SlideShare a Scribd company logo
Merchant Banking
Prof. Rahul Mailcontractor,
KLS’s Institute of Management
Education and Research,
Hindwadi, Belgaum
What Is Merchant Banking ?
• Merchant Banking may be defined as an
institution which covers a wide range of activities
such as underwriting of shares, portfolio
management, Project counseling, insurance etc.
They all render these service for a fee. Both
commercial and investment banks may engage in
merchant banking activities.
• The original purpose of merchant banks was to
facilitate and/or finance production and trade of
commodities and hence the name "merchant“.
Who Is A Merchant Banker?
• A merchant banker is one who is a critical link
between a company raising fund and the
investors.
• Merchant banker is one who underwrites
corporate securities and advices on issues like
corporate mergers.
• The merchant banker may be in the form of a
bank, a company, firm or even a proprietary
concern.
• Merchant Banker understands the requirements of
the business concern and arranges finance with
the help of financial institutions, banks, stock
exchanges and money market
Functions Of Merchant Banks
• Promotional Activities – Merchant Banks helps
the entrepreneur in conceiving an idea,
identification of projects, preparing feasibility
reports, obtaining Government approvals and
incentives etc.
• Issue Management - Management of issues
refers to effective marketing of corporate
securities viz., equity shares, preference shares
and debentures or bonds by offering them to
public. Merchant banks act as intermediary whose
main job is to transfer capital from those who own
it to those who need it .
Functions Of Merchant Banks (cont)
• Credit Syndication - Credit Syndication refers to
obtaining of loans from single development
finance institution or a syndicate or consortium.
Merchant Banks help corporate clients to raise
syndicated loans from commercials bank.
• Project Counseling- It includes preparation of
projects 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 institution.
Functions Of Merchant Banks (cont)
• Portfolio Management - It refers to the effective
management of Securities i.e., the merchant banker helps
the investor in matters pertaining to investment decisions.
Taxation and inflation are taken into account while advising
on investment in different securities. The merchant banker
also undertakes the function of buying and selling of
securities on behalf of their client companies. Investments
are done in such a way that it ensures maximum returns and
minimum risk.
• Working capital Finance: Merchant bankers provide the
following services as a part of working capital finance
• Assessment of working capital requirement
• Preparing the application for the sanction of appropriate
credit facilities
• Providing assistance in negotiations with the banks.
• Advising on issue of debenture for augmenting long term
requirement of working capital.
• Acceptance credit and bill discounting: Activities relating to the
acceptance and discounting of bills of exchange, besides
advancement of loans to business concerns on strength of such
instruments. In order that the bill accepting and discounting takes
place it is imperative that the firms have a good reputation.
Collecting credit information and credit rating is part of this
function.
• Mergers and acquisitions: This is a specialized service provided by
merchant bankers who arrange for negotiating acquisitions and
mergers by offering expert valuation regarding the quantum and
nature of consideration. The activities involved include
• Undertaking management audits to identify the areas of strength and
weakness in order to help formulate guidelines for future growth.
• Conducting exploratory studies on a global basis to locate overseas
market, foreign collaborations, and JVs
• Obtaining approval from shareholders, depositors, creditors,
government and other authorities.
• Identifying organizations with matching characteristics.
• Assisting in capital restructuring.
• Assisting in legal complince.
Functions Of Merchant Banks (cont)
• Leasing and Finance – Many merchant bankers
provide leasing and finance facilities. Some of them
even maintain venture capital funds to assist the
entrepreneurs. They also help companies in raising
finance by way of public deposits.
• Servicing Issues – Merchant Bankers helps in
servicing the shareholders and debenture holders in
distributing dividends, debenture interest.
• Other Specialized Services – Merchant Banks also
provide corporate advisory services on issues like
mergers and amalgamations, tax matters, recruitment of
executives and cost and management audit etc.
Merchant Banking In India
• Need for merchant banking was felt with rapid growth in
number and size of issues made in primary issue.
• Merchant Banking services started by foreign banks,
namely National Grindlays in 1967 followed by Citi Bank
in 1970.
• Merchant Banking services was offered along with other
traditional banking services.
• SBI was first Indian bank to set up merchant banking
division in 1972.
• Later, the ICICI set up its merchant banking division in
1973.
• It was followed by other commercial banks like Canara
Bank, Bank of Baroda, Bank Of India, Syndicate Bank,
Central Bank Of India, PNB, UCO Bank etc.
Merchant Banking Regulations
According to Securities and Exchange Board of India
(Merchant Bankers) Rules, 1992, it is mandatory for a
merchant banker to hold a certificate of registration
granted by the Securities and Exchange Board of India.
If a person/ organization wants to carry or
undertake any of the authorized activities, has to get
registered under the regulations. To obtain the
certificate of registration, one has to apply in the
prescribed form and fulfill two set of norms (a)
operational capabilities and (b)capital adequacy norms
Classification Of Merchant Banker
• Category I – to carry on the activity of issue
management i.e., the preparation of prospectus,
determining the financial structure, tie-up of
financiers ,financial allotment of securities and so
on. To act as adviser, consultant, manager,
underwriter, portfolio manager.
• Category II - to act as adviser, consultant, co-
manager, underwriter, and portfolio manager.
• Category III - to act as underwriter, adviser and
consultant to an issue.
• Category IV – to act only as adviser or consultant
to an issue of capital
Capital Adequacy Norms
• The minimum net worth requirement for acting
as merchant banker is given below:
• Category I – Rs. 5 cores
• Category II – Rs, 50 lakhs
• Category III – Rs. 20 lakhs
• Category IV – Nil
Code Of Conduct
• Should make all efforts to protect the interest of
investors.
• Should maintain high standards of integrity,
dignity and fairness in conduct of business.
• Should fulfill all obligations in a professional and
ethical manner.
• Should not discriminate among the clients.
• Should endeavor to ensure that the inquiries,
grievances are adequately dealt with in a timely
and appropriate manner.
• Should ensure that prospectus/letter of offer is
available to investors at the time of issue.
Code Of Conduct (cont)
• Should render best possible advice to its clients.
• Any penal action taken by SEBI should be
informed to its clients.
• Should inform the Board about legal proceedings
initiated against it.
• Should abide by the rules of SEBI, 2003.
• Should ensure that any person it employs should
have the capacity to be a merchant banker.
• Should not create false market.
Obligations And Responsibilities
• Merchant banker not to associate with any business other than
that of the securities market.
• Maintenance of book of accounts, records, etc. Every merchant
banker shall keep and maintain the following books of
accounts, records and documents namely:
• A. a copy of balance sheet at the end of each accounting period
• b. A copy of profit and loss account for that period
• c. A copy of auditor’s report on the accounts of that period
• d. a statement of financial position
• Submission of half-yearly results.
• Report on steps taken on auditor’s report.
• Acquisition of shares prohibited.
• Information to the Board.
• Disclosure to the Board
Underwriter
• Underwriter are important intermediary in the
new issue /primary market who agree to take
up securities which are not fully subscribed.
They make a commitment to get the issue
subscribed or subscribe to the issue themselves
in the case of non subscription.
• Underwriters are appointed by the issuing
companies in consultation with the lead
managers/ merchant bankers to the issues
Registration
• To act as underwriter,
a) A certificate of registration must be obtained from SEBI. A SEBI
registered merchant banker/ broker would not require a separate
registration.
b) The necessary infrastructure like adequate office space, equipment
and manpower to effectively discharge the activities
c) past experience in underwriting/ employment of at least two persons
with experience in underwriting.
d) Any person directly/indirectly connected with the applicant is not
registered with SEBI as underwriter or previous application of any
such person has been rejected or any disciplinary action has been
taken against such person under the SEBI act regulations
e) Capital adequacy requirement of not less than the net worth of Rs 20
lakh the capital adequacy requirement of broker underwriter would
be specified by the stock exchange concerned
f) The applicant/director/principal officer/partner has been convicted
of offence involving moral turpitude or found guilty of any
economic offence and is fit and proper person
