Prepared to deliver lecture in Class

1. Dr. Jamaluddeen (Jamal)
Assistant Professor
Department of Commerce
University of North Bengal
Merchant Banking

3. 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 counselling,
insurance etc. They render all these services for
a fee
ORIGIN
The term merchant banking originated from the
London who started financing foreign trade
through acceptance of bills
Later these merchants formed an association
which is now called ”Merchant Banking and
Securities House Association”

4. Merchant
Banks
Project
Promotion
Services
Syndication
of Loan
Underwriting
Corporate
Counseling
Venture
Capital
Placement
and
Distribution

5. SERVICES OF MERCHANT
BANKERS
PROJECT COUNSELLING :
It includes preparation of project 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 institutions.
LOAN SYNDICATION :
Assistance is rendered to raise loans for
projects after determining promoter’s

6. ISSUE MANAGEMENT
Management of issues involves marketing of corporate
securities i.e. equity shares, preference shares and
debentures by offering them to public.
Pre-issue activities: They prepare copies of
prospectus and send it to SEBI and then file them to
Registrar of Companies
They conduct meetings with company representatives
and advertising agencies to decide upon the date of
opening issue, closing issue, launching publicity
campaign etc.
They help the companies in fixing up the prices for
their issues

7. UNDERWRITING OF PUBLIC ISSUES :
Underwriting is an insurance to the company which
makes public Issues. Raising of external resources is
easy for the issues backed by well known
underwriters.
MANAGERS, CONSULTANTS OR ADVISERS TO THE ISSUE:
SEBI insist that all issues should be managed by at
least one authorised merchant banker but not more
than two. For an issue of 100 crores, upto a
maximum of four merchant bankers shall be
appointed. They help in listing of shares in stock
exchange, completion of formalities under
Companies Act etc.

8. PORTFOLIO
MANAGEMENT
Investors are interested in safety, liquidity and
profitability of his investment but they cant
choose the appropriate securities. So merchant
bankers help their investors in choosing the
shares. They conduct regular market and
economic surveys.
Portfolio management refers to maintaining
proper combination of securities in a manner
that they give maximum return with minimum
risk. Merchant Bankers provide portfolio
management services to their clients.

9. NRI INVESTMENT
NRIs has to follow lots of complicated rules for
investing in the shares in India. Merchant
bankers help them in choosing the shares and
offer expert advice fulfilling government
regulations thus mobilising more resources
for corporate sector.
ADVISORY SERVICE FOR MERGERS &
TAKEOVERS
Merchant banker acts as middlemen between
offeror and offeree related with
Amalgamation (Merger and purchase),

10. OFF SHORE FINANCE
Merchant Bankers provide services to a
client outside of one's national
boundaries, whether or not that
location is land- or water-based.
Merchant bankers help their clients in :
Long term foreign currency
loan
Joint venture abroad

11. MERCHANT BANKER IN
INDIA
 Commercial banks: SBI, Bank of Baroda, etc.
 Foreign banks: National Grindlays Bank, Citibank, HSBC
bank etc.
 Development banks: ICICI, IFCI, IDBI, SFC, SIDC, etc..
 Private firms: JM Financial and Investment service, DSP
Financial
 Consultants: Ceat Financial Services, Kotak Mahindra,
VMC Project

12. MERCHANT BANKING REGULATIONS
Certificate from SEBI is a must. They are of four
types:
Category I: Can act as Issue managers (Rs.
5 crores)
Category II: Can act only as co-managers
(Rs.50 lakhs)
Category III: Can act as co-managers but cannot
undertake portfolio management
(Rs.20 lakhs)

13. GUIDELINES FOR MERCHANT
BANKERS
SEBI’s authorization is a must to act as merchant
bankers, Authorization criteria include
 Professional qualification in finance, law or
business Mgt.
 Infrastructure like office space, equipment and
man power
 Capital adequacy
 Past track of record, experience, general
reputation and fairness in All transactions
Every merchant banker should maintain copies of (Financial
Statements) balance sheet, P/L account, statement of
financial position

14. SEBI has been vested with the power to
suspend or cancel the authorisation in case
of violation of the guidelines
Every merchant banker shall appoint a
‘Compliance Officer‘ to monitor compliance
of the Act
SEBI may send inspecting authority to
inspect books of accounts, records etc. of
merchant bankers
An initial authorisation fee, an annual fee
and renewal fee may be collected by SEBI
A lead manager holding a certificate under

15. 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 fulfil all obligations in an ethical
manner
Should not discriminate among the clients
Should ensure that prospectus, letter of offer
etc. is available to investors at the time of
issue

16. Should inform the board about any legal
proceedings initiated against it
Should abide by the rules of SEBI
Regulations, 2003
Shall develop its own internal code of
conduct for governing its internal operations
Should ensure that any person it employs
should have the capacity to be a merchant
banker
It is responsible for the act of its employees
CODE OF CONDUCT

17. PROBLEMS OF MERCHANT
BANKERS
SEBI stipulates high capital adequacy
norms for authorization which prevents
young, specialized professionals into
merchant banking business
Non co-operation of the issuing
companies in timely allotment of securities
and refund of application of money etc. is
another problem
Yet merchant banking is vast but should

18. ASK ME ABOUT THE TOPIC IF
YOU WANT …
IF ANY QUERIES

19. ThankYou
Dr. jAMALUDDEEN
Assistant Professor
Department of Commerce
North Bengal University
Contact No. 07499615156
E-mail: qjamaluddeen@gmail.com