MERCHANT BANKING

Submitted By :
Anshul Sharma
Sonam Mishra

Defination
According to SEBI Merchant Bankers rules 1992
& The Notification of the Ministry of Finance
the merchant banker is:

Any person who is engaged in the business of

issue management either by making
arrangements regarding selling , buying or
subscribing
to
securities
as
managerconsultant ,advisor or rendering corporate
advisory services in relation to such issue
management.

In India, Merchant bankers are a body

corporate who carries on any activity of the
issue management, which consist of
preparing prospectus and other information
relating to the issue. Merchant banks in
India are not allowed to conduct any
business other than that related to
securities market. There is no official
category in investment banking.

Merchant Banking : Origin

Merchant Banking came into existence in
17th & 18th century in Italy & France.
Merchant banking in the modern era
started from London; Merchants started to
finance the foreign trade through
acceptance of bill.
Started by national Grindlays bank in 1967
and city bank in 1970.
Recognized the requirements of upcoming
class of Entrepreneurs for diverse financial
services.

Progress of Merchant Banking

In India
Upto 1970, there were only two foreign banks which
performed merchant banking operations in the country.
SBI was the first Indian commercial bank and ICICI
the first financial institution to take up the
activities in 1972 and 1973 respectively. As a result
of buoyancy in the capital market in 1980s some
commercial banks set up their subsidiaries to operate
exclusively in merchant banking industry. In addition, a
number of large stock broking firms and financial
consultants also entered into business. Thus, by the end
of the end of 1980s there were 33 merchant bankers
belonging to three major segments viz.,
commercial banks, all India financial institutions,
and private firms.

Merchant banking industry which remained almost

stagnant and stereotyped for over two decades,
witnessed an astonishing growth after the process of
economic reforms and deregulation of Indian economy
in 1991. The number of merchant banks increased to
115 by the end of 1992-93 300 by the end of 1993-94
and 501 by the end of August, 1994. all merchant
bankers registered with SEBI under four different
categories include 50 commercial banks, 6 all Indian
financial institutions ICICI, IFCI, IDBI, IRBI, Tourism
Finance corporation of India, infrastructure Leasing
and Financial Services Ltd. and private merchant
bankers.

About Merchant Banking

Bank that deals mostly in international finance,
long-term loans for companies and stock
underwriting.
Merchant banking primarily involves financial
advice and services for large corporations and
wealthy individuals.
Merchant banks do not provide regular
banking services to the general public.
Merchant banks invest their own capital in
client companies & provide services for
mergers and acquisitions.

A merchant bank is sometimes said to be

a wholesale bank, or in the business of
wholesale banking.
Its because merchant banks tend to deal
primarily with other merchant banks and
other large financial institutions.
As of today there are 135 Merchant
bankers who are registered with SEBI,
India.
This includes Private, Public & Foreign
players.

Main Merchant Banking

Companies
Public Sector

Functions
Issue Management Services to act as Book
Running Lead Manager/Lead Manager for
theIPOs/FPOs/Rightissues/Debt issues
Project appraisal;
Corporate Advisory Services;
Underwriting of equity issues;
Banker to the Issue/Paying Banker;
Refund Banker;
Monitoring Agency;
Debenture Trustee;

Objectives
To carry on the business of merchant banking,
assist in the capital formation, manage advice,
underwrite, provide standby assistance, securities
and all kinds of investments issued, to be issued or
guaranteed by any company, corporation, society,
firm, trust person, government, municipality, civil
body, public authority established in India.
The main object of merchant banker is to create
secondary market for bills and discount or rediscount bills and acts as an acceptance house.
Merchant bankers another objective is to set up
and provide services for the venture capital
technology funds.

They also provide services to the finance housing

schemes for the construction of houses and buying
of land.
They render the services like foreign exchange
dealer, money exchange, and authorized dealer
and to buy and sell foreign exchange in all lawful
ways in compliance with the relevant laws of India.
They will invest in buying and selling of transfers,
hypothecate and deal with dispose of shares,
stocks, debentures, securities and properties of
any other company.

Obligations and Responsibilites

Merchant bankers have the following obligations
and responsibilities.
Merchant banker should maintain proper books of
accounts, records and submit half yearly/annual financial
statements to the SEBI within stipulated period of time.
No merchant banker should associate with another
merchant banker who is not registered in SEBI.
Merchant bankers should not enter into any transactions
on the basis of unpublished information available to
them in the course of their professional assignment.
Every merchant banker must submit himself to the
inspection by SEBI when required for and submit all the
records.

