Evolution of Mb Ppt

8/6/2019 Evolution of Mb Ppt

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EVOLUTION OF

MERCHANT BANKING

PRESENTED BY

A.MADONA DAFINY JENIFER

(10PBA155)


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CONTENT

DEFINITION OF MERCHANT BANKING

Merchant Account

Merchant Discount Rate

SERVICES OFFERED BY MERCHANT BANKS

HISTORY OF MERCHANT BANKING

INDIAN AND FOREIGN BANKS SUPPORTING THIS

REGULATIONS FOLLOWED

RANKING OF THIS IN INDIA

REFERENCES


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DEFINITION OF

MERCHANT BANKING

Amerchant bank is a financial

institution which provides capital to

companies in the form of share

ownership instead of loans. A merchant

bank also provides advisory on

corporate matters to the firms they lend

to.


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Merchant Account

A merchant account is an agreement

made between the business/seller, the

bank where the merchant account is

held and the payment processor to

settle all transactions made by debit

and credit cards


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Merchant Discount Rate

The rate charged to a merchant by a

bank for providing debit and credit card

services.

The merchant must set up this service with

a bank, and agree to the rate prior to

accepting debit and credit cards as

payment.


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SERVICES OFFERED BY

MERCHANT BANKS

Merchant banking is a service oriented industry. Merchant banks all

over the world carry out the same set of services.

Merchant banks in India carry

out the following functions and services specifically.

1. Corporate Counseling

2. Project counseling

3. Pre-investment Studies

4. Capital restructuring

5. Credit Syndication


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SERVICES OFFERED BY

MERCHANT BANKS(CONT)

6. Issue Management and underwriting

7. Portfolio Management

8. Working Capital Finance

9. Acceptance Credit and Bill discounting

10. Mergers, Amalgamations and Takeovers

11. Venture Capital


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SERVICES OFFERED BY

MERCHANT BANKS(CONT)

12. Lease Financing

13. Foreign Currency Finance

14. Fixed Deposit Broking

15. Mutual funds

16. Relief to Sick Industries

17. Project Appraisal


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HISTORY OF MERCHANT

BANKING

These were invented in the Middle Ages by Italian grain

merchants

In late 17th and early 18th century Europe, the largest

companies of the world were merchant adventurers. Supported

by wealthy groups of people and a network of overseas trading

posts, the collected large amounts of money to finance trade

Across parts of the world. For example, The East India Trading


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HISTORY (CONT)

Company secured a Royal Warrant from

England, providing the firm with official rights

to lucrative trading activities in India. This

company was the forerunner in developing

the crown jewel of the English Empire. The

English colony was started by what we would

today call merchant bankers, because of the

firm's involvement in financing, negotiating,

and implementing trade transactions.


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HISTORY (CONT)

The colonies of other European countries were started in the

same manner. For example, the Dutch merchant adventurers

were active in what is now Indonesia; the French and

Portuguese acted similarly in their respective colonies. The

American colonies also represent the product of merchant

banking, as evidenced by the activities of the famous Hudson

Bay Company. One does not typically look at these countries'

economic development as having been fueled by merchant

bank adventurers. However, the colonies and their progress

stem from the business of merchant banks, according to today's

accepted sense of the word.


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THE HISTORICAL MERCHANT

BANK

Merchant Banking, as the term has evolved in Europe from the 18th

century to today, pertained to an individual or a banking house whose

primary function was to facilitate the business process between a

product and the financial requirements for its development. Merchant

banking services span from the earliest negotiations from a transaction

to its actual consummation between buyer and seller.


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THE HISTORICAL MERCHANT

BANK (CONT)

In particular, the merchant banker acted as a

capital sources whose primary activity was directed

towards a commodity trader/cargo owner who was

involved in the buying, selling, and shipping of goods. The role

of the merchant banker, who had the expertise to understand a

particular transaction, was to arrange the necessary capital and

ensure that the transaction would ultimately produce "collectable"

profits. Often, the merchant banker also became involved in the actual

negotiations between a buyer and seller in a transaction.


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THE MODERN MERCHANT BANK

During the 20th century, however,

European merchant banks expanded their

services. They became increasingly involved in the

actual running of the business for whom the

transaction was conducted. Today, merchant banks actually

own and run businesses For their own account, and that of

others.


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THE MODERN MERCHANT BANK

(cont)Since the 18th century, the term merchant banker

has, therefore, been considerably broadened to

include a composite of modern day skills. These

skills include those inherent in an entrepreneur, a management

advisor, a commercial and/or investment banker plus that of a

transaction broker. Today a merchant banker is who has the

ability to merchandise -- that is, create or expand a need -- and fulfill

capital requirements. The modern European merchant bank, in many ways,

reflects the early activities and breadth of services of the colonial trading

companies


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Foreign Players in Merchant

Banking:

GOLDMAN SACHS (INDIA) SECURITIES PVT. LTD.

MORGAN STANLEY INDIA COMPANY PVT LTD

BARCLAYS SECURITIES (INDIA) PVT. LTD

BANK OF AMERICA, N.A

DEUTSCHE BANK

DEUTSCHE EQUITIES INDIA PRIVATE LIMITED

BARCLAYS BANK PLC

CITIGROUP GLOBAL MARKETS INDIA PVT. LTD.

DSP MERRILL LYNCH LTD

FEDEX SECURITIES LTD


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HISTORY OF MERCHANT

BANKING IN INDIAThe formal beginning of the merchant banking services

In India began in 1967 when the Reserve Bank of India

provided license to the Grind lays Bank. The Grind lays

Bank was engaged in capital issuemanagement and it

provided diverse financial services to the emerging

section of entrepreneurs, especially those belonging to the

small and medium enterprise sector.


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HISTORY OF MERCHANT

BANKING IN INDIA (cont)

Citibank started themerchant banking

services in 1970 and the State Bank of

India followed the same in 1972. After few years,

the nationalmerchant banks started

collaborating with their counterparts in different countries

to start theirmerchant banking divisions abroad.


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Merchant Bankers in India:

There are 135 Merchant bankers who

are registered with SEBI now in India.

There are public sector, Private sector

and foreign players registered with

SEBI. The below are the examples of

few of the Merchant bankers in each of

the Public, private and foreign players.


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Public sector Merchant Bankers:

SBI CAPITAL MARKETS LTD

PUNJAB NATIONAL BANK

BANK OF MAHARASHTRA

IFCI FINANCIAL SERVICES LTD

KARUR VYSYA BANK LTD,

STATE BANK OF BIKANER AND JAIPUR


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Private Sector Merchant

Bankers:

ICICI SECURITIES LTD

AXIS BANK LTD.(FORMERLY UTI BANK LTD.

BAJAJ CAPITAL LTD

TATA CAPITAL MARKETS LTD

ICICI BANK LTD

KOTAK MAHINDRA CAPITAL COMPANY LTD

YES BANK LTD.


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REGULATIONS FOLLOWED BY

MERCHANT BANKERSRegistration of Merchant bankers with SEBI

It is mandatory for a merchant banker to register with the

SEBI. Without holding a certificate of registration granted by the

Securities and Exchange Board of India, no person can act as a

merchant banker in India.

1) Only a body corporate other than a non-banking financial company shall be eligible

to get registration as merchant banker.

2) The applicant should not carry on any business other than those connected with the

Securities market.

3) All applicants for Merchant Bankers should have qualification in Finance, law or

Business Management.


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REGULATIONS (CONT)

4) The applicant should have infrastructure like office space,

equipment, manpower etc.

5) The applicant must have at least two employees with prior

experience in merchant banking.

6) Any associate company, group company, subsidiary or interconnected

company of the applicant should not have been a registered merchant banker

7) The applicant should not have been involved in any securities scam or

proved guilt for any offence

8) The applicant should have a minimum net worth of Rs.5 Crores.


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The various categories for which

registration can be obtained are:

1) Category I to carry on the activity of issue management

and to act as adviser, consultant, manager, underwriter,portfolio

manager.

2) Category II - to act as adviser, consultant, co-manager,

underwriter, portfolio manager.

3) Category III - to act as underwriter, adviser or consultant to an

issue

4) Category IV to act only as adviser or consultant to an issue


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The capital requirement for carrying

on activity as merchant banker:

The capital requirement depends upon the

category. The minimum net worth requirement

for acting as merchant banker is given below:

Category I Rs. 5 crores

Category II Rs, 50 lakhs

Category III Rs. 20 lakhs

Category IV Nil


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Procedure for getting registration:

An application should be submitted to

SEBI in Form A of the SEBI (Merchant

Bankers) Regulations, 1992. SEBI shall

consider the application and on being

satisfied, issues a certificate of registration in Form B

of the SEBI (Merchant Bankers) Regulations, 1992.


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Registration fee payable to SEBI:

Rs. 5 lakhs which should be paid within 15

days of date of receipt of intimation regarding grant

of certificate. Validity period of certificate of

registration is three years from the date of issue. Three months

before the expiry period, an application along with renewal fee

of 2.5 lakhs should be submitted to SEBI in Form A of the SEBI

(Merchant Bankers) Regulations, 1992. SEBI shall consider the

application and on being satisfied renew certificate of registration for a

further period of 3 years.


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CURRENT POSITION OF

MERCHANT BANKS IN INDIA

Note:

OE: Overall Excellence;

FSS: Financial Soundness ;

QPS: Quality Product/Service;

QM: Quality Management;

INN: Innovativeness.


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Ranking of Merchant Banking in

India:

Merchant Banker OE FSS QPS QM INN

ICICI Securities 4.0 4.0 4.2 3.8 4.3

IDBI 4.2 3.2 4.5 4.0 4.8

SBI Caps 4.4. 3.9 4.6. 6.7 5.2

DPS 6.1 5.7 6.0 6.0 5.3

IFCI 6.1 5.7 6.0 6.0 6.3

Bank of Baroda 6.7 6.5 6.7 6.6 6.8

Jardine Fleming 5.8 6.2 5.9 5.0 5.5

JM Finance 6.0 6.5 5.5 5.9 5.4

ENAM 6.3 6.8 6.4 6.3 6.2

PNB Caps 6.8 6.8 6.7 6.8 6.8


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REFERENCES

http://www.articlesbase.com/home-

business-articles/merchant-banking-

services-in-india-an-understanding-

3102091.html#ixzz1QMxqVBif

http://in.answers.yahoo.com/question/index

?qid=20100816061713AADsitl

http://www.investopedia.com/terms/m/merchant-

discount-rate.asp#ixzz1QIeBEAoZ

http://www.investopedia.com/terms/m/merchant-

Account.asp#ixzz1QIdmfkOt


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Evolution of Mb Ppt