Merchant Banking in India Word

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Merchant Banking in IndiaMERCHANT BANKING IN INDIA

INTRODUCTIONFinancial services are an important component of financial system. Thesmooth functioning of financial system depends upon the range of financialservices extended by the providers. Financial services in India havewitnessed remarkable changes in the recent past after the implementation of

Liberalization, privatization and globalization.Funds are tapped from the capital market to finance various mega industrial

projects. In attracting public savings, merchant bankers play a vital role asspecialized agencies. The resources raising functions remains to be the

primary business of a merchant banker. The primary market holds the key torapid capital formation, growth in industrial productions and exports. Therehas to be accountability to the end use of funds raised from the market. Theincrease in the number of issues and amount raised the number of merchant

bankers. Therefore, the field became highly competitive market where it

requires a specialized skill in handling the situation. The merchant bankershave a social responsibility to in building an industrial structure in India.1Merchant Banking in IndiaMerchant bankers assist corporate in raising capital. They assist in issue ofShares, syndicating loans, public issue of debentures. They do not providefunds.They only assist. They also actively arrange working capital, appraisalProjects scrutinize & persuade merger proposals.I n BRITAIN

merchant bankers & investment bankers are synonymous.I n the U.S., Merchant bank means as investment bank which is wellequippedto handle multinational corporations.In INDIA merchant bankers is a body corporate who carries on any activityof the issue management, which consist of preparing prospectus & otherinformation relating to the issue. Merchant banks in India are not allowed toconduct any business other than that related to securities market. There is noofficial category in investment banking.2Merchant Banking in IndiaDEFINITION:

In banking, a merchant bank is a financial institution primarily engaged inoffering financial services and advice to corporations and wealthyindividuals on how to use their money. The term can also be used todescribe the private equity activities of banking.According to Cox, D. merchant banking is defined as, merchant banks arethe financial institutions providing specialist services which generallyinclude the acceptance of bills of exchange, corporate finance, portfoliomanagement and other banking services.

The Notification of the Ministry of Finance defines a merchant banker as,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


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advisory service in relation to such issue management.

I n short, merchant bankers assist in raising capital and advice on relatedissues.3Merchant Banking in IndiaHistory and Origin of Merchant Banking In India

ORIGIN

Merchant banking originated through the entering of London merchants inforeign trade through acceptance of bill. Later, the merchants assisted theGovernment of under developed countries in raising longterms throughfloatation of bonds in London money market. Over a period they extendedtheir activities to domestic business of syndication of long term and shortterm finance, underwriting of new issues, acting as registrars and sharetransfer agents, debenture trustees, portfolio managers, negotiating agentsfor mergers, takeovers etc.

Merchant Banking in IndiaHistorical Perspective:

Till 18th century moneylenders, moneychangers, village merchants(maharanis), & saucers performed the function of banks & merchant banks.They also issued & discounted bills of exchange (handiest) & bank draft.They gave loans on mutual trust, on mortgage of lands, ornaments & other

property. JAGAT SHETH (1720-1773AD, BENGAL) HABIB & SONSwhich is now HABIB BANK (founded in 1941, now is in PAKISTAN).These were the organized merchant bankers in recent history of INDIA.

Merchant Banking is an activity that includes corporate finance

activities, such as advice on complex financings, merger and acquisition

advice (international or domestic), and at times direct equityinvestments in corporations by the banks.

4Merchant Banking in IndiaMerchant banks are private financial institution. Their primary sources ofincome are PIPE financings and international trade. Their secondary incomesources are consulting, Mergers & Acquisitions help and financial marketspeculation. Because they do not invest against collateral, they take fargreater risks than traditional banks. Because they are private, do not takemoney from the public and are international in scope, they are not regulated.Anyone considering dealing with any merchant bank should investigate

the bank and its managers before seeking their help.

The reason that businesses should develop a working relationship with amerchant bank is that they have more money than venture capitalists. Theiradvice tends to be more pragmatic than venture capitalists. It is rare for amerchant bank to fail. The last major failure was Barings Bank (1992). Itfailed because of unsupervised trading of copper futures contracts and

buybacks. When the Dot Com Bubble burst in 2001, scores of venturecapital firms failed. The greatest merchant bank failure in history was the

Knights Templar. After the Crusades, the Order became immensely wealthycontrolling and funding the trade between the Middle East and WesternEurope. They foolishly loaned money to the French Government. To avoidrepaying the money, King Louie had the Pope declare the Order heretics.