Fee
• The application fees for registration as
underwriter since 1999 is Rs 5 lakh. To keep
the registration in force renewal fees of Rs. 2
lakhs every 3 years from the date of initial
registration is payable. Failure to pay the fee
would result in the suspension of the certificate
of registration.
Code of conduct
• Same as that for merchant bankers.
Agreement with clients
Every underwriter has to enter into an
agreement with the issuing company.
The agreement among other provides for the
period during which the agreement is in force,
the amount of underwriter obligations the
period within which the underwriter has to be
subscribe to the issue after being intimated by/
on behalf of the issuer, the amount of
commission / brokerage, and details of
arrangements if any made by the underwriter
for fulfilling the underwriting obligations.
General Responsibilities
• An underwriter cannot derive any direct or
indirect benefit from underwriting the issue
other than the underwriter commission .
• The maximum obligation under all under
writer agreements of an underwriter cannot
exceed 20 times his net worth .
• Underwriters have to subscribe for securities
under the agreement within 45 days of the
receipt of intimation from the issuers.
Bankers to an issue
• The bankers to an issue are engaged in
activities such as acceptance of applications
along with application money from the
investors in respect of issues of capital and
refund of application money.
Registration
To carry on the activities as a banker to an issue, a person must
obtain a certificate of registration from the SEBI.
The SEBI grants registration on the basis of all the activities
relating to banker to an issue in particular with reference to the
following requirements:
(1) The applicant has the necessary infrastructure, communication
and data processing facilities and manpower to effectively
discharge his activities,
(2) The applicant/any of the directors of the applicant is not involved
in any litigation connected with the securities market/has not been
convicted of any economic offence;
(3) Is a scheduled bank and
(4) Grant of a certificate is in the interest of the investors.
(5) A banker to an issue can apply for renewal of his registration
three months before the expiry of the certificate.
Fee
• Every banker to an issue has to pay to the
SEBI an annual fee of Rs 2.5 lakh for the first
two years from the date of initial registration,
and Rs 1 lakh for the third year to keep his
registration in force. The renewal fee to be
paid by him annually for the first two years is
Rs 1 lakh and Rs 20,000 for the third year.
Non-payment of the prescribed fee may lead to
suspension of the registration certificate.
General Obligations and Responsibilities
When required a banker to an issue has to furnish to
the SEBI the following information:
(1) The number of issues for which he was engaged
as a banker to an issue;
(2) The number of applications/details of
applications’ money received;
(3) The dates on which applications from investors
were forwarded to the issuing company/
registrar to an issue;
(4) The dates/ amount of refund to the investors.
Books of Account / Record / Documents
• A banker to an issue is required to maintain
books of account/records/ documents for a
minimum period of three years in respect of,
inter alia, the number of application received,
the names of the investors, the times within
which the applications received were
forwarded to the issuing company/ registrar to
the issue, and dates and amounts of refund
money to investors
Agreement with Issuing Companies
• Every banker to an issue enters into an
agreement with the issuing company. The
agreement provides for the number of
collection centres at which
applications/application money received is
forwarded to the registrar, for issuance and
submission of daily statement by the
designated controlling branch of the banker,
stating the number of applications and the
amount of money received from the investors
Disciplinary Action by the RBI
• If the RBI takes any disciplinary action against
a banker to an issue in relation to issue
payment, the latter should immediately inform
the SEBI. If the banker is prohibited from
carrying on his activities as result of the
disciplinary action, the SEBI registration is
deemed as suspended/ cancelled.
Code of Conduct
• In the conduct of his business, he should observe high
standards of integrity and fairness in all his dealings with
clients/ investors / other members of the profession. He should
exercise due diligence and ensure proper care.
• He should not make any statement/indulge in any act,
practice/ unfair competition harmful to the interest of other
bankers or likely to place the latter in a disadvantageous
position.
• Further, he should not make exaggerated oral/written
statements to his clients about his qualification / capability to
render services or his earlier achievements in this regard.
• Moreover, a banker to an issue should always endeavour to
render the best possible advice to his clients and ensure that all
professional dealings are affected in a prompt, efficient and
cost effective manner.
Code of conduct
• He should not divulge to other clients/press/any other
party any confidential information in his knowledge
about his client. He should also not allow blank
applications forms bearing brokers’ stamp to be kept at
the bank premises / near the entrance of the premises
and accept applications after office hours / or after the
date of closure of the issue/or o bank holidays.
• Finally, he should not act at any time in collusion with
other agents in a manner that is detrimental to small
investors. He has to abide by all acts, rules, regulations,
guidelines, resolutions, notification, directions,
circulars and instructions issued by the Government
/RBI/ Indian Banks Association / SEBI relevant to his
activities as a banker to an issue.
Brokers to the issue
• Brokers are the persons mainly concerned with the
procurement of subscription to the issue from the prospective
investors.
• The appointment of a broker is not compulsory
• The issuing company is free to appoint any number of brokers.
• The manager to the issue and the official broker to the issue
organize the preliminary distribution of securities and procure
direct subscription from as large number of investors as
possible.
• The broker has to get a letter of consent from the respective
exchange to act as broker to an issue.
• Brokerage must be paid according to the agreement between
the broker and the company.
Conditions for Grant Of Certificate Of
Registration as broker
• He holds the membership of any stock exchange
• He shall abide by rules, regulation and bye-laws
of stock exchange of which he is a member.
• He shall pay the fees for registration in the
manner provided in the regulations
• He shall take adequate steps for redressal of
grievances of the investors within one month of
the date of receipt of complaints
Registrar to the Issue and Share
transfer agent
• Registrar to the issue perform the function of
collecting applications from investors and keep a
proper record of application and money received
from investor. They assist the company in
determining the basis of allotment and finalizing
the allotment of securities in consultation with the
stock exchange. They process allotment letters,
refund orders and other documents related to issue
• Share transfer agent maintain record of holder of
securities of company for & on behalf of
company & handle all matters related to transfer
and redemption of securities of the company.
Category of Registrar and Share transfer
agent
There are two categories
Category-I -those who carry on activities of both
Registrar and Share transfer agent
Category-I- those who carry on activities of
either Registrar or Share transfer agent
 Both require registration with SEBI for
carrying on with their operations. They are
granted registration on the basis of conditions
like necessary infrastructure, past experience
and capital adequacy. They can also seek
renewal of registration
Capital adequacy
 Capital adequacy in terms of net worth is Rs 6
lakh for Category-I and Rs 3 lakh for Category-II
 Category-I is required to pay registration fees of
Rs. 50000 and renewal fees of Rs.40000 every 3
years while Category II have to pay Rs. 30000
and Rs. 25000 respectively.
 Maintenance of book of Account- record relating
to all applications received from investors relating
to the issue, record all rejected application
together with reasons, basis of allotment of
shares in consultation with stock exchange, date
of transfer of shares, name of transferor and
transferee.
Debenture Trustee
• A debenture trustee is a trustee for a trust deed
needed for securing any issue of debentures by a
company or any private placement of debentures
by a listed company.
• To act as a debenture trustee a certificate from
SEBI is necessary.
• Only banks , public financial institutions,
insurance companies and body corporate fulfilling
the capital adequacy requirement of Rs2 crore can
act as trustees
Portfolio Managers
• Portfolio managers are defined as a person
who in pursuance of a contract with the clients,
advise/direct/ undertake on behalf of the
clients , the management administration of
portfolio of securities/funds of clients.
• Portfolio management can be
i) Discretionary
ii) Non Discretionary
• Reference
• Financial Services by M Y Khan, McGraw Hill
Education (India) Pvt Ltd, 2013
• Merchant Banking by H.R. Machi Raju, New
Age International (P) Ltd., Publishers, 2010

