Merchant banking originated in the 13th century when traders acted as bankers, financing wars and trades. Merchant bankers advise companies on capital structure, pricing, and project evaluation when managing public issues. They are responsible for appointing advisors, marketing the issue, and obtaining necessary approvals. When selecting a merchant bank, companies consider factors like ethics, reputation, resources, and past performance; and when selecting clients, they consider track record, management, and project viability. The key objectives of merchant banks are providing long-term funds, project advice, and managing portfolios and issues. Regulations require merchant banks to act with integrity and in clients' best interests.

1. MERCHANT
BANKING

2. Origin of Merchant Banking
 13th Century merchant bankers were traders of
commodities and acted as bankers to the kings
of European states.
 They Financed the continental wars and
coastal trades.
 They lent their names to lesser known traders
by accepting bills through which they
guaranteed that the holder of the bill would
receive full payment.

3. Managers to the issue or Merchant
Bankers
 Advise on the capital structure, instrument of
issue.
 Pricing
 Assessing and appraisal of project report.
 Appointment of bankers, underwriters,
brokers, registrars, printers and advertisement
agents.
 Holding brokers-Underwriters,

4.  Press and investor conferences.
 Deciding the pattern of advertisement.
 Deciding the collection branches where
application can be received or collected.
 Deciding on the dates of opening and closing
of the subscription list.
 Obtain daily report of the applications and
amounts collected at branches.

5.  Obtaining subscription to the issue.
 Obtain consent of the Stock Exchange and
get basis of allotment approved.
Looking at the above roles of the MB a
company should choose one after a lot of
research into his integrity, expertise,
competence.

6. Factors to select a MB
 Ethics and integrity.
 Reputation.
 Trained & committed manpower.
 Concern & interest of clients.
 Liaison and networking.
 Relationship & Contacts.
 Infrastructure.
 Past performance.

7. Factors to select a client.
 Track record of the company.
 Track record of the promoters.
 Professional management.
 Financial strength of the promoters and the
company.
 Economic viability of the project.

8. Prime Objectives of MB
 Providing long term funds to the projects or
companies.
 Project counseling- loan syndication, project
appraisal and arrangement of Working
capital.
 Deciding the capital structure.
 Portfolio Management
 Underwriting
 Corporate advisory & issue mgmt.

9. Emerging Areas.
 Private placements with NRI’s and FII’s.
 Brought out deals.
 Market Making
 OTC
 NSE
 Forex
 Financial engineering- M&A’s, capital
restructuring.

10. SEBI (MB) Regulations, 1992
 Code of Conduct for MB
 Observe high standards of integrity and
fairness in all his dealings.
 Render high standard of service, exercise
due diligence, proper care, exercise
independent judgment & disclose conflict
of interest while providing unbiased
service.

11. Code of conduct continued……..
 Not make any statement or become privy
to any act, practice or unfair competition,
likely to harm the interest of other MB or
is likely to place such other MB in a
disadvantageous position in relation to the
MB, while competing for or executing any
assignment. (Harmful statement while
solicitation & execution)

12.  Not make exaggerated statements, written or
oral, to the client either about the qualification
or the capability to render certain services or his
achievements in regard to services rendered to
other clients.
 Render best possible advice to the client having
regard to the clients needs and the environment
and his own professional skill;
 Ensure that all professional dealings are
effected in a prompt, efficient and cost effective
manner.

13. A MB shall not divulge to other clients, press or
any other party any confidential information
about his client, which has come to his
knowledge.
 Deal in securities of the client company without
making disclosure to the board as required under
the regulation and also to the Board of Directors
of the client company.
 Provide investors with true and adequate
information without making any misguiding or

14.  exaggerated claims and are aware of
attendant risks before any investment
decisions are made.
 Ensure copies of prospectus,
memorandum and related literature are made
available to investors.
 Fair allotment of securities and refund of
application money without delay.
 Investor complaints are adequately dealt
with.

15.  The MB shall not generally and particularly in respect
of issue of any securities be party to
 Creation of false market
 Price rigging or manipulation
 Passing of price sensitive information or take
any other action which is unethical or unfair to
the investors.
A MB shall abide by the provisions of the
Act, rules and regulations which may be
applicable and relevant to the activities
carried on by the merchant banker.