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Thousands of monks lost their lives, but France balanced its budget.To understand Merchant Banks, you should know something of theirhistory. Modern merchant banking started in Italy during the 7th Century.The5Merchant Banking in India

banking practices evolved from the financing structure of the Silk Road

Trading that predates the Roman Empire.The basic financing structure was the advance payment for goods bymerchant bankers at a great discount to the delivery value of those goods. Inthe case of Italy and then Germany, wheat was the product. The merchant

banks purchased the wheat soon after planting. They accepted the risk ofcrop failure.They profited when they sold the wheat. In most countries today, thenational government accepts the risk through government crop insurance.As the British Empire expanded in the 18th and 19th Centuries, merchant

banks prospered in London. For instance, merchant bankers fundedCanadas Hudson Bay Company. This period saw the rise of such merchant

banks as Schroders, Warburgs or Rothschilds. Amsterdam benefited fromthe trade created by the Dutch East Indian Company. Since the 18th century,the role of the merchant banker has been considerably broadened to includea composite of modern day skills. Such skills are inherently entrepreneurial,managerial, financial and transactional.Today, North American merchant banks have taken the form of "boutiques"-whereby, each offers its own specialized services. The hallmarks of these

merchant bank boutiques are that they typically charge fees payable in cashand/or the client's stock for each service rendered. You can find a merchantbank that meets any reasonable set of needs.6Merchant Banking in IndiaMerchant Banking in IndiaPost Independence:

In 1967, RBI issued its first merchant banking license to grind lays startedwith management of capital issues, production planning, system design andalso market research. It provides management consulting services as well.Citibank setup its merchant banking division in 1970. its scope includesassisting new entrepreneur, evaluating new projects, raising funds through

borrowing and issuing equity. Indian banks started banking services as a partof multiple services they offered to clients from 1972. State bank of Indiastarted the merchant banking division in 1972. In the initial years theobjective was to render corporate advice and assistance to small andmedium entrepreneurs. Merchant banking activities are organized andundertaken in several forms. Commercial banks and foreign developmentfinance institutions have organized them through formation of division;nationalized banks have formed subsidiaries companies and share brokers

and consultancies constituted themselves into public ltd. Co. or registeredthemselves as private ltd. companies. Some of them have equity stake offoreign merchant bankers.7


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Merchant Banking in IndiaMerchant Bank

A merchant bank deals with the commercial banking needs of internationalfinance, long term company loans, and stock underwriting. A merchant bankdoes not have retail offices where one can go and open a savings orchecking account. A merchant bank is sometimes said to be a wholesalebank, or in the business of wholesale banking. This is because merchant

banks tend to deal primarily with other merchant banks and other largefinancial institutions.The most familiar role of the merchant bank is stock underwriting.A large company that wishes to raise money from investors through thestock market can hire a merchant bank to implement and underwrite the

process. The merchant bank determines the number of stocks to be issued,the price at which the stock will be issued, and the timing of the release ofthis new stock. The merchant bank files all thepaperwork required with thevarious market authorities, and is also frequently responsible for marketing

the new stock, though this may be a joint effort with the company andmanaged by the merchant bank. For really large stock offerings, severalmerchant banks may work together, with one being the lead underwriter.8Merchant Banking in IndiaBy limiting their scope to the needs of large companies, merchant banks canfocus their knowledge and be of specific use to such clients. Some merchant

banks specialize in a single area, such as underwriting or internationalfinance.

Many of the largest banks have both a retail division and a merchant bankdivision. The divisions are generally very separate entities, as there is verylittle similarity between retail banking and what goes on in a merchant bank.Although your life is probably affected every day in some way by decisionsmade in a merchant bank, most people reading this article are unlikely everto visit or deal directly with a merchant bank. Merchant banks operate

behind the scenes and away from the spotlight.9Merchant Banking in India

Importance and Need of merchant banking

Important reason for the growth of merchant banking has beendevelopmental activity throughout the country, exerting excess demand onthe sources of funds for ever expanding industry and trade, thus, leaving awidening gap under bridged between the supply and demand ofinventible funds. All Indian financial institutions and experienced resourcesconstraint to meet the ever increasing demands for funds from the corporatesector enterprises. In the circumstances corporate sector had the onlyalternative to avail of the capital market services for meeting their long-termfinancial requirements through capital issues of equity and debentures. With

the growing demand for funds there was pressure on capital market thatenthused the commercial banks, share brokers and financial consultant firmsto enter into the field of merchant banking and share the growing capitalmarkets. With the result, all the commercial banks in nationalized and public


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sector as well as in private sector including the foreign banks in India haveopened their merchant banking windows and are competing in this field.There has been a mushroom growth of financial consultancy firms and

broker firms doing advisory functions as well as managing public issues insyndication with other merchant bankers.

Notwithstanding the above facts, the need of merchant banking institutionsis felt in the wake of huge public savings lying still untapped. Merchant

banks can play highly significant role in mobilizing funds of savers toinvestible channels assuring promising return on investments and thus can10Merchant Banking in Indiahelp in meeting the widening demand for investible funds for economicactivity.With the growth of merchant banking profession corporate enterprises in

both public and private sectors would be able to raise required amount offunds annually from the capital market to meet the growing requirements for

funds for establishing new enterprises, undertakingexpansion/modernization/diversification of the existing enterprises. Thisreinforces the need for a vigorous role to be played by merchant banks.Merchant banks have been procuring impressive support from capital

market for the corporate sector for financing their projects. This isevidenced from the increasing amount raised form the capital market by thecorporate enterprises year after year.In view of multitude of enactments, rules and regulations, guidelines andoffshoot press release instructions brought out by the government from time

to time imposing statutory obligations upon the corporate sector to complywith all those requirements prescribed therein, the need of skilled agencyexisted which could provide counseling in these matters in a package form.Merchant bankers, with their skills, updated information and knowledge,

provide this service to the corporate units and advise them on suchrequirements to be complied with for raising funds from the capital marketunder different enactments viz. Companies Act, Income-tax Act, ForeignExchange Regulation Act, Securities Contracts (Regulation) Act and variousother corporate laws and regulations. Merchant bankers advise the investorsof the incentives available in the form of tax reliefs, other statutory11Merchant Banking in Indiarelaxations, good return on investment and capital appreciation in suchinvestment to motivate them to invest their savings in securities of thecorporate sector.Role of Merchant Banker