More Related Content

What's hot

Money markets of India
Money markets of IndiaMoney markets of India
Money markets of India
Ogilvy & Mather
 
PRIMARY MARKET PPT
PRIMARY MARKET PPTPRIMARY MARKET PPT
PRIMARY MARKET PPT
Kishan Panchal
 
Financial services
Financial servicesFinancial services
Financial services
Visakhapatnam
 
Consumer finance ppt
Consumer finance pptConsumer finance ppt
Consumer finance ppt
Rahul Mailcontractor
 
Underwriting
Underwriting Underwriting
Underwriting
ashvi1011
 
Investors Protection-Grievances and their Redressal for B.Com, M.Com
Investors Protection-Grievances and their Redressal for B.Com, M.ComInvestors Protection-Grievances and their Redressal for B.Com, M.Com
Investors Protection-Grievances and their Redressal for B.Com, M.Com
Dr. Toran Lal Verma
 
Forfeiting
ForfeitingForfeiting
Forfeiting
Abdul Lathif
 
Credit rating agencies
Credit rating agenciesCredit rating agencies
Credit rating agencies
Alfred George
 
IRDA
IRDAIRDA
Depository ppt
Depository pptDepository ppt
Depository ppt
Inderpal Saini
 
Mutual fund
Mutual fundMutual fund
Mutual fund
Altacit Global
 
Overview of Indian Financial system
Overview of Indian Financial systemOverview of Indian Financial system
Overview of Indian Financial system
Ashish Sahu
 
Securities market
Securities marketSecurities market
Securities market
Prabhakar Murugesan
 
Capital market instruments
Capital market instrumentsCapital market instruments
Capital market instruments
kartikganga
 
Merchant banking guidelines
Merchant banking guidelinesMerchant banking guidelines
Merchant banking guidelines
Taher Ahmed
 
Capital Market
Capital MarketCapital Market
Capital Market
Sneha J Chouhan
 
Money market instruments
Money market instrumentsMoney market instruments
Money market instruments
vidhyamalu
 
Money market & its instruments
Money market & its instrumentsMoney market & its instruments
Money market & its instruments
abhishek rane
 
Debt securitisation
Debt securitisationDebt securitisation
Debt securitisation
Bibin Pv
 
LISTING OF SECURITIES
LISTING OF SECURITIESLISTING OF SECURITIES
LISTING OF SECURITIES
George V James
 

What's hot (20)

Money markets of India
Money markets of IndiaMoney markets of India
Money markets of India
 
PRIMARY MARKET PPT
PRIMARY MARKET PPTPRIMARY MARKET PPT
PRIMARY MARKET PPT
 
Financial services
Financial servicesFinancial services
Financial services
 
Consumer finance ppt
Consumer finance pptConsumer finance ppt
Consumer finance ppt
 
Underwriting
Underwriting Underwriting
Underwriting
 
Investors Protection-Grievances and their Redressal for B.Com, M.Com
Investors Protection-Grievances and their Redressal for B.Com, M.ComInvestors Protection-Grievances and their Redressal for B.Com, M.Com
Investors Protection-Grievances and their Redressal for B.Com, M.Com
 
Forfeiting
ForfeitingForfeiting
Forfeiting
 
Credit rating agencies
Credit rating agenciesCredit rating agencies
Credit rating agencies
 
IRDA
IRDAIRDA
IRDA
 
Depository ppt
Depository pptDepository ppt
Depository ppt
 
Mutual fund
Mutual fundMutual fund
Mutual fund
 
Overview of Indian Financial system
Overview of Indian Financial systemOverview of Indian Financial system
Overview of Indian Financial system
 
Securities market
Securities marketSecurities market
Securities market
 
Capital market instruments
Capital market instrumentsCapital market instruments
Capital market instruments
 
Merchant banking guidelines
Merchant banking guidelinesMerchant banking guidelines
Merchant banking guidelines
 
Capital Market
Capital MarketCapital Market
Capital Market
 
Money market instruments
Money market instrumentsMoney market instruments
Money market instruments
 
Money market & its instruments
Money market & its instrumentsMoney market & its instruments
Money market & its instruments
 
Debt securitisation
Debt securitisationDebt securitisation
Debt securitisation
 
LISTING OF SECURITIES
LISTING OF SECURITIESLISTING OF SECURITIES
LISTING OF SECURITIES
 

Viewers also liked

Merchant Banking
Merchant BankingMerchant Banking
Merchant Banking
Aditya Nakshane
 
Merchant Banking
Merchant BankingMerchant Banking
Merchant Banking
priyaposy
 
Ppt of merchant banking
Ppt of merchant bankingPpt of merchant banking
Ppt of merchant banking
Prof. Chhaya Sachin Patel
 
Merchant banking
Merchant bankingMerchant banking
Merchant banking
Anirban Mazumdar
 
Merchant bank underwriting
Merchant bank underwritingMerchant bank underwriting
Merchant bank underwriting
Paramkusa K
 
