other investors including corporate

bodies/institutions irrespective of the number of shares, debentures,

etc applied for.

c) The unsubscribed portion of the net offer to any of the categories

specified above shall/may be made available for allotment toapplicants in the other category, if so required.

The draw of lots, where required, to finalize the basis of allotment, shall

be done in the presence of a public representative from the Governing Board


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of the Regional Stock Exchange. The basis of allotment shall be signed by

the Executive Director/Managing Director of the stock exchange and the

public nominee (where applicable), in addition to the lead merchant banker

and the Registrar to the Issue being responsible for post issue activities. Thestock exchange shall invite the public representative, on a rotation basis,

from the various public representatives on its governing board.

10. Other responsibilities-

a) The lead merchant banker shall ensure payment of interest to the

applicants for delayed dispatch of allotment letters, refund orders, etcas prescribed in the offer document.

b) The post-issue lead merchant banker shall ensure that the dispatch of

refund orders/allotment letters/ share certificates is done by way of

registered post/certificate of posting, as may be applicable.

c) In case of all issues, advertisement, details relating to over-

subscription, basis of allotment, number, value and percentage of

orders, date of dispatch of certificates and date of completion of

dispatch of certificates and date of filing of listing application shall be

made. Such advertisement shall be released within 10 days from the

date of completion of the various activities.

d) Post-issue lead merchant banker shall continue to be responsible for

post issue activities until the subscribes have received the


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shares/debentures certificates, or refund of application money. The

listing agreement is entered into by Issuer Company with the stock

exchange and listing/trading permission is obtained.

11. Certificate regarding realization of stock-invests The post-

issue lead merchant banker shall submit, within two weeks

from the date of allotment, a certificate to the Board certifying

that the stock-invests on the basis of which allotment was

finalized, have been realized.

ADVANTAGES OF LISTING

1) Listing means the admission of the securities of a public limited

company for trading on a stock exchange. The main objective of

listing are to provide liquidity and free negotiability to securities,

ensure proper supervision and control of dealings therein, and protect

the interests of shareholders and of the general investing public.


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2) Advantage top shareholders and company with regard to tax matters.

Higher status, expansion of activities and helps to grow by making

future financing easier.

3) Companies also appoint the market makers on all stock exchanges

where the securities are listed from time to time various rules and

regulations are issued are stock exchange and company have to

compiled with all this requirements. They mainly relate to the

memorandum and articles of association, prospectus, norms about

publicity, minimum public offer, and basis of allotment and execution

of listing agreement.

PROBLEMS OF MERCHANT BANKERS

1) SEBI guidelines have authorised merchant bankers to undertake issue

related activities only with an exception of portfolio management

These guidelines have made the merchant bankers either to restrict


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their activities or think of separating these activities from the present

one and float new subsidiary and enlarge the scope of its activities.

2) SEBI guidelines stipulate a minimum net worth of Rs.1 crore for authorisation of merchant bankers. Small but professional and

specialised merchant bankers who do not have a net worth of Rs.1

crore may have to close down their 'business. The entry is denied toyoung, specialised professionals into merchant banking business.

3) Non co-operation of the issuing companies in timely allotment. of

securities and refund of application money is another problem of

merchant bankers. The guidelines have put the responsibility on the

merchant bankers. They have to seek the co-operation of the issuing

company to shoulder the responsibility.

SCOPE OF MERCHANT BANKING SERVICES

In the present dynamic environment where public money is playing a

vital role in financing a large number of projects, both in the public and

private sectors, Merchant Banking has a significant role in managing the

show and meeting the growing demands for funds by the corporate sector.


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Merchant Banking includes a whole gamut of activities which meet the

needs of both corporate and individual investors. Merchant bankers act as a

guide for the entrepreneurs who are unaware, or have little knowledge or

experience, of the complexities involved in the above spheres.

In addition to the above, the scope of Merchant Banking services has

extended to providing advisory services to companies to increase or divest

their stakes, public sector undertaking disinvestments, international issues,

etc. With the OTCEI being operation now, Merchant Bankers will have a

key role to play in terms of appraising the projects and offering two-way

quotes for market making in case of entrepreneur going for listing in the

above exchange.

