Functions of merchant banker

1. CAPITAL RESTRUCTURING SERVICES

2. CORPORATE COUNSELING

3.  Providing guidance in areas of diversification based on the
Government’s economic and licensing policies.
 Undertaking appraisal of product lines, analysing their growth
and profitability and forecasting future trends.
 Rejuvenating old-line companies and ailing sick units by
appraising their technology and process, assessing their
requirements and restructuring their capital base.

4.  Commissioning of diagnostic studies.
 Assessment of the revival prospects and planning for rehabilitation
through modernization and diversification and revamping of the
financial and organisational structure.
 Arranging for the approval of the financial institutions/banks for
schemes of rehabilitation involving financial relief, etc

5.  Providing assistance in getting soft loans from financial institutions for
capital expenditures, and the requisite credit facilities from the bank.
 Monitoring of rehabilitation schemes.
 Exploring possibilities for takeover of sick units and providing assistance
in marketing consequential arrangements and negotiation with financial
institutions/banks and other interests/authorities involved.

6. PROJECT COUNSELING

7.  Undertaking the general review of the project ideas/project
profile.
 Providing advice on procedural aspects of project
implementation.
 Conducting review of technical feasibility of the project on
the basis of the report prepared by own experts or by
consultants.

8.  Assisting in the selection of a Technical Consultancy Organisation
(TCO) for preparing project reports and market surveys, or review of
the project report or market survey reports prepared by TCO.
 Assisting in the preparation of project report from a financial angle,
and advising and acting on various procedural steps including
obtaining Government consents for implementation of the project.

9.  Assisting in obtaining approvals/licensing/permission/grants, etc from
Government agencies in the form of intent, industrial licence, DGTD
registration, and Government approval for foreign collaboration.
 Providing guidance to Indian entrepreneurs for making investment in
Indian projects in India and in Indian joint venture overseas.
 Identification of political investment avenues.

10.  Carrying out precise capital structuring and shaping the pattern of
financing.
 Arranging and negotiating foreign collaborations, amalgamation,
mergers, and takeovers.
 Undertaking financial study of the project and preparation of viability
reports to advise on the framework of institutional guidelines and laws
governing corporate finance.

11.  Providing assistance in the preparation of project profiles and feasibility
studies based on preliminary project ideas, covering the technical,
financial and economic aspects of the project from the point of view of
their acceptance by financial institutions and banks.
 Advising and assisting clients in preparing applications for financial
assistance to various national financial institutions, state level
institutions, banks, etc.

12.  Assisting clients in making applications for obtaining letters of
intent, industrial licence, DGTD registration, etc.
 Providing assistance in seeking approvals from the Government of
India for foreign technical and financial collaboration agreements,
guidance on investment opportunities for entrepreneurs coming to
India.

13. Pre-investment studies

14.  Carrying out an in-depth investigation of environment and
regulatory factors, location of raw material, supplies, demand
projections and financial requirements in order to assess the
financial and economic viability of a given project.
 Helping the client in identifying and short-listing those projects
which are built upon the client’s inherent strength with the view to
acceptance corporate profitability and growth in the long run.

15.  Conducting such studies as may be required for foreign companies
wishing to participate in joint venture in India.
 Offering a package of services, including advise on the extent of
participation, Government regulatory factors and an environment
scan of certain industries in India.

16. • Examining the capital structure of the client company to determine the
extent of capitalisation required.
• Preparing a comprehensive memorandum for the Controller of Capital
Issues, and securing consent where the capitalisation takes place
through issue of bonus shares.
• Suggesting an alternative capital structure confirming to legal
requirements, Viz., extent of capitalisation of reserve and quantum of
disinvestment by ‘Offer for Sale’ and/or fresh issue of corporate
securities such as equity shares and preference share in the case of
FERA companies.

17. • Preparing a memorandum covering valuation of shares and
justifying the level of premium applied for critically examining tax
implications where the proposal involves offer for sale.
• Suggesting the ideal capital restructuring for sick units and
advising the client companies on the ‘extent and means of bringing
fresh capital into business’.
• Capital Restructuring may cover mergers, takeovers and
amalgamations, involving modernization or diversification of the
existing production systems and the units.

18. CREDIT SYNDICATION

19. • Estimating the total cost of the project to be undertaken.
• Drawing up a financing plan for the total project cost which confirms
to the promoters and their collaborators, financial institutions and
banks, Govt agencies and underwriters.
• preparing loan application for the financial assistance frim term
lenders, financial institutions/banks, and monitoring their progress,
including pre-sanction negations.
• Selecting institutions and banks for participation in financing.