Merchant bankers
Merchant bankersMerchant bankers
Merchant banking and financial services unit i notes for mba
Merchant banking and financial services unit i notes for mbaMerchant banking and financial services unit i notes for mba
Merchant banking and financial services unit i notes for mba
Dr.N.G.P.Arts and Science College, Coimbatore, India
 
Merchant banking
Merchant bankingMerchant banking
Merchant banking
rgarude
 
Ppt on merchant banking in india
Ppt on merchant banking in indiaPpt on merchant banking in india
Ppt on merchant banking in india
Ankita Nahata
 
Merchant banking in india
Merchant banking in indiaMerchant banking in india
Merchant banking in india
Aditya Kumar
 
Merchant banking
Merchant bankingMerchant banking
Merchant banking
Dharmik
 
Leasing
LeasingLeasing
Leasing
deepakalld
 
Recent developments and reform in the capital markets
Recent developments  and reform in the capital markets Recent developments  and reform in the capital markets
Recent developments and reform in the capital markets
Sanjay Safiwala
 
Reforms in indian money n capital market
Reforms in indian money n capital marketReforms in indian money n capital market
Reforms in indian money n capital market
Amrit Mty
 
Merchant banking
Merchant bankingMerchant banking
Merchant banking
Vishal Kachhdiya
 
New Development In Capital Market
New Development In Capital Market New Development In Capital Market
New Development In Capital Market
Pavan Kumar Vijay
 
Rbi instruments
Rbi instrumentsRbi instruments
Rbi instruments
Hema Raundhal
 
Commercial Banks
Commercial BanksCommercial Banks
chapter 3 : commercial bank
chapter 3 : commercial bank chapter 3 : commercial bank
chapter 3 : commercial bank
Hajar Hafizah
 
RBI
RBIRBI

Viewers also liked (20)

Merchant Banking
Merchant BankingMerchant Banking
Merchant Banking
 
Merchant Banking
Merchant BankingMerchant Banking
Merchant Banking
 
Ppt of merchant banking
Ppt of merchant bankingPpt of merchant banking
Ppt of merchant banking
 
Merchant banking
Merchant bankingMerchant banking
Merchant banking
 
Merchant bank underwriting
Merchant bank underwritingMerchant bank underwriting
Merchant bank underwriting
 
Merchant bankers
Merchant bankersMerchant bankers
Merchant bankers
 
Merchant banking and financial services unit i notes for mba
Merchant banking and financial services unit i notes for mbaMerchant banking and financial services unit i notes for mba
Merchant banking and financial services unit i notes for mba
 
Merchant banking
Merchant bankingMerchant banking
Merchant banking
 
Ppt on merchant banking in india
Ppt on merchant banking in indiaPpt on merchant banking in india
Ppt on merchant banking in india
 
Merchant banking in india
Merchant banking in indiaMerchant banking in india
Merchant banking in india
 
Merchant banking
Merchant bankingMerchant banking
Merchant banking
 
Leasing
LeasingLeasing
Leasing
 
Recent developments and reform in the capital markets
Recent developments  and reform in the capital markets Recent developments  and reform in the capital markets
Recent developments and reform in the capital markets
 
Reforms in indian money n capital market
Reforms in indian money n capital marketReforms in indian money n capital market
Reforms in indian money n capital market
 
Merchant banking
Merchant bankingMerchant banking
Merchant banking
 
New Development In Capital Market
New Development In Capital Market New Development In Capital Market
New Development In Capital Market
 
Rbi instruments
Rbi instrumentsRbi instruments
Rbi instruments
 
Commercial Banks
Commercial BanksCommercial Banks
Commercial Banks
 
chapter 3 : commercial bank
chapter 3 : commercial bank chapter 3 : commercial bank
chapter 3 : commercial bank
 
RBI
RBIRBI
RBI
 

Similar to Merchant banking

1447.ppt
1447.ppt1447.ppt
1447.ppt
RAJI585568
 
Merchant Banking in India give opportunity to invest
Merchant Banking in India give opportunity to investMerchant Banking in India give opportunity to invest
Merchant Banking in India give opportunity to invest
DrBabarAliKhan
 
1447.ppt
1447.ppt1447.ppt
1447.ppt
SachinKhare21
 
mbfc session 3.ppt
mbfc session 3.pptmbfc session 3.ppt
mbfc session 3.ppt
RAJI585568
 
Merchant Banking [2020]
Merchant Banking [2020]Merchant Banking [2020]
Merchant Banking [2020]
RazakKuruvambalam
 
Merchant bankers
Merchant bankersMerchant bankers
Merchant bankers
Babu Babu
 
MERCHANT BANKING.pptx
MERCHANT BANKING.pptxMERCHANT BANKING.pptx
MERCHANT BANKING.pptx
Sunil Bhardwaj
 
Accounts
AccountsAccounts
Accounts
GurjotKaur33
 
Merchant banking
Merchant bankingMerchant banking
Merchant banking
BHARATH C
 
Unit 3 com541-a
Unit  3 com541-aUnit  3 com541-a
Unit 3 com541-a
Haresh R
 
Portfolio manager and merchant banker
Portfolio manager and merchant bankerPortfolio manager and merchant banker
Portfolio manager and merchant banker
Tushar Sachdeva
 
Merchant Banking
Merchant BankingMerchant Banking
Merchant Banking
Biswajit Palit
 
MERCHANT-BANKING-PDF.docx
MERCHANT-BANKING-PDF.docxMERCHANT-BANKING-PDF.docx
MERCHANT-BANKING-PDF.docx
pullaraokota1
 
MERCHANTBANKING-PDF complete picture.pdf
MERCHANTBANKING-PDF complete picture.pdfMERCHANTBANKING-PDF complete picture.pdf
MERCHANTBANKING-PDF complete picture.pdf
Sudarshan Dakuru
 
Issue management intermediaries- P. SAI PRATHYUSHA (PONDICHERRY UNIVERSITY)
Issue management intermediaries- P. SAI PRATHYUSHA (PONDICHERRY UNIVERSITY)Issue management intermediaries- P. SAI PRATHYUSHA (PONDICHERRY UNIVERSITY)
Issue management intermediaries- P. SAI PRATHYUSHA (PONDICHERRY UNIVERSITY)
SaiLakshmi115
 
Merchant banking
Merchant bankingMerchant banking
Merchant banking
Charanjit Kaur
 
Merchant banking
Merchant bankingMerchant banking
Merchant banking
bhanu vashishtha
 
Merchant banking
Merchant bankingMerchant banking
Merchant banking
pavanfalak
 
Merchant banking
Merchant bankingMerchant banking
Merchant banking
Dr. Jamal uddeen
 
Merchant banking
Merchant bankingMerchant banking
Merchant banking
Ujjwal 'Shanu'
 

Similar to Merchant banking (20)

1447.ppt
1447.ppt1447.ppt
1447.ppt
 
Merchant Banking in India give opportunity to invest
Merchant Banking in India give opportunity to investMerchant Banking in India give opportunity to invest
Merchant Banking in India give opportunity to invest
 