The role of merchant banker is dynamic in the wake of diverse nature

of merchant banking services. Merchant bankers dynamism lies inpromptly attending to the corporate problems and suggest ways and means

to solve it. The nature of merchant banking services is development orientedand promotional to help the industry and trade to grow and survive.Merchant banker is, therefore, dedicated to achieve this objective throughhis dynamism. He is always awake to renew his skills, develop expertise in


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new areas so as to equip himself with the knowledge and techniques to dealwith emerging new problems of corporate business world. He has to keep

pace with the changing environment where government rules, regulationsand politics affecting business conditions frequently change; where scienceand technology create new innovations in production processes of industriesenvisaging immediate renovations, diversifications, modernizations orreplacements of existing plant and machinery or other equipments putting

new demands for finances and necessitating overhauling of the capitalstructure of the firms. Merchant banker has to think and devise newinstruments of financing industrial projects. He has to assume widerresponsibilities of saving industrial units from going sick and guidingindustries to be setup in industrially backward areas to eliminate regionalimbalances in industrial development of the country.12Merchant Banking in IndiaHe has to guide the wider section of the community possessing surplus

money to invest in corporate securities and other productive investmentchannels. He has to help the industry in different forms to ensure that it runsrisk free and devoid of uncertainty by assisting the promoters with hisknowledge and skills to resolve the problems being faced by them. He has towatch the interest and win over the confidence of the government, itsagencies, along with the entrepreneurs, the investors and the wholecommunity. He must bridge the communication gap between differentsections and resolve the problem being faced in different areas concernedwith the business world. To discharge the above role, a merchant banker has

to be dynamic.In the days ahead, merchant bankers have very significant role to playtuning their activities to the requirements of the growth pattern of the

corporate sector, the industry and the economy as a whole which is, in

it, a challenging task and to meet these challenges merchant bankers

will have to be more vigorous and strategic in playing their role. They

will have also to adopt new ways and means in discharging their role .13Merchant Banking in India

The growth of Merchant banking in India

Formal merchant activity in India was originated in 1969 with the merchantbanking division setup by the Grindlays Bank, the largest foreign bank inthe country. The main service offered at that time to the corporateenterprises by the merchant banks included the management of public issuesand some aspects of financial consultancy. Following Grindlays Bank,Citibank set up its merchant banking division in 1970.The division took upthe task of assisting new entrepreneurs and existing units in the evaluation ofnew projects and raising funds through borrowing and equity issues.Management consultancy services were also offered. Merchant bankers are

permitted to carry on activities of primary dealers in government securities.Consequent to the recommendations of Banking Commission in 1972, thatIndian banks should offer merchant banking services as part of the multipleservices they could provide their clients, State Bank of India started the


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Merchant Banking Division in 1972. In the initial years the SBIsobjective was to render corporate advice and assistance to small andmedium entrepreneurs.The commercial banks that followed State Bank of India were Central Bankof India, Bank of India and Syndicate Bank in 1977.Bank of Baroda,Standard Chartered Bank and Mercantile Bank in 1978 and United Bank ofIndia, United Commercial Bank, Punjab National Bank, Canara Bank and

14Merchant Banking in IndiaIndian Overseas Bank in late 70s and early 80s. Among the development

banks, ICICI started merchant banking activities in 1973 followed by IFCI(1986) and IDBI (1991).Organizational setup of merchant bankers in India

In India a common organizational setup of merchant bankers to operate is inthe form of divisions of Indian and foreign banks and financial institutions,subsidiary companies established by bankers like SBI, Canara Bank, Punjab

National Bank, Bank of India, etc. Some firms are also organized byfinancial and technical consultants and professionals. Securities andExchange Board of India has divided the merchant bankers into fourcategories based on their capital adequacy. Each category is authorized to

perform certain functions. From the point of organizational setup Indiasmerchant banking organizations can be categorized into four groups on the

basis of their linkage with parent activity. They are:

(A) Institutional BaseWhere merchant banks function as an independent wing or as subsidiary of

various private/Central Governments/State Governments financialinstitutions. Most of the financial institutions in India are in public sectorand therefore such setup plays a role on the lines of government prioritiesand policies.(B) Banker Base

15Merchant Banking in IndiaThese merchant bankers function as division/subsidiary of bankingorganization. The parent banks are either nationalized commercial bank orthe foreign banks operating in India. These organizations have brought

professionalism in merchant banking sector and they help their parentorganization to make a presence in capital market.(C) Broker BaseIn the recent past there has been an inflow of qualified and professionallyskilled brokers in various stock exchanges of India. These brokers undertakemerchant banking related operations also like providing investment and

portfolio management services.(D) Private BaseThese merchant banking firms are originated in private sector. These

organizations are the outcome of opportunities and scope in merchantbanking business and they are providing skill-oriented specialized servicesto their clients. Some foreign merchant bankers are also entering eitherindependently or through some collaboration with their Indian counterparts.