20. • Follow-up of term loan application with the financial institution
anf banks and obtaining the approval for their respective share of
participation
• Assisting in completion of formalities for drawing of finance
sanctioned by institutions by expediting legal documentation
formalities, drawing up agreement, etc. as prescribed by the
participating financial institutions and banks.
• Assessing working capital requirements

21. ISSUE MANAGEMENT AND
UNDERWRITING

22. • Preparation of action.
• Preparation of budget for the total expenses for the issues.
• Preparation of CCI application and assisting in obtaining
contact/acknowledgement.
• Drafting of products.
• Selection of institutional and broker underwriters for
Syndicating/underwriting arrangements.

23. • Selection of Issue house and advertising agencies for
undertaking pre and post-issue publicity.
• Obtaining the approval of institutional underwriters and
stock exchanges for publication of the prospects.
• Making arrangements for designing and printing of
prospects and application forms, as well as their dispatch, if
necessary.

24. CONTINUE
• Providing assistance in launching the issue in the form of
advertisement campaigns by holding press, brokers and investors,
conferences, etc.
• Coordination with the underwriters, brokers, bankers to the issue
and the stock exchanges.
• Providing advice on the design of a sound capital structure,
acceptable to financial institutions.

25. CONTINUE
• Determining the Quantum, terms and timing of the public issue of
different forms of security, the extent and sources, loan finance
and deployment of internal resources, etc.in compliance with the
requirements of the companies Act/ Stock Exchanges, etc.
• Arranging for stock exchange clearance and listing of securities.
• Liaisoning and coordination with various constituents of the public
issue to the function of issue management successful

26. PORTFOLIO MANAGEMENT

27. • Undertaking investment in securities.
• Undertaking investment for non-resident Indians, on both
repatriations and non-repatriations basis.
• Undertaking review of Provident Fund investment, Trust investment,
etc.
• Safe custody of securities in India and overseas.
• Providing advice on selection of investment.
• Carrying out a critical evaluation of investment portfolio.

28. WORKING CAPITAL FINANCE

29. • Assessment of working capital requirements.
• Preparing the necessary application to negotiation for the sanction of
appropriate credit facilities.
• Providing assistance in negotiations with all banks, and suggesting a sharing
pattern of credit limits amongst participating banks, where more than one
bank is involved.
• Assisting, coordinating and expediting documentation and other formalities
for disbursement.
• Advising on the issue of debenture for augmenting long-term requirements of
working capital

30. • Assessment of working capital requirements.
• Preparing the necessary application to negotiation for the sanction of
appropriate credit facilities.
• Providing assistance in negotiations with all banks, and suggesting a sharing
pattern of credit limits amongst participating banks, where more than one
bank is involved.
• Assisting, coordinating and expediting documentation and other formalities
for disbursement.
• Advising on the issue of debenture for augmenting long-term requirements of
working capital

32.  Underwriting management audits to identify areas of
corporate strength and weaknesses in order to help formulate
guidelines and directions for future growth.
 Conducting exploratory studies on a global basis to locate
overseas markets , foreign collaborations and prospective joint
venture associates.
 Examining the pros and cons of proposals and formulation
schemes for financial reconstruction, merger and acquisition.

33.  Obtaining approvals from shareholders, depositors, creditors,
government and other authorities.
 Monitoring the implementation of merger and amalgamation
schemes.
 Identifying the organization with matching characteristics.
 Assisting in the compliance of legal requirements, obtaining
consent from various authorities.
 Advising on capital recognition of business enterprises.

34.  Existence of excess unused manufacturing capacity of the
purchasing company, which can be utilized efficiently by
taking over other units.
 Lack of manufacturing space with the purchasing company.
The best solution may be to buy controlling interest in other
companies having excessive manufacturing space or capacity.
 Advantages of economic scale, Viz., bulk buying and joint-
seling, particularly the possibility of reduced sales promotin
expenses may cause a takeover bid in a horizontal merger of
enterprises in a similar trade

35.  Advantages of economic scale, Viz., bulk buying and joint-
selling, particularly the possibility of reduced sales promotion
expenses may cause a takeover bid in a horizontal merger of
enterprises in a similar trade.
 benefit of vertical integration attracts a takeover bid by a
company which is a supplier to customers who are making
larger profits, so that the group as a whole can reap the
benefits.