In the present day capital market scenario, the merchant banks play

the role of an encouraging and supporting force to the entrepreneurs,

corporate sectors and the investors. There is -vast scope for merchant

bankers to enlarge their operations both in domestic and international

market.

1. Growth of New Issues Market: The growth of new issue market is

unprecedented since 1990-91 The amount of annual average of capital issues by non-government public companies was only about 90 crores in the 70s,

the same rose to over Rs.1,000 crs in the 80s' and further to Rs.12,700 crores

in the first four years of 1990's. This figure could be well beyond Rs.40,000

crores by the end of 1994-95. The number of capital issues has also


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increased from 363 in 1990-91 to 900 in 1993-94. The trend is expected to

continue in future.

2. Entry of Foreign Investors: An outstanding development in the historyof Indian capital market was its opening up in 1992 by allowing foreign

institutional investors to invest in primary and secondary market and also

permitting Indian companies to directly tap foreign capital through euro

issues. Within two years to March 1994, the total inflow of foreign capital

through these routes reached to about $5 billion. It is estimated that this

figure may go up to $ 35-40 billion by the turn of this century. Further,

foreign direct investments as also investment by NRIs have risen

considerably due to number of incentives offered to them.

3. Changing Policy of Financial Institutions: With the changing emphasis

in the lending policies of financial institutions from security orientation to

project orientation, corporate enterprises would require the expert services of

merchant bankers for project appraisal, financial management etc. The

policy of decentralisation and encouragement of small and medium

industries will further increase the demand for technical and financial

services which can be provided by merchant bankers.

4. Development of Debt Market: The concept of debt market has set to

work through National Stock Exchange and the Over the Counter Exchangeof India. Experts feel that of the estimated capital issues of Rs.40, 000 crores

in 1994-95, a good portion may be raised through debt instruments. The

development of debt market will offer tremendous opportunity to Merchant


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Bankers.

5. Innovations in Financial Instruments: The Indian capital market has

witnessed innovations in the introduction of financial instruments such asnon-convertible debentures with detachable warrants, cumulative convertible

preference shares, zero coupon bonds, deep discount bonds, triple option

bonds, secured premium notes, floating rate bonds, auction rated debentures

etc. This has further extended the role of Merchant Bankers as market

makers for these instruments.

6. Corporate Restructuring: As a result of liberalisation and globalisation

the competition in the corporate sector is becoming intense. To survive in

the competition, companies are reviewing their strategies, structure and

functioning. This had led to corporate restructuring including mergers,

acquisitions, splits, disinvestments and financial restructuring. This offers

good opportunity to Merchant bankers to extend the area of their operations.

7. Disinvestment: The government raised Rs.2000 crores through

disinvestment of equity shares of selected public sector undertakings in

1993-94. The government proposes to shift the present method of periodic

sale of public sector shares to round the year off loading of shares directly

on the stock exchange from the year 1995-96. The government will sell the

shares of identified public sector at any time during the year when they get agood price above minimum stipulated level. This is likely to provide good

business to Merchant Bankers in future.

Ranking of Merchant Banking in India :


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Note: OE: Overall Excellence; FSS: Financial Soundness ; QPS: Quality

Product/Service; QM: Quality Management; INN: Innovativeness.

Merchant Banker OE FSS QPS QM INN

ICICI Securities 4.0 4.0 4.2 3.8 4.3

IDBI 4.2 3.2 4.5 4.0 4.8

SBI Caps 4.4. 3.9 4.6. 6.7 5.2

DPS 6.1 5.7 6.0 6.0 5.3

IFCI 6.1 5.7 6.0 6.0 6.3

Bank of Baroda 6.7 6.5 6.7 6.6 6.8

Jardine Fleming 5.8 6.2 5.9 5.0 5.5

JM Finance 6.0 6.5 5.5 5.9 5.4

ENAM 6.3 6.8 6.4 6.3 6.2

PNB Caps 6.8 6.8 6.7 6.8 6.8

CHALLENGES AHEAD

1) Merchant bankers have to tap the opportunities lying ahead with the

developing pace of the economy. These opportunities arise in the

form of challenges before the merchant bankers to test their skills,

expertise and efforts to attune their activities with the programme of


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economic development of the country, adopt new instruments and

innovative means of financing to meet the growing financial

requirements of the corporate clients.

