Prashant Kale [25]

Meaning
In banking, merchant bank is a financial institution

primarily engaged in offering financial services and advice to corporations and wealthy individuals on how to use their money.
The term can also be used to describe the private equity

activities of banking.

Merchant Banks - Concept

No statutory or any authoritative definition.
For many, it means management of capital issues of

companies. Some confuse this with investment banking and an issue house. Yet another group of persons mean it to what a merchant banker does. In this situation, let us try to settle for a workable definition of this term.

Definition In the Indian context, understood to be non-fund based

and non-banking services Merchant bankers -neither merchants nor bankers Rule 2(e) of SEBI (merchant bankers) Rules 1992, defines merchant banker means any person who is engaged in the business of issue management either by making arrangements regarding selling, buying or subscribing to securities as manager-consultant, advisor or rendering corporate advisory services in relation to such issue management

Merchant banking Vs Commercial banking

A bank can undertake merchant banking business, but a Merchant Bank can not undertake banking business.

Merchant Banking Vs Investment Banking

Thin difference investment banker does the following

Selling issues of securities of companies, Underwriting functions, Helps in mergers and acquisitions, Investment advises, Finding buyers for private placement, Dealing in securities, etc.

Hence, similarities between MB and IB. Generally,

investment advises and dealing in securities are not performed by Merchant Banker.

Merchant Banking in India

Merchant Banking Divisions Foreign Banks Indian Banks Financial Institutions Private Merchant Bankers

Subsidiary

Division in Bank

Merchant Banking and Corporates

Guidance Project Formulations Implementation Objectives of Merchant Banking

Modernization
Diversification Mobilizing Resources Raising Working Capital

Activities of Merchant Bankers

Wide range of activities broadly classified under two

heads - counseling and procuring finance

Some of the important functions of a Merchant Bankers are

Project counseling or reinvestment studies for investors Syndication of loans and project finance Issue management Provision of working capital Portfolio Management Foreign Currency Loans

SERVICES RENDERED BY MERCHANT BANKERS

Project finance advice
Project appraisal Capital restructuring Issue management Loan syndication

Foreign currency finance

Investment management

Continued..
Mutual funds
Lease finance Bill discounting

Mergers and acquisitions

Working capital finance Government consents Arranging fixed deposits Corporate counseling

Continued..
Underwriting
Non-resident investment Relief to sick industrial units Hire purchase Money market operations

AUTHORISED ACTIVITIES OF MERCHANT BANKERS

Issue Management
Corporate Adviser Services relating to Issue Underwriting Portfolio Management Managers, Consultants or Advisors in the

Issue

Categories of merchant bankers

Category I Those authorised to act in the capacity of

led manager/co-manager/advisor or consultant to an issue, portfolio manager and underwriter to an issue. Category II those authorised to act in the capacity of co-manager or consultant to an issue or portfolio manager. Category III those authorised to act only in the capacity of advisor or consultant to an issue.

Association of merchant bankers

AMBI registered as a self regulatory organization

under sec. 25 of the companies act 1956 Reasons to form AMBI No control on prices of new issues Prices decided by merchant bankers Investors have become more demanding Demands for stringent regulation of the merchant bankers.

Punjab National Bank

The Bank is registered with SEBI as Category I Merchant

Banker for providing all the major Merchant Banking services.

Canara Bank
One of the leading Merchant Bankers in India

Offering specialized services to Banks, PSUs, State owned

Corporations, Local Statutory bodies and corporate sector. They are SEBI registered Category I Merchant Banker/Underwriter to carry on Issue Management (Public/Rights/Private Placement Issues), Underwriting, Consultancy and Corporate Advisory Services etc. They also hold SEBI registration Certificate to act as "Bankers to an Issue" with network of exclusive Capital Market Service Branches to handle "Capital Market" related assignments.

SPECTRUM OF SERVICES

Equity Issue (Public/Rights) Management Debt Issue Management Private Placements Project Appraisals Monitoring Agency Assignments IPO Funding Security Trustee Services Agriculture Consultancy Services Corporate Advisory Services Mergers and Acquisitions Buy Back Assignments Share Valuations