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Private sector merchant banking firms have come up either as the soleproprietorship or public limited companies. Many of these firms were inexistence for quite some times before they added a new activity in the formof merchant banking services by opening new divisions on the lines ofcommercial banks and All India Financial Institutions.16Merchant Banking in India

Requirements for setting up a merchant banking outfit1. Formation of the Business Organization

SEBI act, 1992 does not prescribe any specific form of businessorganization to carry on the activities as merchant banker. However, thetypes of organizations are listed below:a. Sole proprietorship

b. Partnership firmc. Hindu Undivided Family (HUF)d. Corporate Enterprises

e. Co-operative SocietyGenerally it is preferred that the Merchant Banking outfit be a registeredcompany. Merchant Banks are generally setup as subsidiary companies of

banks (Public or Private). For example, SBI caps, ICICI Securities etc.2. Adoption of a viable business plan

All the basic tests required to find out whether the business to be undertakenis viable or not are also applicable to a Merchant Banking setup. Capitaladequacy, profitability, growth opportunities and current market size aresome of the factors which need to be looked into.

17Merchant Banking in India3. Registration of Merchant Bankers

a. Application for grant of certificate

An application for grant of a certificate needs to be made to SEBI .The application can be made for any one of the following categories of themerchant banker namely:- Category I, that is(i) to carry on any activity of the issue management, which will inter-aliaconsist of preparation of prospectus and other information relating to theissue, determining financial structure, tie-up of financiers and final allotmentand refund of the subscription; and(ii) to act as adviser, consultant, manager, underwriter, portfolio manager. 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 anissue; Category IV, that is to act only as adviser or consultant to an issue.To carry on the activity as underwriter or portfolio manager a separate

certificate of registration needs to be obtained from SEBI.18Merchant Banking in India

b. Application to conform to the requirements


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e. Procedure for Registration

The Board on being satisfied that the applicant is eligible shall grant acertificate. On the grant of a certificate the applicant shall be liable to paythe fees as prescribed.f. Payment of fees and the consequences of failure to pay fees

Every applicant eligible for grant of a certificate shall pay such fees in suchmanner and within the period specified.

Where a merchant banker fails to pay the Annual fees as provided inSchedule II, the Board may suspend the registration certificate, whereuponthe merchant banker shall cease to carry on any activity as a merchant

banker for the period during which the suspension subsists.The Merchant Bank can commence business on acquisition of a Certificateof Registration from the SEBI after completion of the above mentionedformalities.21Merchant Banking in India

Main Objectives Of Merchant BankersMerchant bankers render their specialized assistance in achieving the

main objectives which are presented below:

1. To carry on the business of merchant banking, assist in the capitalformation, manage advice, underwrite, provide standby assistance,securities and all kinds of investments issued, to be issued orguaranteed by any company, corporation, society, firm, trust person,government, municipality, civil body, public authority established inIndia.

2. The main object of merchant banker is to create secondary market forbills and discount or re-discount bills and acts as an acceptance house.3. Merchant bankers another objective is to set up and provide servicesfor the venture capital technology funds.4. They also provide services to the finance housing schemes for theconstruction of houses and buying of land.22Merchant Banking in India5. They render the services like foreign exchange dealer, moneyexchange, and authorized dealer and to buy and sell foreign exchangein all lawful ways in compliance with the relevant laws of India.6. They will invest in buying and selling of transfers, hypothecate anddeal with dispose of shares, stocks, debentures, securities and

properties of any other company.Obligations and Responsibilites

Merchant bankers have the following obligations and responsibilities.1. Merchant banker should maintain proper books of accounts, recordsand submit half yearly/annual financial statements to the SEBI withinstipulated period of time.

2. No merchant banker should associate with another merchant bankerwho is not registered in SEBI.3. Merchant bankers should not enter into any transactions on the basisof unpublished information available to them in the course of their


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Companies leading to the investor protection. They are presented

below:

a) If any Companys other income exceeds 10 per cent of the totalincome, the details should be disclosed.

b) The Company should disclose any adverse situation which affects theoperations of the Company and occurs within one year prior to thedate filing of the offer document with the Registrar of Companies or

Stock Exchange.c) The Company should also disclose the information regarding thecapacity utilization of the plant for the last 3 years.d) The Promoters of the Company must maintain their holding at least at20 per cent of the expanded capital.e) The minimum application money payable should not be less than 25

per cent of the issue price.f) The company should disclose the time normally taken for the disposalof various types of investors grievances.

g) The Company can make firm allotments in public issues as follows:Indian mutual funds (20%),FIIS (24%),Regular employees of the company (10%),Financial institution (20%).

26Merchant Banking in Indiah) The Company should disclose the safety net scheme or buy backarrangements of the shares proposed in public issue. This scheme is

applicable to a limited number of 500 shares per allottee and the offershould be valid for a period of at least 6 months from the date ofdispatch of securities.i) According to the guidelines, in case of the public issues, at least 30mandatory collection centres should be established.

j) According to the SEBI guidelines regarding rights issue, theCompany should give advertisements in not less than two newspapersabout the dispatch of letters of offer. No preferential allotmentmay be made along with any rights issue.k) The Company should also disclose about the fee agreed between thelead managers and the Company in the memorandum ofunderstanding.The Difference between

Investment banks and Merchant banks

Merchant banks and investment banks, in their purest forms, are

different kinds of financial institutions that perform different services.

