Merchant Banking Prashant

8/4/2019 Merchant Banking Prashant

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Prashant Kale [25]


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Meaning In banking, merchant bank is a financial institution

primarily engaged in offering financial services and

advice to corporations and wealthy individuals on howto use their money.

The term can also be used to describe the private equity

activities of banking.


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Merchant Banks - Concept No statutory or any authoritative definition.

For many, it means management of capital issues of

companies. Some confuse this with investment banking and an issue

house.

Yet another group of persons mean it to what a merchant

banker does. In this situation, let us try to settle for a workable

definition of this term.


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Definition In the Indian context, understood to be non-fund basedand non-banking services

Merchant bankers -neither merchants nor bankers Rule 2(e) of SEBI (merchant bankers) Rules 1992, defines merchant banker means any person who is engaged in the

business of issue management either by makingarrangements regarding selling, buying or subscribing tosecurities as manager-consultant, advisor or rendering

corporate advisory services in relation to such issuemanagement


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Merchant banking Vs Commercial

banking

A bank can undertake merchant bankingbusiness, but a Merchant Bank can notundertake banking business.


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Merchant Banking Vs Investment

Banking Thin difference

investment banker does the following Selling issues of securities of companies,

Underwriting functions, Helps in mergers and acquisitions, Investment advises, Finding buyers for private placement, Dealing in securities, etc.

Hence, similarities between MB and IB. Generally,investment advises and dealing in securities are notperformed by Merchant Banker.


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Merchant Banking in IndiaMerchant Banking Divisions

IndianBanks

FinancialInstitutions

PrivateMerchantBankers

Subsidiary Division inBank

ForeignBanks


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Merchant Banking and Corporates

Objectives ofMerchantBanking

Guidance

Project Formulations

Implementation

Modernization

Diversification

Mobilizing Resources

Raising Working Capital


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Activities of Merchant BankersWide range of activities broadly classified under two

heads - counseling and procuring finance

Some of the important functions of a MerchantBankers are Project counseling or reinvestment studies for investors Syndication of loans and project finance Issue management Provision of working capital Portfolio Management Foreign Currency Loans


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SERVICES RENDERED BY

MERCHANT BANKERS Project finance advice

Project appraisal

Capital restructuring

Issue management

Loan syndication

Foreign currency finance

Investment management


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Continued.. Mutual funds

Lease finance

Bill discounting

Mergers and acquisitions

Working capital finance

Government consents

Arranging fixed deposits

Corporate counseling


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Continued.. Underwriting

Non-resident investment

Relief to sick industrial units

Hire purchase

Money market operations


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AUTHORISED ACTIVITIES OF

MERCHANT BANKERS Issue Management

Corporate Adviser Services relating to Issue

Underwriting

Portfolio Management

Managers, Consultants or Advisors in the

Issue


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Categories of merchant bankers Category I Those authorised to act in the capacity of

led manager/co-manager/advisor or consultant to anissue, portfolio manager and underwriter to an issue.

Category II those authorised to act in the capacity ofco-manager or consultant to an issue or portfoliomanager.

Category III

those authorised to act only in thecapacity of advisor or consultant to an issue.


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Association of merchant bankersAMBI registered as a self regulatory organization

under sec. 25 of the companies act 1956

Reasons to form AMBI-

No control on prices of new issues

Prices decided by merchant bankers

Investors have become more demanding

Demands for stringent regulation of the merchantbankers.


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Punjab National Bank The Bank is registered with SEBI as Category I Merchant

Banker for providing all the major Merchant Banking

services.


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Canara Bank

One of the leading Merchant Bankers in India

Offering specialized services to Banks, PSUs, State owned

Corporations, Local Statutory bodies and corporate sector.

They are SEBI registered Category I Merchant

Banker/Underwriter to carry on Issue Management

(Public/Rights/Private Placement Issues), Underwriting,

Consultancy and Corporate Advisory Services etc.

They also hold SEBI registration Certificate to act as "Bankers

to an Issue" with network of exclusive Capital Market ServiceBranches to handle "Capital Market" related assignments.


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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


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Documents

Merchant Banking Prashant