Merchant Banking
INTRODUCTION <ul><li>Refers to British Merchant banking . </li></ul><ul><li>Concerned with mobilising savings of people . ...
DEFINITION MERCHANT BANKING is defined as “an institution which covers a wide range of activities such as management of cu...
ORIGIN <ul><li>Originated through London merchants. </li></ul><ul><li>Extension of activities to domestic business of synd...
Merchant Banking In India…?
Merchant banking in India <ul><li>Need for merchant banking was felt with rapid growth in number & size of issues made in ...
<ul><li>Merchant banking services were offered along with other traditional banking services. </li></ul><ul><li>SBI was fi...
DIFFERENCE BETWEEN COMMERCIAL BANKING & MERCHANT BANKING <ul><li>Deals with Debt & Debt related finance. </li></ul><ul><li...
Merchant Banking Services…?
SERVICES OF MERCHANT  BANK <ul><li>The financial institutions in India could not meet  the demand  for long-term fund requ...
Services of Merchant Banks Preparing project report for govt. approval , financial assistance Project Counseling  2 Covers...
Drafting, completion of formalities, appoint Registrar etc Managers to Issue 6 Guarantee given by the underwriter, make ra...
Provide help in better and smooth trade to NRIs Non- Resident Investment 10 Help in areas involving foreign currency Off S...
Merchant Banker as Managers, Consultants or Advisors <ul><li>Companies are free to appoint one or more agencies as manager...
Merchant Banker As lead Manager   <ul><li>Appointment of a lead manager by a company </li></ul>S. No Size of  the  issue M...
Duties & Responsibilities Of LM <ul><li>To enter into an agreement </li></ul><ul><li>Certificate of registration with SEBI...
<ul><li>Due care & diligence </li></ul><ul><li>Submitting due diligence certificates </li></ul><ul><li>Submit all particul...
Qualities Required of Merchant Bankers <ul><li>Ability to analyse  </li></ul><ul><li>Abundant knowledge </li></ul><ul><li>...
CATEGORY OF MERCHANT BANKER <ul><li>CATEGORY </li></ul><ul><li>1 st  :- </li></ul><ul><li>2 nd  :- </li></ul><ul><li>3 rd ...
The M.B.registered with SEBI classified according to the category :- MERCHANT BANKER PUBLIC SECTOR PRIVATE SECTOR COMMERCI...
Merchant banking Problems….?
Restriction of merchant banking activities <ul><li>SEBI guidelines have authorised merchant bankers to undertake issue rel...
Minimum net worth of Rs.1 crore <ul><li>SEBI guidelines stipulate that a minimum net worth of Rs.1 crore for authorisation...
Non co-operation of issuing companies <ul><li>Non co-operation of the issuing companies in timely allotment of securities ...
MERCHANT BANKERS COMMISSION   <ul><li>Maximum 0.5% </li></ul><ul><li>Project appraisal fees </li></ul><ul><li>Lead Manager...
<ul><li>Underwriting fees </li></ul><ul><li>Brokerage commission 1.5% </li></ul><ul><li>Other expenses :- </li></ul><ul><l...
Merchant banking Scope in India…?
1) Growth of new issues market <ul><li>Indian market largest emerging market </li></ul><ul><li>Domestic and foreign invest...
2) Entry of FII <ul><li>Indian capital market is globalised </li></ul><ul><li>Indian Cos. are permitted to invest in euro ...
3) Changing policy of FI <ul><li>Liberalisation of policies </li></ul><ul><li>FI would require expert services of M.Bs for...
4) Development of debt market <ul><li>Good portion of capital can be raised through debt instruments. </li></ul><ul><li>Tr...
5) Innovations in Financial Instruments <ul><li>New financial instruments have come up. </li></ul><ul><li>M.Bs are market ...
6) Corporate Restructuring <ul><li>Liberalisation and globalisation </li></ul><ul><li>Competition in corporate sector beco...
7) Disinvestment <ul><li>It means reduction of some kind of asset of a firm for achieving either financial or ethical obje...
Conclusion <ul><li>Inspite of problems popping up, merchant banking in India has vast scope to develop because of lot of d...
Thank you...
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17159027 Merchant Banking Basics By Saylee

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17159027 Merchant Banking Basics By Saylee

  1. 1. Merchant Banking
  2. 2. INTRODUCTION <ul><li>Refers to British Merchant banking . </li></ul><ul><li>Concerned with mobilising savings of people . </li></ul>
  3. 3. DEFINITION MERCHANT BANKING is defined as “an institution which covers a wide range of activities such as management of customer services, portfolio mgmt, credit syndication, acceptance credit, counselling, insurance etc .