In practice, the fine lines that separate the functions of merchant banks andinvestment banks tend to blur. Traditional merchant banks often expand into27

Merchant Banking in Indiathe field of securities underwriting, while many investment banks participatein trade financing activities.In theory, investment banks and merchant banks perform different functions.


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Pure investment banks raise funds for businesses and some

governments by registering and issuing debt or equity and selling it on a

market. Traditionally, investment banks only participated in underwritingand selling securities in large blocks. Investment banks facilitate mergersand acquisitions through share sales and provide research and financialconsulting to companies.Traditionally, investment banks did not deal with the general public.

Traditional merchant banks primarily perform international financingactivities such as foreign corporate investing, foreign real estate

investment, trade finance and international transaction facilitation.

Some of the activities that a pure merchant bank is involved in may includeissuing letters of credit, transferring funds internationally, trade consultingand co-investment in projects involving trade of one form or another.The current offering of investment banks and merchant banks varies by theinstitution offering the services, but there are a few characteristics thatmost companies that offer both investment and merchant banking share.

As a general rule, investment banks focus on initial public offerings (IPOs)28Merchant Banking in Indiaand large public and private share offerings. Merchant banks tend to operateon small-scale companies and offer creative equity financing, bridgefinancing, mezzanine financing and a number of corporate credit products.While investment banks tend to focus on larger companies, merchant banksoffer their services to companies that are too big for venture capital firms toserve properly, but are still too small to make a compelling public share

offering on a large exchange. In order to bridge the gap between venturecapital and a public offering, larger merchant banks tend to privately placeequity with other financial institutions, often taking on large portions ofownership in companies that are believed to have strong growth potential.Merchant banks still offer trade financing products to their clients.Investment banks rarely offer trade financing because most investment

banking clients have already outgrown the need for trade financing and thevarious credit products linked to it.Merchant banks and Commercial banks

29Merchant Banking in IndiaServices of Merchant Bankers In India:-

Merchant bankers provide services as follows:

Merchant banks Commercial banks

1) Assist in raising capital in the form ofequity, preference shares, and syndicatedloan working capital instruments.Provide funds in the form ofterm loan and working capital.

2) Advisor not financer. Financing is the main business.3) Do not accept chequable deposits. Demand deposits are the keyfeature.4) Mainly fees based business. Mainly fund based business


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5) Being advisors, they are closer to thecustomers and get to know risks of thetransaction s properly. They work onrisks shields i.e. mitigation measuresBeing lenders, they are morecautions, assess risks in lending

proposal and cannot afford to be

grossly relationship based andclose to the customer.6) Most of work they get is aboutmanagement of equity issues in thecapacity of lead manager, underwriter,

piercing of issue, book running, andliaisoning with SEBI.Commercial banks majority

business is of terms lending and

bank deposits.30Merchant Banking in IndiaBusiness planning stage: 1)project feasibility study2)advice on capital structuringEquity raising: 3)preparation of prospectus andliaison with SEBI4)pricing decisions5)marketing in the capacity of lead

managers6)underwriters to the issue7)post issue management8)assistance in ADR/GDRDebt raising: 9)management of debenture issue10)preparation of bankable proposaland syndication of loanWorking capital raising: 11)assistance in arranging optimalcapital financeStrategic advice: 12)advice on mergers andacquisitions13)corporate structuring adviceSERVICES PROVIDED BY MERCHANT BANKS: (in detail)The development activity through the country had exerted excess demand onthe sources of funds by the ever expanding industry and trade which couldnot be met by the All India Financial Institutions. In these circumstances, thecorporate sector enterprises had the only alternative to avail themselves of31Merchant Banking in India

the capital market services for meeting the long-term fund requirementsthrough capital issues of equity and debentures. The growing demand forfunds from capital market has enthusied many organizations to enter into thefield of merchant banking for managing the public issues.


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The need of merchant banker is also felt in the wake of huge untappedpublic savings as merchant bankers can play a highly significant role inmobilizing funds from savers to invest in channels assuring promising returnon investments and thus narrow down the gap between demand for andsupply of investible funds.Merchant bankers not only provide advisory services to corporate

enterprises but also advise the investors of the incentives available in

the form of tax relief and other statutory obligations. Thus, themerchant bankers help industry and trade to raise funds, and the

investors to invest their saved money in sound and healthy concerns

with confidence, safety and expectation of higher yields.