2) Merchant bankers will have to conduct management of capital issues

in a different fashion than what is being done at present. If small

industries are to be provided the full benefit of their services of

corporate counseling, project counseling and loan syndication than

besides distributions of their securities to the public and arranging

long-term institutional or banking finance for them, it would be

necessary for merchant banks to make out-right purchase of capital

issues in and to retain the purchased equity of the company till the

implementation of the project, commencement of production and

profitable working of the company when the issue may be treated as

good for marketing to the general public, may be on premium, so as to

make capital gains on that.

3) If the planned objective of economic decentralization and rapid

development of rural economy is to be achieved merchant bankers

will have to make expert efforts in the interest of the national

economy by mobilizing the savings from the rural sector and creating

avenues for its investment in rural areas in industry, trade and

commerce in different shapes and different magnitudes

4) Merchant bankers have to find out ways and means for rehabilitating

the sick industries and also devise the manner by which the running

industry might be saved from going sick.


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5) In the international field, where the public and private enterprises are

entering to raise foreign currency resources, Indian counterparts have

to depend upon the assistance of foreign merchant bankers. Indianmerchant bankers, therefore, will have to sharpen their skills and

attain the requisite expertise in the field of international merchant

banking.

6) To tap the latest technology available internationally and procure the

transfer of the technology to India, merchant bankers should

frequently make-exploring tours to foreign countries, organize

meetings and conferences with the Chamber of Commerce and

Industry and other commercial, industrial and financial organizations

so as to enthuse the foreigners to take interest in investment activity in

India.

7) Merchant Bankers have reason to believe they will be handicapped

without the marketing support. But the worst sufferer would be the

investor, especially the small investor it is this class, which forms the

backbone of the capital market. As a result of the ban, the small

investor would be deprived of the opportunity to study the corporate

profile of the Issuer. In the absence of adequate information, they will

have to depend on manipulated facts and information fed byunreliable sources.

SOME PAST ISSUES


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NAME

OF THE

ISSUE

BOOK

RUNNING

LEAD

MANAGER

DATE

OF

ISSUE

NO. OF

BIDDIN

G

CENTER

S

ISSUE

SIZE

(LAKH

SHARES)

FLOOR

PRICE

ISSUE

PRICE

Biocon

Ltd

Kotak Mahindra

capital co.

ltd,DSP Mrrril

Lynch ltd.

11/03/04

to

18/03/04

20 100 Rs. 270

To

Rs. 315

Oil

&Natural

Gas

Corporati

on Ltd.

Kotak Mahindra

Capital Co.

Ltd.,DSP

Merrill Lynch

Ltd, JM Morgan

Stanley Pvt.

Ltd.

05/03/04

to

13/03/04

62 1425.933 Rs.680

To

Rs.750

Rs.750 &

Rs.712.50

for retail

investors

Gas

Authority

of India

Ltd.

HSBC

Securities &

Capital Markets

(India) Ltd

27/02/04

to

05/03/04

36 845.6516 Rs.185 Rs195 &

185.25 for

retail

investorsPatni

Compute

rs

Systems

Ltd.

DSP Merrill

Lynch

Ltd.,Kotak

Mahindra

Capital Ltd.

27/01/04

to

05/02/04

27 187.24 Rs.200

To

Rs.230

Rs.230

GROWTH OF CAPITAL MARKET


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SOME CORPORATE EXAMPLES:

2004-05


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Initial public offerings (IPO) OF UNION BANK OF INDIA August

2002 - Union Bank of India, one of Indias largest public sector banks in the

country which has achieved excellence in every sphere of banking and has

emerged as a strong bank, hit the capital markets in August-2002 with anIPO of 18, 00,00,000 equity shares of Rs. 10 each for cash at premium of Rs.

6 per share (at an issue price of Rs. 16 per share ). Opened to public on Aug

20, 2002 and closed on Aug 28, 2002.

