Merchant Banker Final

8/8/2019 Merchant Banker Final

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MERCHANT BANKER

Presented By:

Sonali Daine 11

Dipti Dalvi 12

Mandar Deshmukh 13

Rupesh Devaliya 14

Kriselle Dsilva 15


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BASICS OF MERCHANT BANKING

New concept in the area of financial services in

India

Caters to the need of trade & industry

Concept of Banking

Commercial Banking

Investment Banking


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DEFINITION

Merchant banking may be defined as aninstitution which covers a wide range ofactivities such as underwriting of shares,portfolio management, project counseling,insurance etcThey render all theseservices for a fee.

Merchant Banker is a person who carries on

merchant banking services i.e. financial advisoryservices

Compulsory registration with SEBI


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ORIGIN OF MERCHANT BANKING

The concept originated from Italy during 3rd

century.

The first known firms which have been involvedwere Riccadi of luca, Medici, Fuggier and so on.

In olden time merchant banking was also known

as accepting and issuing houses in the U.K. andinvestment banks in the USA


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ORIGIN OF MERCHANT BANKING IN INDIA

National Grind lays bank in India initiatedmerchant banking services in1969.

The Citibank followed it in 1970.

The state bank of India was the first Indiancommercial bank to set up a separate merchantbanking division in 1973.

ICICI followed it in 1974

Both these Indian merchant bankers emerged asleader in merchant banking having done significantbusiness during the period 1974-85 in comparison toforeign banks


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CODE OF CONDUCT

To protect the interest of investors

To maintain high standards of integrity, dignity &fairness in conduct of a business

Fulfill all obligations in a professional & ethicalmanner

Should not discriminate among the clients

Should ensure that prospectus, letter of offer etc.. isavailable to investors at the time of issue

Should render best possible advice to its clients


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CONT

Any penal action taken by SEBI should be informed

to its clients

Should inform the board about any legal proceedingsinitiated against it.

Should abide by the rules of SEBI, 2003

Should ensure that any person it employs shouldhave the capacity to be a merchant banker.

It is responsible for the act of its employees andagents

Should not create any false markets


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SERVICES OF MERCHANT BANKER

Project Counseling:-

y Preparation of Project Reports

y Deciding upon financing pattern

y Filling up of forms for obtaining funds from financial

institutions

Loan Syndication

y

To raise loans for projects after determiningpromoter's contribution

y Loans can be obtained single institution or

consortium


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CONT

Issue Management

y Management of securities offering of clients to the

general public & existing shareholders on the right

basis

y Issue managers are also known as merchant banker

or lead managers

y Type of Issue:

Public Issues

Right Issue

Private Placement


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LIMIT FOR LEAD MANAGERS

Size of the issue (in Rs) No of lead managers

50 crore 2

50-100crore 3100-200crore 4

200-400crore 5

Above 400crore 5 or more as agreed by the

board


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PRE-ISSUE ACTIVITIES

They prepare copies of prospectus and send it toto SEBI and then file them to Registrar ofCompanies

They conduct meetings with companyrepresentatives and advertising agencies todecide upon the date of opening issue, closingissue, launching publicity campaign etc..

They help the companies in fixing up the pricesfor their issues


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POST-ISSUE ACTIVITIES

Collection of application forms

Screening of applications

Deciding allotment procedure

Mailing of allotment letters

Share Certificates

Refund orders


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CONT

Underwriting of public issues

Managers, Consultants,or advisors to the issue

Portfolio Management

NRI Investment

Advisory services relating to mergers &takeovers

Off- Shore Finance


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REGISTRATION CHARGES

Charges payable by the merchant banker

Category 1- a sum of Rs. 2.5 lakh to be paid

annually for the first two year commencing fromthe date of initial registration and thereafter a

sum of Rs. 1 lakh to keep the registration in

force.

Category 2- A sum of Rs. 1.5 lakh to be paid

annually for the first two year commencing from

the initial registration and thereafter a sum of

Rs.50000 to keep the registration in force.


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CONT

Category -3- A sum of Rs. 1 lakh to be paid


the date of initial registration and there after a

sum of 25000 to keep the registration in force.

Category 4- A sum of Rs. 5000 to be paid


the date of initial registration and there after asum of Rs. 1000 to keep the registration in force


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GUIDELINES FOR MERCHANT

BANKERS

SEBIs authorization is a must to act as a

merchant bankers.

y Authorization criterion include:

Professional qualification in finance, law orbusiness management

Infrastructure like office space, equipment and

man power

Capital adequacy Past track of record, experience, general

reputation and fairness in all transactions


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CONT

Every merchant banker should maintain copies

of balance sheet, Profit and loss account,

statement of financial position

Half-yearly unaudited result should be submittedto SEBI

Merchant bankers are prohibited from buying

securities based on the unpublished pricesensitive information of their clients


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CONT

SEBI has been vested with the power to suspend orcancel the authorization in case of violation of theguidelines

Every merchant banker shall appoint a ComplianceOfficer to monitor compliance of the Act

SEBI has the right to send inspecting authority toinspect books of accounts, records etc of merchantbankers

Inspections will be conducted by SEBI to ensure thatprovisions of the regulations are properly complied

An initial authorization fee, an annual fee andrenewal fee may be collected by SEBI

A lead manager holding a certificate under category Ishall accept a minimum underwriting obligation of5% of size of issue or Rs.25 lakhs whichever is less


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MERCHANT BANKERS COMMISSION

Maximum 0.5%

Project appraisal fees

Lead Manager :

- 0.5% upto Rs.25 crores

- 0.2% more in excess of Rs.25 crores

Underwriting fees

Brokerage commission 1.5%

Other expenses :-

- Advertising- Printing

- Registrars expenses

- Stamp duty


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MERCHANT BANKING SCOPE IN

INDIA

1) Growth of new issues market

2) Entry of FII

3) Changing policy of FI

4) Development of debt market

5) Innovations in Financial Instruments

6) Corporate Restructuring

7) Disinvestment


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PROBLEMS OF MERCHANT

BANKERS

SEBI stipulates high capital adequacy norms forauthorization which prevents young, specializedprofessionals into merchant banking business

Non co-operation of the issuing companies in timelyallotment of securities and refund of application ofmoney etc.. is another problem

Yet merchant banking is vast but should developadequate expertise to provide a full range of merchantbanking services


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CONCLUSION

In spite of problems popping up, merchant

banking in India has vast scope to develop

because of lot of domestic as well as foreign

businesses booming here. Indian economyprovides an amicable environment for these firms

to set up, flourish and expand here.


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THANK YOU

Documents

Merchant Banker Final