Broadly a merchant banker can provide the following services:

1. Corporate Counseling2. Project Counseling And Pre-Investment Studies3. Credit Syndication And Project Finance4. Issue Management

32Merchant Banking in India5. Underwriting6. Bankers7. Portfolio Management8. Venture Capital Financing9. Leasing10.Non-Resident Investment Counseling And Management11.Acceptance Credit And Bill Discounting

12.Advising On Mergers, Amalgamations And Take-Over13.Arranging Offshore Finance14.Fixed Deposit Broking15.Relief To Sick IndustriesLets take a brief look at each of these functions:Corporate Counseling

33Merchant Banking in IndiaIt includes a whole range of financial services provided by a merchant

banker to a corporate unit a view to ensure better performance, maintainsteady growth and create a better image among investors.It covers the entire field of merchant banking activities i.e., projectcounseling, capital restructuring, portfolio management and the full range offinancial engineering including venture capital, public issue management,loan syndication, working capital, fixed deposits, lease financing,acceptance credit, etc. However, the scope of corporate counseling is limitedto suggestions and opinions leaving to the client to take corrective actionsfor solving its corporate problems.A merchant banker finds out the problems of enterprise, which shall include

organizational goals for the enterprise, size of the organization andoperational scales, choice of a product, pricing, etc, and suggests ways andmeans to solve those problems.

Project Counseling


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34Merchant Banking in IndiaProject counseling is an important merchant banking service which includes

preparation of project reports, deciding upon the financing pattern to financethe cost of the project, appraising the project report with the financialinstitutions/banks.Project reports are prepared to obtain government approval of the project,

for procuring financial assistance from financial institutions and banks, forensuring market for the proposed product, for planning public issues, etc.Financing the project cost is an important aspect of project counseling. Thetwo sources of funds available to finance the project cost are internal sourcesof funds (or owners' funds) which includes promoter's contribution andretained earnings; and external sources of funds which refers to the

borrowed funds in the form of loans from banks, private investors andfinancial institutions and in the form of debentures from the public.Merchant banker has to decide the financing mix of the internal and external

sources of funds keeping in view the rules, regulations and norms prescribedby the government or followed by the term lending financial institutions.While rendering project counseling services, the merchant banker has toensure that the application forms for obtaining the funds from financialinstitutions are filled in with relevant and appropriate information and beforesubmitting the application, the merchant banker has to appraise the projectconsidering the various aspects as to the type of the project, location,technical, commercial and financial viability of the project.35

Merchant Banking in IndiaCredit SyndicationOnce the client company has decided about the project proposed to beundertaken, the next step is looking for the sources wherefrom the fundscould be procured to implement the project.Merchant banker has to locate the sources of funds and comply theformalities required to procure the funds. This service rendered by themerchant banker in arranging and procuring credit from financialinstitutions, banks and other lending and investment organizations forfinancing the clients' project cost or meeting working capital requirement isreferred to as loan syndication or credit syndication.Credit syndication in case of domestic borrowings is with the institutionallenders and banks. Long and medium term funds are obtained from the AllIndia Financial Institutions like IFCI, IDBI etc., state level financial bodieslike SFC, SIDC etc., commercial banks, mutual funds etc. Short-term fundsare also required by the firm for purchase of raw materials, payment ofwages, salaries etc. Sources of financing these short term requirements orworking capital needs can be from internal sources like internal accrualsfrom working or operations and short term loans from friends and relatives;

or from external sources like short term borrowings from banks etc.Issue Management and Underwriting

36Merchant Banking in India


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Management of capital issues is a professional service rendered by theskilled and experienced merchant bankers. Previously, the managing agentsfor a particular corporate used to manage public issues. The abolition of themanaging agency system, the growth in the public limited companies innumber and size, the imposition of new rules and regulations regarding the

public issue of securities made it necessary for merchant bankers to play adefinite role in the management of public issues.

Public issue management involves marketing of corporate securities byoffering the securities to the public, procuring private subscription to thesecurities and offering securities to existing shareholders of the company.As a manager to the public issue, the merchant banker, before the publicissue has to obtain the consent of the stock exchanges to the memorandumand articles of association, appoint other managers, bankers, underwriters,

brokers etc. ,advice the company to appoint auditors, solicitors and board ofdirectors, draft the prospectus and obtain consent from the companies legaladvisors, board of directors and other concerned parties, file the prospectus

with registrar, make an application for enlistment with stock exchanges andfinally advertise for the issue.A merchant bankers post issue activities include final allotment and/orrefund of subscription amount, calculation of underwriters liability in caseof under subscription and complying the necessary statutory requirementsfor listing of securities on the stock exchange.Under writing of public issue37Merchant Banking in India

A fully underwritten public issue spells confidence to the investing public,which ensures a good response to the issue. Keeping this in view companies,which float a public issue usually, desire a full underwriting of the issue.Underwriting is only the guarantee given by the underwriter that in the eventof under subscription, the amount underwritten would be subscribed in

proportion by the underwriter. An underwriter of the issue gets the followingbenefits: It earns a commission of the commitment given. It earns the right to be appointed as bankers of that issue. It expands its clientele by underwriting more and more issues.Bankers to the Issue

The merchant banker can automatically become the banker to the issue inthe following cases: The bank is a broker to the company It has given underwriting commitments. It acts as a manger to the issue The function of a banker to the issue is to accept application formsfrom the public together with subscription money and transfer them tothe account of the controlling branch.