1447.ppt
1447.ppt1447.ppt
1447.ppt
 
mbfc session 3.ppt
mbfc session 3.pptmbfc session 3.ppt
mbfc session 3.ppt
 
Merchant Banking [2020]
Merchant Banking [2020]Merchant Banking [2020]
Merchant Banking [2020]
 
Merchant bankers
Merchant bankersMerchant bankers
Merchant bankers
 
MERCHANT BANKING.pptx
MERCHANT BANKING.pptxMERCHANT BANKING.pptx
MERCHANT BANKING.pptx
 
Accounts
AccountsAccounts
Accounts
 
Merchant banking
Merchant bankingMerchant banking
Merchant banking
 
Unit 3 com541-a
Unit  3 com541-aUnit  3 com541-a
Unit 3 com541-a
 
Portfolio manager and merchant banker
Portfolio manager and merchant bankerPortfolio manager and merchant banker
Portfolio manager and merchant banker
 
Merchant Banking
Merchant BankingMerchant Banking
Merchant Banking
 
MERCHANT-BANKING-PDF.docx
MERCHANT-BANKING-PDF.docxMERCHANT-BANKING-PDF.docx
MERCHANT-BANKING-PDF.docx
 
MERCHANTBANKING-PDF complete picture.pdf
MERCHANTBANKING-PDF complete picture.pdfMERCHANTBANKING-PDF complete picture.pdf
MERCHANTBANKING-PDF complete picture.pdf
 
Issue management intermediaries- P. SAI PRATHYUSHA (PONDICHERRY UNIVERSITY)
Issue management intermediaries- P. SAI PRATHYUSHA (PONDICHERRY UNIVERSITY)Issue management intermediaries- P. SAI PRATHYUSHA (PONDICHERRY UNIVERSITY)
Issue management intermediaries- P. SAI PRATHYUSHA (PONDICHERRY UNIVERSITY)
 
Merchant banking
Merchant bankingMerchant banking
Merchant banking
 
Merchant banking
Merchant bankingMerchant banking
Merchant banking
 
Merchant banking
Merchant bankingMerchant banking
Merchant banking
 
Merchant banking
Merchant bankingMerchant banking
Merchant banking
 
Merchant banking
Merchant bankingMerchant banking
Merchant banking
 

Recently uploaded

Sustainable-Development-Goals-presentation-by-Office-of-National-Statistics.ppt
Sustainable-Development-Goals-presentation-by-Office-of-National-Statistics.pptSustainable-Development-Goals-presentation-by-Office-of-National-Statistics.ppt
Sustainable-Development-Goals-presentation-by-Office-of-National-Statistics.ppt
JayanthAdithya1
 
Google Pay: Save, Pay, Manage 17+ - App Store
Google Pay: Save, Pay, Manage 17+ - App StoreGoogle Pay: Save, Pay, Manage 17+ - App Store
Google Pay: Save, Pay, Manage 17+ - App Store
gargtinna79
 
Scam 1992 Harshad mehta scam pdf download
Scam 1992 Harshad mehta scam pdf downloadScam 1992 Harshad mehta scam pdf download
Scam 1992 Harshad mehta scam pdf download
bharatbharatjangid46
 
Introduction to trading Solana Memecoins.docx
Introduction to trading Solana Memecoins.docxIntroduction to trading Solana Memecoins.docx
Introduction to trading Solana Memecoins.docx
Raul Canessa
 
Typical Scams to Stay Away from When Buying Verified Binance Accounts
Typical Scams to Stay Away from When Buying Verified Binance AccountsTypical Scams to Stay Away from When Buying Verified Binance Accounts
Typical Scams to Stay Away from When Buying Verified Binance Accounts
Any kyc Account
 
Abortion pills in Muscat(+918133066128) Cytotec pills buy Oman
Abortion pills in Muscat(+918133066128) Cytotec pills buy OmanAbortion pills in Muscat(+918133066128) Cytotec pills buy Oman
Abortion pills in Muscat(+918133066128) Cytotec pills buy Oman
maishakhanam230
 
Purdue University System degree offer diploma Transcript
Purdue University System degree offer diploma TranscriptPurdue University System degree offer diploma Transcript
Purdue University System degree offer diploma Transcript
oywfdy
 
Chapter 1 Introduction to Management.pdf
Chapter 1 Introduction to  Management.pdfChapter 1 Introduction to  Management.pdf
Chapter 1 Introduction to Management.pdf
rishavchakrabarti2
 
MEMBERS, FRIENDS AND ASSOCIATES OF ATHENS CALLS ATHENS JUNE 2024
MEMBERS, FRIENDS AND ASSOCIATES OF ATHENS CALLS ATHENS  JUNE 2024MEMBERS, FRIENDS AND ASSOCIATES OF ATHENS CALLS ATHENS  JUNE 2024
MEMBERS, FRIENDS AND ASSOCIATES OF ATHENS CALLS ATHENS JUNE 2024
Antonis Zairis
 
School Project on FiamaDi Wills 2024 .pptx
School Project on FiamaDi Wills 2024 .pptxSchool Project on FiamaDi Wills 2024 .pptx
School Project on FiamaDi Wills 2024 .pptx
sanjaysethi34
 
How Technology Is Impacting The Future Of Finance In India
How Technology Is Impacting The Future Of Finance In IndiaHow Technology Is Impacting The Future Of Finance In India
How Technology Is Impacting The Future Of Finance In India
shruti1menon2
 
Financial Analysis course curriculum for students
Financial Analysis course curriculum for studentsFinancial Analysis course curriculum for students
Financial Analysis course curriculum for students
Israel9876
 
Introduction to Islamic Banking and Finance.Part4
Introduction to Islamic Banking and Finance.Part4Introduction to Islamic Banking and Finance.Part4
Introduction to Islamic Banking and Finance.Part4
NasrudinMohamedAhmed
 
Cornell University degree offer diploma Transcript
Cornell University degree offer diploma TranscriptCornell University degree offer diploma Transcript
Cornell University degree offer diploma Transcript
yyfabne
 
Group c MCB kit.pptxvvghjiiirfgghhhdddft
Group c MCB kit.pptxvvghjiiirfgghhhdddftGroup c MCB kit.pptxvvghjiiirfgghhhdddft
Group c MCB kit.pptxvvghjiiirfgghhhdddft
rajninant
 
Manchester University diploma
 Manchester University diploma Manchester University diploma
Manchester University diploma
ewopzo
 
Paul Turovsky - A Seasoned Financial Analyst
Paul Turovsky - A Seasoned Financial AnalystPaul Turovsky - A Seasoned Financial Analyst
Paul Turovsky - A Seasoned Financial Analyst
Paul Turovsky
 
Understanding Urban Land Markets: Characteristics, Influencing Factors, and G...
Understanding Urban Land Markets: Characteristics, Influencing Factors, and G...Understanding Urban Land Markets: Characteristics, Influencing Factors, and G...
Understanding Urban Land Markets: Characteristics, Influencing Factors, and G...
Aditi Sh.
 