  4. 4. ORIGIN <ul><li>Originated through London merchants. </li></ul><ul><li>Extension of activities to domestic business of syndication of long-term & short-term finance, share transfer agents, debenture trustees, takeover etc. </li></ul>
  5. 5. Merchant Banking In India…?
  6. 6. Merchant banking in India <ul><li>Need for merchant banking was felt with rapid growth in number & size of issues made in primary market. </li></ul><ul><li>Merchant banking services were started by foreign banks, namely National Grindlays in 1967 & City bank in 1970 . </li></ul>
  7. 7. <ul><li>Merchant banking services were offered along with other traditional banking services. </li></ul><ul><li>SBI was first Indian bank to set up Merchant banking division in 1972. </li></ul>
  8. 8. DIFFERENCE BETWEEN COMMERCIAL BANKING & MERCHANT BANKING <ul><li>Deals with Debt & Debt related finance. </li></ul><ul><li>Asset oriented. </li></ul><ul><li>Generally avoid risks. </li></ul><ul><li>Deals with Equity & Equity related finance. </li></ul><ul><li>Management oriented. </li></ul><ul><li>Willing to accepts risks. </li></ul>
  9. 9. Merchant Banking Services…?
  10. 10. SERVICES OF MERCHANT BANK <ul><li>The financial institutions in India could not meet the demand for long-term fund required by the ever expanding industry and trade. </li></ul><ul><li>Corporate sectors enterprise meet their demand through issuing share and debenture in capital market. </li></ul>
  11. 11. Services of Merchant Banks Preparing project report for govt. approval , financial assistance Project Counseling 2 Covers the entire field of merchant banking, Ltd to giving suggestions Corporate Counseling 1 Summary Particulars Sr No
  12. 12. Drafting, completion of formalities, appoint Registrar etc Managers to Issue 6 Guarantee given by the underwriter, make raising of external resource easy Underwriting 5 Marketing corporate securities, intermediary in transfer of capital from one who owns to needy Issue Management 4 Assistance rendered to get term loan for project, help client make appraisal, designing capital structure etc Loan Syndication 3
  13. 13. Provide help in better and smooth trade to NRIs Non- Resident Investment 10 Help in areas involving foreign currency Off Shore Finance 9 Middlemen in setting negotiation Mergers and takeovers 8 Investment in different kind of securities Portfolio Management 7
  14. 14. Merchant Banker as Managers, Consultants or Advisors <ul><li>Companies are free to appoint one or more agencies as managers to the issue. </li></ul><ul><li>Sebi guidelines prescribe that issue should be managed atleast by one authorised merchant banker. </li></ul><ul><li>Not more than two M.B. should be appointed as lead managers to a public issue. </li></ul><ul><li>In issue over Rs.100 crores, maximum upto four M.B. could be associated as managers. </li></ul>
  15. 15. Merchant Banker As lead Manager <ul><li>Appointment of a lead manager by a company </li></ul>S. No Size of the issue Maximum Number Of Lead Manager 1. Less than Rs.50 crores 2 2. Rs.50 crores to Rs.100 crores 3 3. Rs.100 crores to Rs.200 crores 4 4. Rs.200 crores to Rs.400 crores 5 5. Above Rs.400 crores 5 or more as prescribed by SEBI
  16. 16. Duties & Responsibilities Of LM <ul><li>To enter into an agreement </li></ul><ul><li>Certificate of registration with SEBI </li></ul><ul><li>Work of issue management </li></ul><ul><li>Clearly defined responsibility </li></ul><ul><li>Minimum underwriting obligation </li></ul>
  17. 17. <ul><li>Due care & diligence </li></ul><ul><li>Submitting due diligence certificates </li></ul><ul><li>Submit all particulars to SEBI </li></ul><ul><li>Suggestions or modifications </li></ul><ul><li>Collections of the amount </li></ul><ul><li>Ensuring refund </li></ul><ul><li>Inform depository participants </li></ul>
  18. 18. Qualities Required of Merchant Bankers <ul><li>Ability to analyse </li></ul><ul><li>Abundant knowledge </li></ul><ul><li>Ability to built up relationship </li></ul><ul><li>Innovative approach </li></ul><ul><li>Integrity </li></ul>(left) Rashesh Shah Chairman & CEO, Edelweiss (right) Nimesh Kampani Chairman & MD, JM Financial (Best merchant bankers)
  19. 19. CATEGORY OF MERCHANT BANKER <ul><li>CATEGORY </li></ul><ul><li>1 st :- </li></ul><ul><li>2 nd :- </li></ul><ul><li>3 rd :- </li></ul><ul><li>4 th :- </li></ul><ul><li>MINIMUM NETWORTH </li></ul><ul><li>1 crore </li></ul><ul><li>50 lacs </li></ul><ul><li>20 lacs </li></ul><ul><li>NIL </li></ul>
  20. 20. The M.B.registered with SEBI classified according to the category :- MERCHANT BANKER PUBLIC SECTOR PRIVATE SECTOR COMMERCIAL BANKS :- 24 INTERNATIONAL BANKER :- 10 FINANCIAL INSTITUTION :- 6 STATE INSTITUTION :- 4 BANKS :- 10 FINANCE & INVESTMENT :- 231 LEASING
  21. 21. Merchant banking Problems….?