For its IPO, the bank engaged a host of lead managers which included

ICICI Securities, DSP Merrill Lynch, JP Morgan Stanley Private Ltd., SBI

Capital Markets Ltd., etc. A majority of procedures was planned to be

utilized to meet the growing demand for credit, and for funding its ambitious

Information Technology programme.

The issue was oversubscribed by five times, with the bank collecting an

amount of Rs. 1,432 crores from the primary market.

Initial public offerings (IPO) OF BIOCON INDIA

BIOCON INDIA is the Indias first biotech IPO. The companys offer was

for Rs. 10 million. The price band was between Rs. 270 and Rs. 315 per

equity share of face value Rs. 5. The company received bids for more than

330 million shares.

Issue was oversubscribed by 33 times. The issue opened on March

11, 2004 and closed on March 18, 2004. The shares were subscribed within5 minutes of its opening. The lead managers were DSP Merrill Lynch, Kotak

Mahindra Capital and HSBC Securities.

SECONDARY DATA


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OBJECTIVE;

Objective of this survey was to find whether issue management helped

the investors in getting the benefits of the funds being handled by the expert

portfolio manager and his services and thereby gaining higher returns from

the funds invested.

RESEARCH DESIGN:

The method used for the survey was QUESTIONAIRE personal visit

were made to a bank, and experts to get a more practical knowledge on this

topic.

RESERCH METHODOLOGY:

This survey was aimed at finding out whether the investors are really

benefited out of the issue management service. It also includes whether the

investors and firms are really affected of these intermediaries. This question

helps in finding out what is the role and effect of merchant banking activity

in the issue management.

QUESTIONNAIRE


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A: I personally find one is that there is wide gap of about 45 days between

the date of final pricing and the date on which the issue opens, then issue is

required to be marketed to the large number of retail investors, which

involve big expense and if not marketed properly there are chances of under subscription. Also while allotting the shares to the public we face much

difficulty due to insufficient information in the application form.

4) Does become a good lead manager affects the investors attitude

towards any public issue?

A: Yes, it affects the mind and attitude of the investor, I am not saying thathaving a support of good merchant banker gives guarantee to success but at

the time of advertising of the public issue we publish the name of lead

manager, that gives the basic idea about the genuineness of the issue.

5) Does the regulatory environment in India is efficient to control

and promote the merchant bankers?

A: Yes, Consequent upon the policy of liberalization adopted by the

government in 1991, and the subsequent abolition of capital issues control

1992, the primary market got a tremendous boost. After establishment of

SEBI the market became more flexible and investors confidence have

increased in current days, also SEBI is also promoting the primary and

secondary market through various policies.

6) As being a portfolio manager where do you invest the clients

money?


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A: As our main object of portfolio is to reduce risk by diversification and

maximize gains, we mostly invest clients money in a good rated company

and we often invest their money sector wise also which is in boom in current

market condition.

7) According to you, which sector does you think is booming to

invest the clients money?

A: I think the IT sector and banking sector is the best option to invest the

clients money.

8) So, as a merchant banker, where do you see IPO market after 10

years? What would you advice our investors?

A: As I said before since 1991 our IPO market is under tremendous growth

and in coming years there are chances of coming thousands of issues. And

most of the companies will get success in the capital market if the market

remains in this condition.

LIMITATIONS OF THE PROJECT


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As far as my project is concerned, it was a great experience to meet

various people in the finance field. People from various banks, financial

institutions to whom I met, helped in giving me practical knowledge of this

topic issue management.

However, there were certain limitations. The main limitation was I

was not able to collect information about the topic from all the merchant

bankers. Some of them were senior manager, business development

manager. If the information collected from them is not 100% correct then it

may affect tabulated primary data. Also there was shortage of data available

with the bank.

These were some of major limitations I found while collecting

secondary data.

CONCLUSION


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After analyzing the primary data, It can be conclude that at present

capital market is the best option available to those people who want to take

risk and want high returns, also various services offered by the merchant

banks will gain a lot of importance in future since it helps an individual

investor, other intermediaries and FIIS, who have a large funds, by the way

of management of funds by expert portfolio managers.

