Merchant Banking in India

1. NAGINDAS
KHANDWALA
COLLEGE!!

3. GROUP MEMBERS
NAME ROLL NOS
KRISHNA MEHTA 314
RICHA MODI 317
PARITA PATEL 323
SNEHA RAHEJA 325

4. HISTORY OF MERCHANT BANKING
 Merchant banking came into existence in 17th and
18th century in Italy and France.
 Merchant banking officially came in India through
Grindlays bank in 1967.
 Merchant banking is known by different names in
different places like in U.S.A-investment bank,
U.K-accepting and clearing house.
 Merchants formed an association which is called
“Merchant banking and security house
association”.

5. TRADITIONAL MERCHANT BANKING
 Merchant banking as evolved in Europe
pertained to an individual or a banking house
whose primary function was to facilitate the
business process between a product and
financial requirements of it.
 The merchant bankers acted as capital source
whose primary activity was directed towards a
commodity owner who was involved in buying
and selling of goods.

6. MODERN MERCHANT BANKING
 During 20th century merchant banks expanded
their services.
 They became increasingly involved in the actual
running of the business for which the business
was conducted.
 Today merchant banks actually own and run
business for their own account.
 Modern skills include a management advisor,
entrepreneur etc.

7. STATE BANK OF INDIA
 State bank of India(SBI) is the nations largest bank. It was
initially established as bank of Calcutta on 2nd June 1806.
 The primary focus of SBI is on Indian clients. It mission was
to become a professional merchant banker.
 The services rendered by SBI are import finance for Indian
corporate, foreign currency loans under various scheme.

8. CATEGORIES OF MERCHANT BANKERS
CATEGORIES ACTIVITY NET WORTH
CATEGORY 1 TO CARRY ON
ACTIVITIES OF ISSUE
MANAGEMENT, ACT AS
ADVSIOR,
CONSULTANT,
MANAGER,
UNDERWRITER.
1 CRORE
CATEGORY 2 TO ACT AS ADVISOR,
CONSULTANT, CO-MANAGER,
UNDERWRITER AND
PORTFOLIO MANAGER.
50 LAKHS
CATEGORY 3 TO ACT AS ADVISOR,
CONSULTANT AND
UNDERWRITER TO THE
ISSUE.
20 LAKHS
CATEGORY 4 TO ACT AS ADVISOR
AND CONSULTANT TO
THE ISSUE.
NIL

9. ROLE OF MERCHANT BANKS
 Project Counselling
 Loan Syndication
 Issue Management
 Underwriting of Public Issue
 Managers, consultants or Advisors to the
Issue
 Portfolio Management
 Corporate Restructuring

10. CORPORATE RESTRUCTURING
 Corporate restructuring is the process of redesigning
one or more aspects of a company.
 It involves increasing or decreasing the layers of
personnel between the top and the bottom of an
organization, or reassigning roles and
responsibilities.

11. CONTD…
 The process of reorganizing a company
may be implemented due to a number of
different factors, such as positioning the
company to be more competitive, survive
a currently adverse economic climate, or
poise the corporation to move in an
entirely new direction.
 Tata Motors acquisition of Jaguar Land
Rover through Jaguar Land Rover Ltd. Is
an example of Corporate Restructuring

12. MERCHANT BANK`S

13. CODE OF CONDUCT
 A Merchant Bank shall make all efforts to protect the
interests of investors
 A Merchant Bank shall maintain high standards of integrity,
dignity and fairness in the conduct of its business
 A Merchant Bank shall fulfil its obligations in a prompt,
ethical and professional manner.