  22. 22. Restriction of merchant banking activities <ul><li>SEBI guidelines have authorised merchant bankers to undertake issue related activities and made them restrict their activities or think of separating these activities from present one and float new subsidiary and enlarge the scope of its activities. </li></ul>
  23. 23. Minimum net worth of Rs.1 crore <ul><li>SEBI guidelines stipulate that a minimum net worth of Rs.1 crore for authorisation of merchant bankers. </li></ul>
  24. 24. Non co-operation of issuing companies <ul><li>Non co-operation of the issuing companies in timely allotment of securities and refund of application money is another problem faced by merchant bankers. </li></ul>
  25. 25. MERCHANT BANKERS COMMISSION <ul><li>Maximum 0.5% </li></ul><ul><li>Project appraisal fees </li></ul><ul><li>Lead Manager :- </li></ul><ul><li>- 0.5% upto Rs.25 crores </li></ul><ul><li>- 0.2% more in excess of Rs.25 crores </li></ul>
  26. 26. <ul><li>Underwriting fees </li></ul><ul><li>Brokerage commission 1.5% </li></ul><ul><li>Other expenses :- </li></ul><ul><li>- Advertising </li></ul><ul><li>- Printing </li></ul><ul><li>- Registrar’s expenses </li></ul><ul><li>- Stamp duty </li></ul>
  27. 27. Merchant banking Scope in India…?
  28. 28. 1) Growth of new issues market <ul><li>Indian market largest emerging market </li></ul><ul><li>Domestic and foreign investors setting up their biz here. </li></ul><ul><li>Many public and private issues coming up </li></ul><ul><li>Growth in new issues market </li></ul><ul><li>Scope for M.Bs. have risen </li></ul>
  29. 29. 2) Entry of FII <ul><li>Indian capital market is globalised </li></ul><ul><li>Indian Cos. are permitted to invest in euro issues. Similarly, FII are permitted to invest in India. </li></ul><ul><li>Hence they need M.Bs to advise them for their invt in India. </li></ul><ul><li>Increasing no. of JVs also require expert services of M.Bs. </li></ul>
  30. 30. 3) Changing policy of FI <ul><li>Liberalisation of policies </li></ul><ul><li>FI would require expert services of M.Bs for project appraisal, financial management, financial restructuring etc. </li></ul>
  31. 31. 4) Development of debt market <ul><li>Good portion of capital can be raised through debt instruments. </li></ul><ul><li>Tremendous opportunities to M.Bs. </li></ul>
  32. 32. 5) Innovations in Financial Instruments <ul><li>New financial instruments have come up. </li></ul><ul><li>M.Bs are market makers for these instruments. </li></ul>
  33. 33. 6) Corporate Restructuring <ul><li>Liberalisation and globalisation </li></ul><ul><li>Competition in corporate sector becoming intense. </li></ul><ul><li>Cos. reviewing their strategies, structure and functioning etc. leading to corporate restructuring. </li></ul><ul><li>Good opportunity to M.Bs to extend their area of operation. </li></ul>
  34. 34. 7) Disinvestment <ul><li>It means reduction of some kind of asset of a firm for achieving either financial or ethical objectives. </li></ul><ul><li>Motive of disinvestment is to obtain funds. </li></ul>
  35. 35. Conclusion <ul><li>Inspite of problems popping up, merchant banking in India has vast scope to develop because of lot of domestic as well as foreign businesses booming here. Indian economy provides an amicable environment for these firms to set up, flourish and expand here. </li></ul>
  36. 36. Thank you...

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