10 Ways to Maximize the Benefits of Crypto token.pdf
10 Ways to Maximize the Benefits of Crypto token.pdf10 Ways to Maximize the Benefits of Crypto token.pdf
10 Ways to Maximize the Benefits of Crypto token.pdf
Kezex (KZX)
 
Instagram. 61821944 likes · 150491 talking about this. Discover what's
Instagram. 61821944 likes · 150491 talking about this. Discover what'sInstagram. 61821944 likes · 150491 talking about this. Discover what's
Instagram. 61821944 likes · 150491 talking about this. Discover what's
Virni Arrora
 

Recently uploaded (20)

Sustainable-Development-Goals-presentation-by-Office-of-National-Statistics.ppt
Sustainable-Development-Goals-presentation-by-Office-of-National-Statistics.pptSustainable-Development-Goals-presentation-by-Office-of-National-Statistics.ppt
Sustainable-Development-Goals-presentation-by-Office-of-National-Statistics.ppt
 
Google Pay: Save, Pay, Manage 17+ - App Store
Google Pay: Save, Pay, Manage 17+ - App StoreGoogle Pay: Save, Pay, Manage 17+ - App Store
Google Pay: Save, Pay, Manage 17+ - App Store
 
Scam 1992 Harshad mehta scam pdf download
Scam 1992 Harshad mehta scam pdf downloadScam 1992 Harshad mehta scam pdf download
Scam 1992 Harshad mehta scam pdf download
 
Introduction to trading Solana Memecoins.docx
Introduction to trading Solana Memecoins.docxIntroduction to trading Solana Memecoins.docx
Introduction to trading Solana Memecoins.docx
 
Typical Scams to Stay Away from When Buying Verified Binance Accounts
Typical Scams to Stay Away from When Buying Verified Binance AccountsTypical Scams to Stay Away from When Buying Verified Binance Accounts
Typical Scams to Stay Away from When Buying Verified Binance Accounts
 
Abortion pills in Muscat(+918133066128) Cytotec pills buy Oman
Abortion pills in Muscat(+918133066128) Cytotec pills buy OmanAbortion pills in Muscat(+918133066128) Cytotec pills buy Oman
Abortion pills in Muscat(+918133066128) Cytotec pills buy Oman
 
Purdue University System degree offer diploma Transcript
Purdue University System degree offer diploma TranscriptPurdue University System degree offer diploma Transcript
Purdue University System degree offer diploma Transcript
 
Chapter 1 Introduction to Management.pdf
Chapter 1 Introduction to  Management.pdfChapter 1 Introduction to  Management.pdf
Chapter 1 Introduction to Management.pdf
 
MEMBERS, FRIENDS AND ASSOCIATES OF ATHENS CALLS ATHENS JUNE 2024
MEMBERS, FRIENDS AND ASSOCIATES OF ATHENS CALLS ATHENS  JUNE 2024MEMBERS, FRIENDS AND ASSOCIATES OF ATHENS CALLS ATHENS  JUNE 2024
MEMBERS, FRIENDS AND ASSOCIATES OF ATHENS CALLS ATHENS JUNE 2024
 
School Project on FiamaDi Wills 2024 .pptx
School Project on FiamaDi Wills 2024 .pptxSchool Project on FiamaDi Wills 2024 .pptx
School Project on FiamaDi Wills 2024 .pptx
 
How Technology Is Impacting The Future Of Finance In India
How Technology Is Impacting The Future Of Finance In IndiaHow Technology Is Impacting The Future Of Finance In India
How Technology Is Impacting The Future Of Finance In India
 
Financial Analysis course curriculum for students
Financial Analysis course curriculum for studentsFinancial Analysis course curriculum for students
Financial Analysis course curriculum for students
 
Introduction to Islamic Banking and Finance.Part4
Introduction to Islamic Banking and Finance.Part4Introduction to Islamic Banking and Finance.Part4
Introduction to Islamic Banking and Finance.Part4
 
Cornell University degree offer diploma Transcript
Cornell University degree offer diploma TranscriptCornell University degree offer diploma Transcript
Cornell University degree offer diploma Transcript
 
Group c MCB kit.pptxvvghjiiirfgghhhdddft
Group c MCB kit.pptxvvghjiiirfgghhhdddftGroup c MCB kit.pptxvvghjiiirfgghhhdddft
Group c MCB kit.pptxvvghjiiirfgghhhdddft
 
Manchester University diploma
 Manchester University diploma Manchester University diploma
Manchester University diploma
 
Paul Turovsky - A Seasoned Financial Analyst
Paul Turovsky - A Seasoned Financial AnalystPaul Turovsky - A Seasoned Financial Analyst
Paul Turovsky - A Seasoned Financial Analyst
 
Understanding Urban Land Markets: Characteristics, Influencing Factors, and G...
Understanding Urban Land Markets: Characteristics, Influencing Factors, and G...Understanding Urban Land Markets: Characteristics, Influencing Factors, and G...
Understanding Urban Land Markets: Characteristics, Influencing Factors, and G...
 
10 Ways to Maximize the Benefits of Crypto token.pdf
10 Ways to Maximize the Benefits of Crypto token.pdf10 Ways to Maximize the Benefits of Crypto token.pdf
10 Ways to Maximize the Benefits of Crypto token.pdf
 
Instagram. 61821944 likes · 150491 talking about this. Discover what's
Instagram. 61821944 likes · 150491 talking about this. Discover what'sInstagram. 61821944 likes · 150491 talking about this. Discover what's
Instagram. 61821944 likes · 150491 talking about this. Discover what's
 