Every merchant banker must disclose

information to the SEBI when it requires any
information from them.
All merchant bankers must abide by the code
of conduct prescribed for them.
Every merchant banker who acts as lead
manager must enter into an agreement with
the issuer setting out mutual rights, liabilities,
obligations, relating to such issues with
particular reference to disclosures allotment,
refund etc.

Categories
To act as a merchant banker, a person or firm should hold a
certificate granted by the regulator- the securities and
exchange board of India. SEBI regulations provide for
categories of Merchant Bankers;

Category I: It Will take up activities associated

with issue management.
Category II: Allowed to carry the roles of
advisor, consultant, co-manager, underwriter and
portfolio manager;
Category III: Allowed to act as underwriter,
advisor, and consultant; and
Category IV: Only allowed to act as advisor or
consultant.

CAPITAL ADEQUACY NORMS :

Category I

: Rs. 5 crores

Category II : Rs.50 lakhs

Category III : Rs.20 lakhs

Category IV : Nil

Services

Merchant bankers provide services as follows:

Business planning stage:
1)project feasibility study
2)advice on capital structuring
Equity raising:
3)preparation of prospectus and liaison with SEBI
4)pricing decisions
5)marketing in the capacity of lead managers
6)underwriters to the issue
7)post issue management
8)assistance in ADR/GDR
Debt raising:
9)management of debenture issue
10)preparation of bankable proposal and syndication of loan
Working capital raising:
11)assistance in arranging optimal capital finance
Strategic advice:
12)advice on mergers and acquisitions
13)corporate structuring advice

Merchant banking activities are regulated by

1.Guidelines of SEBI & Ministry of Finance

2.Companies Act, 1956
3.Listing Guidelines of Stock Exchange and
4.Securities Contracts (Regulation) Act,1956

Regulations of Merchant Banking:

The merchant banking activity in India is

governed
by
SEBI
(Merchant
Bankers)
Regulations, 1992.
Registration with SEBI is mandatory to carry out
the business of merchant banking in India.
An applicant should comply with the following
norms: i) The applicant should be a corporate
body.
ii) The applicant should have necessary
infrastructure like office space, equipment,
manpower, etc.

Contd..
iii) The applicant must have at least two employees
with prior experience in merchant banking.
iv) Any associate company, group company,
subsidiary or interconnected company of the
applicant should not have been a registered
merchant banker.
v) The applicant should not have been involved in
any securities scam or proved guilt for any offence.
vi) The applicant should have a minimum net worth
Rs50 million.

Qualities of merchant bankers

Knowledge: Thorough understanding of technical issues related

to business, understanding of legal and statutory requirements,
appreciation of business acumen; financial expertise is a key thing
a merchant banker must know. Delivery of his services depends
on his basic understanding of these issues.

Capital market familiarity: Merchant banker should be well

versed with stock markets, their movements. He should track imp
happenings in the market on ongoing basis

Liasioning ability: Merchant bankers are required to liaison with

SEBI, RBI, the stock exchanges, depositories and other
government authorities for public issue related duties. It is
imperative that a merchant bank maintains excellent rapport with
all of them and also close relations even at informal levels. This
only can see speedy and favorable clearances by the authorities.

Innovation: Corporate may approach with unique

requirements. Standard solutions and products may not
solve problems sometimes. Merchant bankers should do
out of box thinking and be able to do financial
engineering. They can device new financial instruments
and get approved from the authorities. Innovation is
required even to address stringent legal requirements.

Integrity: Merchant banker has valuable and

confidential information of its customers. Merchants
bankers should take utmost care that the information is
not leaked and also not consumed for the purpose other
than for which it was disclosed to the merchant banker.

Merchant Banking Services

1.Canara Bank
Their uniqueness is extending services under single window
concept covering the following areas:
Merchant Banking
Commercial Banking
Investments
Bankers to Issue - Escrow Bankers
Underwriting
Loan Syndication

As leading Merchant Bankers in India, they have associated

with issues ranging from Rs.1crore to Rs.1500 crores,
involving various types of industries, banks, statutory
Bodies etc. and have an edge in handling Private Placement
issues both retail & HNIs.

