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PRESENTED TO PROF VIDYASHEELA BANERJEE

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Name Roll No.

Robin Awathare M1001

 Jatin Kambli M1016

Mahesh Patade M1034

Rakesh Patil M1036

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Introduction History

Merchant banking in India

Role of merchant bank Setting up a merchant banking outfit

Objectives

Obligations and Responsibilities

Code of Conduct

Guidelines of SEBI

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Merchant bankers assist corporate in raising capital.They assist in issue of Shares, syndicating loans,public issue of debentures.

They also actively arrange working capital, appraisalProjects scrutinize & persuade merger proposals.

In BRITAIN merchant bankers & investment bankersare synonymous. 

In the U.S., Merchant bank means as investment bankwhich is well-equipped to handle multinationalcorporations.

Merchant banks in India are not allowed to conductany business other than that related to securitiesmarket.

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ORIGIN  Merchant Banking in India – Historical Perspective

1.  JAGAT SHETH (1720-1773AD, BENGAL)

2. HABIB & SONS which is now HABIB BANK

Merchant Banking in India – Post Independence

1. In 1967, RBI issued its first merchant bankinglicense to grind lays

2. State bank of India started the merchant bankingdivision in 1972

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Stock underwriting Project counselling

Loan syndication

Issue management Portfolio management

Nri investment :

Advisory service relating to mergers and

takeovers

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Formation of the Business Organization Adoption of a viable business plan

Registration of Merchant Bankers1. Application for grant of certificate

2. Application to conform to the requirements

3. Furnishing of information, clarification andpersonal representation

4. Consideration of application

5. Procedure for Registration

6. Payment of fees and the consequences of failure topay fees

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Industry compartmentalizationo Expertise in underwriting, hire purchase, leasing,

and portfolio management, money-lending, etc.

oRBI does not permit merchant banking firms to get

into these activitiesopromoters have to setup different companies for

different purposes

oManagement cost increases and expertise pooling

i.e. multiple use of same talent is not possible

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Malafide practiceso  Corporate have excessively friendly

approach

o Favored allotment of shares, tamperingwith project appraisal report to bankers iscommon

o Corporate like to use merchant bankers for

malafide intentions

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Regulations

oMuch better and scope for further improvement

oMore accountable and responsible

o Professional qualification focused on merchant

banking is not available

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Size and dynamics of the market

o Indian market is growing. In fact India is one of the

largest emerging markets. Obviously, public issues,

FDI, debt raising are on rise. Lots of new projects

are happening. Merchant bankers have lots space to

contribute.

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Banking policies 

o RBI prefers that commercial banks do not indulge in

merchant banking business directly.

o They should setup a subsidiary for the purpose. This

limits scope of commercial banks and gives space to

merchant bankers.

o Some countries allow commercial bankers to get

involved in IPO’s, placement of debentures, etc.

o Indian scenario is favorable to merchant bankers.

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Corporate culture 

o corporate can do project appraisal, strategic

restructuring in house as well.

o If the corporate prefer third-party independent

assessment, then only they will engage merchant

bankers. Otherwise merchant banker’s role is only

statutory as in issue management.

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Corporate dynamics 

oMore happening in business gives more

opportunities to merchant bankers.

oMergers, takeover acquisition, new projects, fund

raising for government institutions, active money

market are all providing better business prospectus

to merchant bankers.

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Upto 1970, there were only two foreign banks

SBI was the first Indian commercial bank andICICI the first financial institution to take up

the activities in 1972 and 1973 respectively In 1980’s some commercial banks set – up

their subsidiaries

Large stock broking firms and financial

consultants Growth after the process of economic reforms

and deregulation of Indian economy in 1991

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The number of merchant banks increased to115 by the end of 1992-93, 300 by the endof 1993-94 and 501 by the end of August,1994

A large number of reputed internationalMerchant Bankers like Merrill Lynch, MorganStanley, Goldman Sachs, etc.

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Leading Merchant Bankers in India, offeringspecialized services to Banks, PSUs, State ownedCorporations, Local Statutory bodies and

corporate sector

Serviceso Merchant Bankingo

Commercial Bankingo Investmentso Underwritingo Loan Syndication

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Other Serviceso Equity Issue (Public/Rights) ManagementoDebt Issue Managemento Private Placementso

Project AppraisalsoMonitoring Agency Assignmentso IPO FundingoAgriculture Consultancy ServicesoCorporate Advisory ServicesoMergers and Acquisitionso Buy Back Assignmentso Share Valuations

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Issue management serviceso Project Appraisalo Capital structuringo Preparation of offer documento Tie Ups (placement)o Formalities with SEBI / Stock Exchange / ROC etc.,o Underwritingo Promotion /Marketing of Issueso Collecting Banker / Banker to an issueo Post Issue Managemento Refund Bankerso Handling of Dividend Warrant/Interest Warrant Paymentso Debenture Trusteeship