Portfolio Management38Merchant Banking in IndiaPortfolio refers to investment in different types of marketable securities or


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investment papers like shared, debentures and debenture stocks, bonds etc.from different companies or institutions held by individuals firm orcorporate units.Portfolio management refers to managing efficiently the investment in thesecurities held by professionals to others.Merchant bankers take up management of a portfolio of securities on behalfof their clients, providing special services with a view to ensure maximum

return by such investments with a minimum risk of loss of return on themoney invested in securities.A merchant banker while performing the services of portfolio managementhas to enquire of the investment needs of the client, the tax bracket, abilityto bare risk, liquidity requirements, etc. they should study the economicenvironment affecting the capital market, study the securities market andidentify blue chip companies in which money can be invested. They shouldkeep record of latest amendment in government guidelines, stock exchangeregulations, RBI regulations, etc.

Advisory Services Relating To Mergers and Takeovers39Merchant Banking in IndiaA merger is defined as a combination of two or more companies into asingle company where one services and other looses their corporateexistence. A merger is also defied as an amalgamation wherein theshareholders of the combining companies become substantially theshareholders of the company formed.A takeover is referred to as an acquisition, which is the purchase, by one

company of a controlling interest in the share capital of another existingcompany.Merchant bankers are the middlemen settling negotiations between theoffered and the offeror. Their role is specific and specialized in handling themergers and taker over assignments. Being a professional expert, themerchant banker is apt to safeguard the interest of the shareholders in boththe companies and as such his assistance is useful for both the companies,i.e. the acquirer as well as the acquired company.Based on the purpose of business objective, the search of the acquirercompany will start for a merger partner company. If the objective of mergeris growth oriented i.e. seeking expansion in production and marketsegments, utilization of existing companies or optimum utilization ofresources, then the acquirer company will select a business related companyas a merger partner.40Merchant Banking in IndiaIf the objective is diversification in production line or business activities,then it will select a non-related company as a merger partner.Once the merger partner is proposed the merchant banker has to appraise the

merger/takeover proposal with respect to financial viability and technicalfeasibility. He has to negotiate with the parties and decide the purchaseconsideration and mode of payment. He has to comply with the legalformalities like getting approval from the Government/ RBI; drafting the


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scheme of amalgamation; getting approval of company Board, financialinstitution, high court if required; arranging for the meeting etc.

Venture Capital FinancingFinancing an emerging high-risk project is called venture capital financing.Many merchant bankers are entering into this area by also financing viableupcoming projects. The financing is by subscription to the equity capital,while repayment is by selling the equity through stock market when the

shares are listed.Leasing

Is there another lucrative area of financing where merchant bankers areturning? Leasing is a viable source of financing while acquiring capitalassets. The services include arrangement for lease finance facilities forleasing companies, legal; documents and tax consultancy.41Merchant Banking in India

Non Resident Investment

To attract NRI investments in the primary and secondary markets, themerchant bankers provide investment advisory services to the NRIs in termsof identification of investment opportunities, selection of securities,

portfolio management, etc. they also take care of operational details likepurchase and sale of securities securing the necessary clearance from RBIunder FERA for repatriation of dividends and interest, etc.Acceptance Credit and Bill DiscountingThough merchant bankers world over specialize in acceptance credit and billdiscounting, these services are not currently provided by merchant bankers

in India the principal reasoning being the lack of an active market forcommercial bills.Arranging Offshore Finance

The merchant bankers also help their clients in the following areas involvingforeign currency financing:1. Financing Of Exports And Imports2. Long Term Foreign Currency Loans3. Joint Ventures Abroad4. Foreign Collaboration ArrangementsThe assistance rendered as in the case of financial services covers appraisals,negotiations, compliance with procedural and legal aspects etc.42Merchant Banking in IndiaManagement of Fixed Deposits of Companies

Recently, merchants bankers have begun to structure and mobilize fixeddeposits for their corporate clients. They take care of the procedural andlegal aspects, and also mange the collection and subsequent servicing of thedeposits. Advice with regard to the amount to be raised, interest charges,terms of deposits and other related issues are also offered to the client.

Relief to Sick IndustriesThe services offered by merchant bankers to sick industries can be

summarized as follows:1. Assessment of capital requirements and counseling on capital


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restructuring;2. Appraisal of technological, environmental, financial and other factorscausing sickness;3. Preparations of programs and packages for rehabilitation of sick units;4. Providing necessary assistance where the rehabilitation packageinvolves mergers or amalgamation;5. Obtaining necessary approval for implementation the rehabilitation

package from the statutory authorities;6. Monitoring the implementation of the scheme of rehabilitation.43Merchant Banking in IndiaQualities of merchant bankers:-

To be a successful merchant banker, following qualities are necessary:

1. Knowledge: Thorough understanding of technical issues related tobusiness, understanding of legal and statutory requirements, appreciationof business acumen; financial expertise is a key thing a merchant banker

must know. Delivery of his services depends on his basic understandingof these issues.2. Capital market familiarity: Merchant banker should be well versedwith stock markets, their movements. He should track imp happenings inthe market on ongoing basis.3. Liasioning ability: Merchant bankers are required to liaison with SEBI,RBI, the stock exchanges, depositories and other government authoritiesfor public issue related duties. It is imperative that a merchant bankmaintains excellent rapport with all of them and also close relations even

at informal levels. This only can see speedy and favorable clearances bythe authorities.44Merchant Banking in India4. Innovation: Corporate may approach with unique requirements.Standard solutions and products may not solve problems sometimes.Merchant bankers should do out of box thinking and be able to dofinancial engineering. They can device new financial instruments and getapproved from the authorities. Innovation is required even to addressstringent legal requirements.5. Integrity: Merchant banker has valuable and confidential information ofits customers. Merchants bankers should take utmost care that theinformation is not leaked and also not consumed for the purpose otherthan for which it was disclosed to the merchant banker.45Merchant Banking in India