SPECTRUM OF SERVICES:

Equity Issue (Public/Rights) Management

Debt Issue Management
Private Placements
Project Appraisals
Monitoring Agency Assignments
IPO Funding
Security Trustee Services
Agriculture Consultancy Services
Corporate Advisory Services
Mergers and Acquisitions
Buy Back Assignments
Share Valuations
Syndication

ISSUE MANAGEMENT SERVICES:Project Appraisal

Capital structuring
Preparation of offer document
Tie Ups (placement)
Formalities with SEBI / Stock Exchange / ROC etc.,
Underwriting
Promotion /Marketing of Issues
Collecting Banker / Banker to an issue
Post Issue Management
Refund Bankers
Handling of Dividend Warrant/Interest Warrant
Payments
Debenture Trusteeship

Investment Criteria
A wide range of later stage opportunities are considered.
Targeted companies include the following characteristics:
1. Having weathered the start-up process and established a core
business model that is sustainable;
2. Proven management team;
3. If not already profitable, visibility to profitability within a 12month period;
4. Having established business partnerships that give it a major
position in a market space;
5. Significant barriers to entry; and
6. Technology or business that is scalable with global applications.
They look for opportunities for synergistic consolidation
and/or companies that are on the verge of extraordinary
growth.

2. State bank of india

SBIs

Merchant Banking Group is strongly positioned to offer

perfect financial solutions to your business. They specialize in the
arrangement of various forms of Foreign Currency Credits for
Corporate.

They

provide the resources, convenience and services to meet

your needs by arranging Foreign Currency credits through:
Commercial loans
Syndicated loans
Lines of Credit from Foreign Banks and Financial Institutions
FCNR loans
Loans from Export Credit Agencies
Financing of Imports.
They are internationally the most Preferred Bank by Export Credit
Agencies for Guarantees in case of the Indian Clients or Projects

SBI being an Indian entity has no India exposure

ceiling. Their Primary focus is On Indian Clients.
SBIs seasoned Team of professionals provides you
with Insightful credit Information and helps you
Maximize the Value from the transaction.

PRODUCTS AND SERVICES

1] Arranging External Commercial Borrowings (ECB)
2] Arranging and participating in international loan
syndication
3] Loans backed by Export Credit Agencies
4] Foreign currency loans under the FCNR (B)
scheme
5] Import Finance for Indian corporate.

3. Punjab National Bank

Indias one of the Leading Nationalized Bank

established in 1895, serving over 3.5crore customers
through 4520 branches and 439 extension counters is the
largest amongst Nationalized Banks. The Bank has recently
been ranked 21st among top 500 companies and 9th among
top 50 brands by the Economic Times. All the Branches of
the Bank have been computerized. The Bank has a concept
of "Any Time, Any Where Banking" through the introduction
of Centralized Banking Solution (CBS) and over 2511 offices
have already been brought under its ambit.

The Bank is registered with SEBI as Category I Merchant

Banker for providing all the major Merchant Banking
services.

Our gamut of Merchant Banking services includes:

Issue Management Services to act as Book
Running Lead Manager/Lead Manager for the
IPOs /FPOs/Right issues/Debt issues
Project appraisal
Corporate Advisory Services
Underwriting of equity issues
Banker to the Issue/Paying Banker
Refund Banker
Monitoring Agency
Debenture Trustee
Marketing of the issue through a strong network of
QIBs/HNIEs/Corporates and Retail investor. The
Bank itself is one of the major investor in the
market having a treasury of 45000 crores.

Their Software for handling the Refund Banker

is one of the best systems in the industry. Its
unique features provides online payment of the
instrument by our 2470 branches in 733
centers, online status of paid instruments,
100% reconciliation at any point of time etc.

The Bank has an exclusive and specialized

Capital Market Service Branch at New Delhi for
providing Merchant Banking Services to the
Corporate

4. ICICI Bank

Employees : 94,204
Employee Growth : 37.2 Percent
ICICI Bank is India`s 2nd largest bank (after
SBI) with more than 600 branches and 2200
ATM nationwide. ICICI`s retail banking group
offers lending and deposit services to small
businesses and individuals. Larger businesses
are served by the corporate banking group,
which offers finance services and treasury
products. ICICI`s rural and government
banking unit offers micro loans and agricultural
banking. Other ICICI offerings include online
banking, asset management and insurance.

ICICI Security is a SEBI Registered CAT-1

Merchant Banker.
The Bank has not managed any public
issues from the years 2008-2009 to 20132014 as a merchant banker.
ICICI Advice on wide variety of product :
1. Private Equity Financing
2.
Secondary Sale Transactions
3.
Pre IPO Deals.

THANK YOU