14. CONTD…
 A Merchant Bank shall always endeavour to
render the best possible advice to the clients
having regard to their needs
 A Merchant Bank shall not make untrue
statement or suppress any material fact in any
documents, reports or information furnished to
the Board.
 Merchant Bank shall develop its own internal
code of conduct for governing its internal
operations

15. NORMS FOR REGISTRATION

16. NORMS FOR REGISTRATION
An applicant should comply with the
following norms:
 The applicant should be a body corporate
 The applicant should not carry on any
business other than those connected with
the securities market

17. CONTD…
 The applicant should not have been
involved in any securities scam or proved
guilty for any offence
 The applicant must have at least two
employees with prior experience in
merchant banking
 The applicant should have a minimum net
worth of Rs.5 cr

18. DIFFERENCE BETWEEN MERCHANT
BANK AND COMMERCIAL BANK

19. MERCHANT
BANK
 They Serve mainly large
companies and very
wealthy individuals
 Merchant banking focuses
on investing a depositor’s
assets in a finance portfolio
and managing these
investments
 Merchant banks are
commonly called as
“Investment Banks”
COMMERCIAL
BANK
 This is accessible to anyone
for basic banking needs
 A commercial bank can
provide loans to individuals
and small businesses
 Typically referred to as
“Banks”

20. MERCHANT
BANK
 Apart from raising funds
by investing and
managing the assets of
wealthy clients, it also
offers counsel and advice
to large corporations
 Advice used by
corporation before
merger and acquisition
of, another corporation
 Involves the provision of
financial services and
advice
 Merchant banks were
actually the original
banks and were invented
in the Middle Ages
COMMERCIAL
BANK
 It raises funds by
collecting deposits from
groups of people as well
as interest charged on
loans
 It purchases bonds from
governments and
corporate entities
 Involves the provision of
financial services
 The use of Commercial
banks by the average
citizen is a relatively new
phenomenon

22. Problems of MERCHANT BANKERS
SEBI guidelines have authorized merchant
bankers to undertake issue related
activities only.
SEBI guidelines stipulate a minimum net
worth of Rs. 1 crore for authorization of
merchant bankers.
 Non co-operation of the issuing
companies.

23. Current Scenario
PNB aims profit of Rs.7,500 crore by 2013
• The country’s second largest public sector lender Punjab
National Bank aims to double its profit to Rs.7500 crore
in the next four years. “The bank has set a target to
expand total business to Rs. 10crore and earn net profit
of Rs.7,500 crore by 2013,” said PNB Chairman and
Managing Director K C Chakrabarty, who is charge of
Deputy Governor of RBI.
• The growth driver would be better asset liability
management, thrust on recovery, focus on customers and
financial inclusion, he has said.

24. CONTD…
 Besides, the bank plans to open new line of
businesses in the current fiscal including
merchant banking subsidiary.
 PNB investment services aims to provide
investment consultancy and merchant banking
services and would be operational in next three
months. Currently, these operations are run by a
division of a bank.

26. ICICI banks to oversee Mergers and Acquisitions
• ICICI bank and its merchant banking arm, ICICI
Securities (I-Sec), have entered into an agreement,
whereby all mergers & acquisitions deals will be done
out of ICICI bank.
• The agreement goes on to define an mergers &
acquisitions deals as one which involves change in
management control.
• This arrangement replaces the earlier practice of both
I-Sec and ICICI bank working together on mergers &
acquisitions deals.

27. CONTD…
 “Since a prominent number of people, who wish
to be advised on mergers & acquisitions, also
looks for acquisition finance, it was decided that
the business should be housed in the bank,”
MD Madhabi Puri told ET.
 “Now, if a corporate is seeking a sell mandate or
a buy mandate, where the transfer of controlling
interest take place, the deal will be done by
ICICI Bank” ICICI Bank had initially entered
investment banking space in 2006.

28. Association of Merchant Bankers
• Association of Merchant Bankers in India is a Professional
non-profit company setup to represent the industry.
• It is expected to set code of ethics and facilitate dialogue
between the industry and regulatory bodies.
• Training and Awareness programmers are also expected from
AMBI.
• Because of lack of support from the members and non-initiative
from SEBI/Government, AMBI is dormant at
present.