Merchant banking

  • 1. Merchant Banking Prof. Rahul Mailcontractor, KLS’s Institute of Management Education and Research, Hindwadi, Belgaum
  • 2. What Is Merchant Banking ? • Merchant Banking may be defined as an institution which covers a wide range of activities such as underwriting of shares, portfolio management, Project counseling, insurance etc. They all render these service for a fee. Both commercial and investment banks may engage in merchant banking activities. • The original purpose of merchant banks was to facilitate and/or finance production and trade of commodities and hence the name "merchant“.
  • 3. Who Is A Merchant Banker? • A merchant banker is one who is a critical link between a company raising fund and the investors. • Merchant banker is one who underwrites corporate securities and advices on issues like corporate mergers. • The merchant banker may be in the form of a bank, a company, firm or even a proprietary concern. • Merchant Banker understands the requirements of the business concern and arranges finance with the help of financial institutions, banks, stock exchanges and money market
  • 4. Functions Of Merchant Banks • Promotional Activities – Merchant Banks helps the entrepreneur in conceiving an idea, identification of projects, preparing feasibility reports, obtaining Government approvals and incentives etc. • Issue Management - Management of issues refers to effective marketing of corporate securities viz., equity shares, preference shares and debentures or bonds by offering them to public. Merchant banks act as intermediary whose main job is to transfer capital from those who own it to those who need it .
  • 5. Functions Of Merchant Banks (cont) • Credit Syndication - Credit Syndication refers to obtaining of loans from single development finance institution or a syndicate or consortium. Merchant Banks help corporate clients to raise syndicated loans from commercials bank. • Project Counseling- It includes preparation of projects 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 institution.
  • 6. Functions Of Merchant Banks (cont) • Portfolio Management - It refers to the effective management of Securities i.e., the merchant banker helps the investor in matters pertaining to investment decisions. Taxation and inflation are taken into account while advising on investment in different securities. The merchant banker also undertakes the function of buying and selling of securities on behalf of their client companies. Investments are done in such a way that it ensures maximum returns and minimum risk. • Working capital Finance: Merchant bankers provide the following services as a part of working capital finance • Assessment of working capital requirement • Preparing the application for the sanction of appropriate credit facilities • Providing assistance in negotiations with the banks. • Advising on issue of debenture for augmenting long term requirement of working capital.
  • 7. • Acceptance credit and bill discounting: Activities relating to the acceptance and discounting of bills of exchange, besides advancement of loans to business concerns on strength of such instruments. In order that the bill accepting and discounting takes place it is imperative that the firms have a good reputation. Collecting credit information and credit rating is part of this function. • Mergers and acquisitions: This is a specialized service provided by merchant bankers who arrange for negotiating acquisitions and mergers by offering expert valuation regarding the quantum and nature of consideration. The activities involved include • Undertaking management audits to identify the areas of strength and weakness in order to help formulate guidelines for future growth. • Conducting exploratory studies on a global basis to locate overseas market, foreign collaborations, and JVs • Obtaining approval from shareholders, depositors, creditors, government and other authorities. • Identifying organizations with matching characteristics. • Assisting in capital restructuring. • Assisting in legal complince.
  • 8. Functions Of Merchant Banks (cont) • Leasing and Finance – Many merchant bankers provide leasing and finance facilities. Some of them even maintain venture capital funds to assist the entrepreneurs. They also help companies in raising finance by way of public deposits. • Servicing Issues – Merchant Bankers helps in servicing the shareholders and debenture holders in distributing dividends, debenture interest. • Other Specialized Services – Merchant Banks also provide corporate advisory services on issues like mergers and amalgamations, tax matters, recruitment of executives and cost and management audit etc.
  • 9. Merchant Banking In India • Need for merchant banking was felt with rapid growth in number and size of issues made in primary issue. • Merchant Banking services started by foreign banks, namely National Grindlays in 1967 followed by Citi Bank in 1970. • Merchant Banking services was offered along with other traditional banking services. • SBI was first Indian bank to set up merchant banking division in 1972. • Later, the ICICI set up its merchant banking division in 1973. • It was followed by other commercial banks like Canara Bank, Bank of Baroda, Bank Of India, Syndicate Bank, Central Bank Of India, PNB, UCO Bank etc.
  • 10. Merchant Banking Regulations According to Securities and Exchange Board of India (Merchant Bankers) Rules, 1992, it is mandatory for a merchant banker to hold a certificate of registration granted by the Securities and Exchange Board of India. If a person/ organization wants to carry or undertake any of the authorized activities, has to get registered under the regulations. To obtain the certificate of registration, one has to apply in the prescribed form and fulfill two set of norms (a) operational capabilities and (b)capital adequacy norms
  • 11. Classification Of Merchant Banker • Category I – to carry on the activity of issue management i.e., the preparation of prospectus, determining the financial structure, tie-up of financiers ,financial allotment of securities and so on. To act as adviser, consultant, manager, underwriter, portfolio manager. • Category II - to act as adviser, consultant, co- manager, underwriter, and portfolio manager. • Category III - to act as underwriter, adviser and consultant to an issue. • Category IV – to act only as adviser or consultant to an issue of capital
  • 12. Capital Adequacy Norms • The minimum net worth requirement for acting as merchant banker is given below: • Category I – Rs. 5 cores • Category II – Rs, 50 lakhs • Category III – Rs. 20 lakhs • Category IV – Nil
  • 13. Code Of Conduct • Should make all efforts to protect the interest of investors. • Should maintain high standards of integrity, dignity and fairness in conduct of business. • Should fulfill all obligations in a professional and ethical manner. • Should not discriminate among the clients. • Should endeavor to ensure that the inquiries, grievances are adequately dealt with in a timely and appropriate manner. • Should ensure that prospectus/letter of offer is available to investors at the time of issue.
  • 14. Code Of Conduct (cont) • Should render best possible advice to its clients. • Any penal action taken by SEBI should be informed to its clients. • Should inform the Board about legal proceedings initiated against it. • Should abide by the rules of SEBI, 2003. • Should ensure that any person it employs should have the capacity to be a merchant banker. • Should not create false market.
  • 15. Obligations And Responsibilities • Merchant banker not to associate with any business other than that of the securities market. • Maintenance of book of accounts, records, etc. Every merchant banker shall keep and maintain the following books of accounts, records and documents namely: • A. a copy of balance sheet at the end of each accounting period • b. A copy of profit and loss account for that period • c. A copy of auditor’s report on the accounts of that period • d. a statement of financial position • Submission of half-yearly results. • Report on steps taken on auditor’s report. • Acquisition of shares prohibited. • Information to the Board. • Disclosure to the Board
  • 16. Underwriter • Underwriter are important intermediary in the new issue /primary market who agree to take up securities which are not fully subscribed. They make a commitment to get the issue subscribed or subscribe to the issue themselves in the case of non subscription. • Underwriters are appointed by the issuing companies in consultation with the lead managers/ merchant bankers to the issues
  • 17. Registration • To act as underwriter, a) A certificate of registration must be obtained from SEBI. A SEBI registered merchant banker/ broker would not require a separate registration. b) The necessary infrastructure like adequate office space, equipment and manpower to effectively discharge the activities c) past experience in underwriting/ employment of at least two persons with experience in underwriting. d) Any person directly/indirectly connected with the applicant is not registered with SEBI as underwriter or previous application of any such person has been rejected or any disciplinary action has been taken against such person under the SEBI act regulations e) Capital adequacy requirement of not less than the net worth of Rs 20 lakh the capital adequacy requirement of broker underwriter would be specified by the stock exchange concerned f) The applicant/director/principal officer/partner has been convicted of offence involving moral turpitude or found guilty of any economic offence and is fit and proper person
