Professional Documents
Culture Documents
Merchant Banking-An
Overview
• Companies raise capital by issuing
securities in the market. Merchant
bankers act as intermediaries
between the issuers of capital and
the ultimate investors who purchase
these securities.
• Merchant banking… is the financial
intermediation that matches the
entities that need capital and those that
have capital. It is a function that
facilitates the low of capital in the
market.
• Ministry of Finance: “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 service in relation to
such issue management”
• Banking commission Report-1972
a) Necessity
b) Distinct from commercial Banks
c) Investment Management and Advisory
services
d) Medium and small savers
e) Manage
Merchant Banking in India
• Grindlays Banks-1967
Management of capital issue
Production planning, system design to
market research
Management consultancy
• Citibank-1970
• SBI-1972
Services rendered
• Organising finance for investment in
projects
• Assistance in financial management
• Acceptance of house business
• Raising Eurodollar loans and issue of
foreign currency bonds
• Financing export of capital goods,
hydropower
• Financing of hire-purchase
transaction, leasing
Regulation
• Merchant Bankers Regulations of
Securities and Exchange Board of
India
• Company Act 1956
• Listing guidelines of Stock Exchanges
• Securities Contracts (Regulation) Act,
1956
• Formation of divisions
• Subsidiaries companies
Structure
• Category-I
to carry on any activity of the issue
management, which will inter-alia
consist of preparation of prospectus and
other information relating to the issue,
determining financial structure, tie-up of
financiers and final allotment and refund
of the subscription; and
to act as adviser, consultant, manager,
underwriter, portfolio manager.
Structure
• Category II
that is, to act as adviser, consultant, co-
manager, underwriter, portfolio
manager;
• Category III
that is to act as underwriter, adviser,
consultant to an issue;
• Category IV
that is to act only as adviser or
consultant to an issue.
Registration with SEBI
• Around 250 Merchant Bankers
• Abolished all categories and
maintained Category-I
• Separate registration for
underwriters and portfolio manager
• Segregation between fee based and
Fund based activities
Registration with SEBI
• Registration with SEBI is mandatory to carry out the
business of merchant banking in India. An applicant
should comply with the following norms: