1. Merchant Banking
PRESENTED BY:
BISWAJIT PALIT
AMRITA DAWN
JERRY JOHN
RAJSHEKHAR

3. DEFINITION
• MERCHANT BANKING is defined as “an
institution which covers a wide range of
activities such as underwriting of shares,
portfolio management, management of
customer services, project counseling,
insurance etc”…
• They render all these services for a fee

4. DIFFERENCE BETWEEN
MERCHANT BANK AND
COMMERCIAL BANK

5. COMMERCIAL BANKING MERCHANT BANKING
Deals with Debt & Debt related
finance.
Deals with Equity & Equity related
finance.
Asset oriented. Management oriented.
Generally avoid risks. Willing to accepts risks.
Commercial banks are referred to as
“Banks”
Merchant banks are commonly called
as “Investment Banks”
Anyone can open an A/C It cannot be done.
Related to secondary market. Related to primary market.

6. Merchant Banking
Services…?

7. SERVICES OF MERCHANT BANK
 Corporate counseling
 Project counseling
 Loan syndication
 Issue management
 Portfolio management
 Advisory service relating to mergers and
takeovers
 Offshore finance
Non resident investment

8. Corporate Counseling
Covers the entire field of merchant banking, Ltd
to giving suggestions
• Corporate counselling aims at engaging employees in
making healthy lifestyle choices by providing the
employees and the organization with the tools,
resources, and knowledge to create a health supportive
work environment.

9. Project Counseling
Preparing project report for govt. approval , financial
assistance
• It includes preparation of project reports,
deciding upon the financing pattern, appraising
the project relating to its technical, commercial
and financial viability. It includes filling up of
application forms for obtaining funds from
financial institutions.

10. Loan syndication
Assistance rendered to get term loan for project, help client make
appraisal, designing capital structure etc
• Assistance is rendered to raise loans for
projects after determining promoter’s
contribution. These loans can be obtained
from a single institution or a consortium.

11. ISSUE MANAGEMENT :
Management of issues involves marketing of corporate securities i.e.…
equity shares, preference shares and debentures by offering them to
public.
Pre-issue activities:
They prepare copies of prospectus and send it to to SEBI and then file
them to Registrar of Companies
They conduct meetings with company representatives and advertising
agencies to decide upon the date of opening issue, closing issue,
launching publicity campaign etc..
They help the companies in fixing up the prices for their issues
Post-issue activities:
It includes collection of application forms, screening of applications,
deciding allotment procedure, mailing of allotment letters, share
certificates and refund orders

12. PORTFOLIO MANAGEMENT
Investment in different kind of securities
• Portfolio refers to investment in different kinds of securities such as
shares, debenture issued by different companies. It is a combination of
assets but a carefully blended asset combination.
• Portfolio management refers to maintaining proper combination of
securities in a manner that they give maximum return
• Investors are interested in safety, liquidity and profitability of his
investment but they cant choose the appropriate securities. So
merchant bankers help their investors in choosing the shares. They
conduct regular market and economic surveys.

13. ADVISORY SERVICE RELATING TO MERGERS
AND TAKEOVERS
• Merger is a combination of two or more companies into a
singe company where one survives and other loses its
existence
• Takeover is the purchase by one company acquiring
controlling interest in the share capital of another company
• Merchant banker acts as middlemen between offer or and
offeree, negotiates mode of payment and gets approval from
government.

14. Offshore finance
 Help in areas involving foreign currency
• Located or based outside of one's national
boundaries. The term offshore is used to
describe foreign banks, corporations,
investments and deposits. A company may
legitimately move offshore for the purpose of tax
avoidance or to enjoy relaxed regulations.

15. Non resident investment
Provide help in better and smooth trade to NRIs
• NRIs has to follow lots of complicated rules
for investing in the shares in India. Merchant
bankers help them in choosing the shares and
offer expert advice fulfilling government
regulations thus mobilizing more resources for
corporate sector.

16. Qualities Required of
Merchant Bankers
 Ability to analyse
 Abundant knowledge
 Ability to built up
relationship
 Innovative approach
 Integrity
(Best merchant bankers)
(left) Rashesh Shah
Chairman & CEO, Edelweiss
(right) Nimesh Kampani
Chairman & MD, JM Financial

17. Merchant banking
Problems….?

18. Qualities of Merchant
Banker
 Should have knowledge and information about the
capital markets, trends in the stock exchange,
psychology of the investing public, and technological
and economical changes in the country;
 Ability to analyze and evaluate various technical,
financial, and economical aspects of an industrial
project;
 Safeguard the interest of the investing public. Integrity
and maintenance of high professional standards are
necessary for the success;

19. conti…
 Should realize the changing environment of capital
market and keep cordial relationship with the investors;
 They should develop innovative capital market
instruments for satisfying the changing needs of
investors;
 Must restrict, concentrate and develop their strength to
keep costs under control.

20. filing of the prospectus
 Printing and dispatch of prospectus and application form;
 Filing of initial listing application;
 Promotion of the issue;
 Statutory announcement;
 Collection of applications;
 Processing of applications;
 Allotment of shares;
 Listing of the issue;
 Cost of public issue.

21. proBleMs of Merchant
Bankers
 As per SEBI guidelines, Merchant Bankers are authorized to
undertake only issue related activities, which restrict their scope of
activities.
 Not creating trouble for customer for the image of these bankers at the
investors.
 Yet merchant banking is vast but should develop adequate expertise to
provide a full range of merchant banking services
 SEBI stipulates high capital adequacy norms for authorization which
prevents young, specialized professionals into merchant banking
business

22. Merchant banking
Guidelines And Scope in
India…?

23. guidelines for the Merchant
Bankers
 Should have qualification in finance, law or business
management;
 Should have adequate office space, equipment and
manpower;
 At least 2 merchant bank operations qualified persons to
be appointed;
 Should be fair in all transactions;
 SEBI will supervise the activities of merchant bankers.

24. future prospects / scope
in india
 Growth of primary market;
 Entry of foreign investors;
 Changing policy of financial institutions;
 Development of debt market;
 Innovations in Financial Instruments
 Corporate restructuring.

25. 1) Growth of new issues
market
 Indian market largest emerging market
 Domestic and foreign investors setting up
their biz here.
Many public and private issues coming up
 Growth in new issues market

26. 2) Entry of Foreign
Institutional Investers
 Indian capital market is globalised
 Indian Cos. are permitted to invest in euro
issues. Similarly, FII are permitted to invest in
India.
 Hence M.Bs need to advise for their invest in
India.
 Increasing no expert services of M.Bs.

27. 3) Changing policy of Financial
Institutions
 Liberalisation of policies
 FI would require expert services of M.Bs
for project appraisal, financial
management, financial restructuring etc.

28. 4) Development of debt
market
 Good portion of capital
can be raised through
debt instruments.
 Tremendous
opportunities to M.Bs.

29. 5) Innovations in Financial
Instruments
 New financial instruments have come up.
M.Bs are market makers for these
instruments.

30. 6) Corporate Restructuring
 Liberalization and globalization
 Competition in corporate sector becoming intense.
 Reviewing their strategies, structure and functioning
etc. leading to corporate restructuring.
 Good opportunity to M.Bs to extend their area of
operation.

31. BISWAJIT PALIT
AMRITA DAWN
JERRY
JOHN
RAJSHAKHER