  • 18. Fee • The application fees for registration as underwriter since 1999 is Rs 5 lakh. To keep the registration in force renewal fees of Rs. 2 lakhs every 3 years from the date of initial registration is payable. Failure to pay the fee would result in the suspension of the certificate of registration.
  • 19. Code of conduct • Same as that for merchant bankers.
  • 20. Agreement with clients Every underwriter has to enter into an agreement with the issuing company. The agreement among other provides for the period during which the agreement is in force, the amount of underwriter obligations the period within which the underwriter has to be subscribe to the issue after being intimated by/ on behalf of the issuer, the amount of commission / brokerage, and details of arrangements if any made by the underwriter for fulfilling the underwriting obligations.
  • 21. General Responsibilities • An underwriter cannot derive any direct or indirect benefit from underwriting the issue other than the underwriter commission . • The maximum obligation under all under writer agreements of an underwriter cannot exceed 20 times his net worth . • Underwriters have to subscribe for securities under the agreement within 45 days of the receipt of intimation from the issuers.
  • 22. Bankers to an issue • The bankers to an issue are engaged in activities such as acceptance of applications along with application money from the investors in respect of issues of capital and refund of application money.
  • 23. Registration To carry on the activities as a banker to an issue, a person must obtain a certificate of registration from the SEBI. The SEBI grants registration on the basis of all the activities relating to banker to an issue in particular with reference to the following requirements: (1) The applicant has the necessary infrastructure, communication and data processing facilities and manpower to effectively discharge his activities, (2) The applicant/any of the directors of the applicant is not involved in any litigation connected with the securities market/has not been convicted of any economic offence; (3) Is a scheduled bank and (4) Grant of a certificate is in the interest of the investors. (5) A banker to an issue can apply for renewal of his registration three months before the expiry of the certificate.
  • 24. Fee • Every banker to an issue has to pay to the SEBI an annual fee of Rs 2.5 lakh for the first two years from the date of initial registration, and Rs 1 lakh for the third year to keep his registration in force. The renewal fee to be paid by him annually for the first two years is Rs 1 lakh and Rs 20,000 for the third year. Non-payment of the prescribed fee may lead to suspension of the registration certificate.
  • 25. General Obligations and Responsibilities When required a banker to an issue has to furnish to the SEBI the following information: (1) The number of issues for which he was engaged as a banker to an issue; (2) The number of applications/details of applications’ money received; (3) The dates on which applications from investors were forwarded to the issuing company/ registrar to an issue; (4) The dates/ amount of refund to the investors.
  • 26. Books of Account / Record / Documents • A banker to an issue is required to maintain books of account/records/ documents for a minimum period of three years in respect of, inter alia, the number of application received, the names of the investors, the times within which the applications received were forwarded to the issuing company/ registrar to the issue, and dates and amounts of refund money to investors
  • 27. Agreement with Issuing Companies • Every banker to an issue enters into an agreement with the issuing company. The agreement provides for the number of collection centres at which applications/application money received is forwarded to the registrar, for issuance and submission of daily statement by the designated controlling branch of the banker, stating the number of applications and the amount of money received from the investors
  • 28. Disciplinary Action by the RBI • If the RBI takes any disciplinary action against a banker to an issue in relation to issue payment, the latter should immediately inform the SEBI. If the banker is prohibited from carrying on his activities as result of the disciplinary action, the SEBI registration is deemed as suspended/ cancelled.
  • 29. Code of Conduct • In the conduct of his business, he should observe high standards of integrity and fairness in all his dealings with clients/ investors / other members of the profession. He should exercise due diligence and ensure proper care. • He should not make any statement/indulge in any act, practice/ unfair competition harmful to the interest of other bankers or likely to place the latter in a disadvantageous position. • Further, he should not make exaggerated oral/written statements to his clients about his qualification / capability to render services or his earlier achievements in this regard. • Moreover, a banker to an issue should always endeavour to render the best possible advice to his clients and ensure that all professional dealings are affected in a prompt, efficient and cost effective manner.
  • 30. Code of conduct • He should not divulge to other clients/press/any other party any confidential information in his knowledge about his client. He should also not allow blank applications forms bearing brokers’ stamp to be kept at the bank premises / near the entrance of the premises and accept applications after office hours / or after the date of closure of the issue/or o bank holidays. • Finally, he should not act at any time in collusion with other agents in a manner that is detrimental to small investors. He has to abide by all acts, rules, regulations, guidelines, resolutions, notification, directions, circulars and instructions issued by the Government /RBI/ Indian Banks Association / SEBI relevant to his activities as a banker to an issue.
  • 31. Brokers to the issue • Brokers are the persons mainly concerned with the procurement of subscription to the issue from the prospective investors. • The appointment of a broker is not compulsory • The issuing company is free to appoint any number of brokers. • The manager to the issue and the official broker to the issue organize the preliminary distribution of securities and procure direct subscription from as large number of investors as possible. • The broker has to get a letter of consent from the respective exchange to act as broker to an issue. • Brokerage must be paid according to the agreement between the broker and the company.
  • 32. Conditions for Grant Of Certificate Of Registration as broker • He holds the membership of any stock exchange • He shall abide by rules, regulation and bye-laws of stock exchange of which he is a member. • He shall pay the fees for registration in the manner provided in the regulations • He shall take adequate steps for redressal of grievances of the investors within one month of the date of receipt of complaints
  • 33. Registrar to the Issue and Share transfer agent • Registrar to the issue perform the function of collecting applications from investors and keep a proper record of application and money received from investor. They assist the company in determining the basis of allotment and finalizing the allotment of securities in consultation with the stock exchange. They process allotment letters, refund orders and other documents related to issue • Share transfer agent maintain record of holder of securities of company for & on behalf of company & handle all matters related to transfer and redemption of securities of the company.
  • 34. Category of Registrar and Share transfer agent There are two categories Category-I -those who carry on activities of both Registrar and Share transfer agent Category-I- those who carry on activities of either Registrar or Share transfer agent  Both require registration with SEBI for carrying on with their operations. They are granted registration on the basis of conditions like necessary infrastructure, past experience and capital adequacy. They can also seek renewal of registration
  • 35. Capital adequacy  Capital adequacy in terms of net worth is Rs 6 lakh for Category-I and Rs 3 lakh for Category-II  Category-I is required to pay registration fees of Rs. 50000 and renewal fees of Rs.40000 every 3 years while Category II have to pay Rs. 30000 and Rs. 25000 respectively.  Maintenance of book of Account- record relating to all applications received from investors relating to the issue, record all rejected application together with reasons, basis of allotment of shares in consultation with stock exchange, date of transfer of shares, name of transferor and transferee.
  • 36. Debenture Trustee • A debenture trustee is a trustee for a trust deed needed for securing any issue of debentures by a company or any private placement of debentures by a listed company. • To act as a debenture trustee a certificate from SEBI is necessary. • Only banks , public financial institutions, insurance companies and body corporate fulfilling the capital adequacy requirement of Rs2 crore can act as trustees
  • 37. Portfolio Managers • Portfolio managers are defined as a person who in pursuance of a contract with the clients, advise/direct/ undertake on behalf of the clients , the management administration of portfolio of securities/funds of clients. • Portfolio management can be i) Discretionary ii) Non Discretionary
  • 38. • Reference • Financial Services by M Y Khan, McGraw Hill Education (India) Pvt Ltd, 2013 • Merchant Banking by H.R. Machi Raju, New Age International (P) Ltd., Publishers, 2010