Merchant Banking Presentation

7/30/2019 Merchant Banking Presentation

1/28

Merchant Banking


2/28

INTRODUCTION Merchant Banking may be defined as an institution which

covers a wide range of activities such as

Both commercial and investment banks may engage in

merchant banking activities. The original purpose of

merchant banks was to facilitate and/or finance production

and trade of commodities and hence the name "merchant.

They all render these service for a fee.


3/28

ORIGIN

The term merchant bankingoriginated from the London who

started financing foreign tradethrough acceptance of bills

Later they helped government ofunder developed countries to

raise long term funds

Later these merchants formed anassociation which is now called

Merchant Banking andSecurities House Association


4/28

Who Is A Merchant Banker?

CRITICAL LINK BETWEENCOMPANY & INVESTORS

UNDERWRITES SECURITY ANDADVICES ON MERGERS

ACT AS BANK, COMPANY, FIRM

OR PROPRIETARY CONCERN

UNDERSTAND BUSINESS ANDARRANGE FINANCE


5/28


6/28

Merchant banking in India

Need for merchant banking was felt with rapidgrowth in number & size of issues made inprimary market.

Merchant banking services were started byforeign banks, namely National Grindlays in1967 & City bank in 1970 .

Merchant banking services were offered alongwith other traditional banking services.

SBI was first Indian bank to set up Merchantbanking division in 1972.

Merchant banking services were offered alongwith other traditional banking services.


7/28

DIFFERENCE BETWEEN COMMERCIAL BANKING & MERCHANT

BANKING


8/28

Merchant Banking

Services?


9/28

SERVICES OF MERCHANT BANK

The financial institutions inIndia could not meet the

demand for long-term fundrequired by the ever

expanding industry and trade.

Corporate sectors enterprise

meet their demand throughissuing share and debenture incapital market.


10/28

Services of Merchant Banks


11/28



12/28



13/28

CATEGORY OF MERCHANT BANKER

CATEGORY

1st

2nd

3rd

4th

MINIMUMNETWORTH

5 crore

50 lacs

20 lacs

Nil


14/28

Guidelines for merchant bankers appointment

Companies are free toappoint one or more

agencies as managersto the issue.

SEBI guidelinesprescribe that issue

should be managed atleast by one authorisedmerchant banker.

In issue over Rs.100crores, maximum up to

four M.B. could beassociated asmanagers.


15/28

Cont..

Appointment of a lead manager by a company

S

1. Less than Rs.50 crores 2

2. Rs.50 crores to Rs.100 crores 3



5. Above Rs.400 crores 5 or more asprescribed by

SEBI


16/28

Duties & Responsibilities Of LM

To enter into an agreement

Certificate of registration with SEBI

Work of issue management

Clearly defined responsibility

Minimum underwriting obligation

Due care & diligence

Submitting due diligence certificates

Submit all particulars to SEBISuggestions or modifications

Collections of the amount

Ensuring refund

Inform depository participants


17/28

Qualities Required of Merchant Bankers

Ability to analyses

Abundant knowledge

Ability to built uprelationship

Innovative approach

Integrity

(left) Rashesh ShahChairman & CEO, Edelweiss

(right)Nimesh KampaniChairman & MD, JM Financial

(Best merchant bankers)


18/28

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


19/28

Merchant banking

Problems.?


20/28

Restriction of merchant banking

activities SEBI guidelines have authorisedmerchant bankers to undertake

issue related activities and made

them restrict their activities orthink of separating these

activities from present one and

float new subsidiary and enlarge

the scope of its activities.

Fees or commission for PSU IPO

FPO


21/28

Minimum net worth of Rs.1 crore

SEBI guidelines

stipulate that a

minimum net worth ofRs.1 crore for

authorisation of

merchant bankers.


22/28

Non co-operation of issuing companies

Non co-operation of the issuing companies

in timely allotment of securities and refund

of application money is another problem

faced by merchant bankers.


23/28

Merchant banking

Scope in India?

d


24/28

Scope in India

d


25/28

Scope in India

i di


26/28

Scope in India


27/28

Conclusion

Inspite of problems popping up, merchant

banking in India has vast scope to develop

because of lot of domestic as well as foreignbusinesses booming here. Indian economy

provides an amicable environment for these

firms to set up, flourish and expand here.


28/28

Thank you...

Merchant Banking Presentation

Documents

Transcript of Merchant Banking Presentation