Portfolio management is an important and effective tool for managing

funds. So, as the time passes and when the people will understand the benefits and importance of portfolio management, its popularly will

definitely increase.

The current scenario Indian Inc is at the top of the achievement cycle.

This is really healthy sign for Indian economy. Taking lessons from the past

events of the dotcom bust and vanishing companies, the investors should

scrutinize the IPO before investing. Investment in IPOs does not itself mean

a profit rather it may bring loss to the investors as happened during an IPO

boom between 1992-95 where the investors lost in over 80% of the 3911

issues. Number of IPOs has also delivered negative returns in the recent

past.

It seems that some companies are flooding the issues without any

genuine reason. They simply want to encash the opportunities to raise funds.

In this regard, SEBI is considering the idea of IPO grading so that the

investors do not get confused by a series of public issues hitting the market.


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In spite of all these efforts investors should think for quality IPOs. After all

it is investors money that is at stake.

The merchant banker plays a vital role in channelising the financialsurplus of the society into productive investment avenues. Hence before

selecting a merchant banker, one must decide what the services for which he

is being approached are. Selecting the right intermediary who has the

necessary skills to meet the requirements of the client will ensure success.

It can be said that this project helped me to understand every details

about Merchant Banking and in future how its going to get emerged in the

Indian economy. Hence, Merchant Banking can be considered as essential

financial body in Indian financial system.

Market development is predicated on a sound, fair and transparent

regulatory framework. To sustain the growth of the market and crystallize

the growing awareness and interest into a committed, discerning and

growing awareness and interest into a essential to remove the trading

malpractice and structural inadequacies prevailing in the market, and

provide the investors an organized, well regulated market place in future.

ANNEXURE


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Format of Due Diligence Certificate to be given by the Debenture

Trustee Before. Opening of the Issue

To

Securities and Exchange Board of IndiaDear Sirs,

Sub.: Issue of by Ltd.

We, the under noted debenture trustee(s) to the abovementioned forthcoming

issue state as follows:

(1) We have examined various documents pertaining to the security to be

created for the said issue and other such relevant documents.

(2) On the basis of such examination and of the discussions with the

company, its directors and other officers, other agencies and of independent

verification of the various relevant documents, we confirm that:

(a) The company has made adequate provisions for and/or has taken steps to

provide for adequate security for the debentures to be issued.

(b) The company has obtained all the permissions necessary for creating

security on the said property(ies).

(c) The company has made all the relevant disclosures about the security and

also its continued obligations towards the debenture holders.

(d) All disclosures made in the draft prospect us letter of offer with respect

to the security are true, fair and adequate to enable the investors to make a

well-informed decision as to the investment in the proposed issue.

(3) We have satisfied ourselves about the ability of the company to servicethe debentures.

Place:

Debenture Trustee to the Issue with the Seal

Format for Due Diligence Certificate at the


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Time of Filing of the Offer Document with the ROC

To,

The Securities and Exchange Board of India

Mumbai/Chennai /New Delhi/KoIkata

Issue Management: Pre-Issue and Post-Issue Obligations __ Dear Sires)

Sub: Public issue of shares of etc.

(Details of the issue)

This is to certify that the offer document filed with the Registrar of

Companies on was suitably updated under intimation to the SEBI and that

the said offer document contains all the material disclosures in respect of the

issuer company as on the said date. We confirm that the registrations of all

the intermediaries named in the offer document are valid as on date and that

none of these intermediaries has been debarred from functioning by any

regulatory authority. We confirm that written consent has been obtained

from shareholders for inclusion of their securities as part of promoters'

contribution, subject to lock-in. We further confirm that the securities

proposed to form part of promoters' contribution and subject to lock-in have

not been disposed off/sold/transferred by the promoters during the period

starting from the date of filing the draft prospectus with the SEBI, till date.


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BIBLIOGRAPHY

BOOKS:

Financial Management -

By M.Y.Khan

Indian Banking (Theory) -By Natrajan and S. P. Parmeshwaran

WEBSITES:

www.mangement paradise.com

www.google .com

www.rbi.org.in

www.sebi.gov.in

Date post:	07-Apr-2018
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