Problems and hurdles:-Not many but some problems are faced by Indian merchant bankers.I. Industry compartmentalization : company which is in merchant banking

business would have expertise in underwriting, hire purchase, leasing, andportfolio management, money-lending. But RBI does not permit merchantbanking firms to get into these activities. So the same promoters have to setupdifferent companies for different purposes. Management cost increases and


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expertise pooling i.e. multiple use of same talent is not possible.II. Malafide practices: India corporate culture is bettering. but still manycorporate have excessively friendly approach. Favored allotment of shares,tampering with project appraisal report to bankers is common. Corporatelike to use merchant bankers for malafide intentions. This gives growth tomore boutique fly-by-day firms. Giant professional or multinationalmerchant bankers are cautions in their approach to Indian market.

III. Regulations: though regulations are much better now, there is still scopefor further improvement. Merchant bankers can be made more accountableand responsible. Professional qualification focused on merchant banking isnot available. Industry is not well organized and all the players do not playthe same tune. This is specifically evident in comparison with insuranceindustry and mutual funds industry.46Merchant Banking in India

Scope for merchant banking in India:-

Scope for merchant banking depends upon size of the market,restriction-liberation, banking policies, corporate culture, and

corporate dynamics.

1. Size and dynamics of the market : Indian market is growing. In factIndia is one of the largest emerging markets. Obviously, public issues, FDI,debt raising are on rise. Lots of new and green fried projects are happening.Merchant bankers have lots space to contribute.2. Restrictions-liberalization : more liberal the market is, more thethings left to be decided by the corporate. Merchant bankers assist in

decision making and hence their scope increases. With significantmarket freedom, merchant bankers work has increased many folds.3. Banking policies : RBI prefers that commercial banks do not indulgein merchant banking business directly. They should setup a subsidiaryfor the purpose. This limits scope of commercial banks and givesspace to merchant bankers. This policy also results in fair business

practices. Some countries allow commercial bankers to get involvedin IPOs, placement of debentures, etc. Indian scenario is favorable tomerchant bankers.47Merchant Banking in India4. Corporate culture: corporate can do project appraisal, strategicrestructuring in house as well. If the corporate prefer third-partyindependent assessment, then only they will engage merchant

bankers. Otherwise merchant bankers role is only statutory as inissue management. India inc. apparently prefers and is happy withmerchant bankers work.5. Corporate dynamics : more happening in business gives moreopportunities to merchant bankers. Mergers, takeover acquisition,

new Greenfield projects, fund raising for government institutions,active money market are all providing better business prospectus tomerchant bankers.48


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Merchant Banking in IndiaProgress of Merchant Banking in India:-

Upto 1970, there were only two foreign banks which performedmerchant banking operations in the country. SBI was the first Indiancommercial bank and ICICI the first financial institution to take up the

activities in 1972 and 1973 respectively. As a result of buoyancy in thecapital market in 1980s some commercial banks set up their subsidiaries

to operate exclusively in merchant banking industry. In addition, a numberof large stock broking firms and financial consultants also entered into

business. Thus, by the end of the end of 1980s there were 33 merchant

bankers belonging to three major segments viz., commercial banks, all

India financial institutions, and private firms. Merchant bankingfunctions of these institutions was related only to management of newcapital issues.Merchant banking industry which remained almost stagnant andstereotyped for over two decades, witnessed an astonishing growth after the

process of economic reforms and deregulation of Indian economy in 1991.The number of merchant banks increased to 115 by the end of 1992-93 300

by the end of 1993-94 and 501 by the end of August, 1994. all merchantbankers registered with SEBI under four different categories include 50commercial banks, 6 all Indian financial institutionsICICI, IFCI, IDBI,IRBI, Tourism Finance corporation of India, infrastructure Leasing andFinancial Services Ltd. and private merchant bankers.In addition to Indian Merchant Bankers, a large number of reputedinternational Merchant Bankers like Merrill Lynch, Morgan Stanley,

49Merchant Banking in IndiaGoldman Sachs, Jardie Fleming Kleinwort Benson etc. are operating inIndia under authorization of SEBI. As a result of proliferation, IndianMerchantBankers are faced with severe competition not only among themselves butalso with the well developed global players.CURRENT AFFAIRS

RBI allows cash withdrawal from merchant banker terminals

Besides ATMs, customers can now also withdraw cash up to Rs1000 fromterminals at different merchant establishments, the Reserve Bank. As afurther step towards enhancing the customer convenience in using the plasticmoney, it has been decided to permit cash withdrawals at POS (point ofsale) terminals. To start with, this facility will be available for all debit cardsissued in India, up to Rs1000 per day," RBI said in a statement issued here.The use of debit cards at POS terminals at different merchant establishmentshas been steadily increasing, it said. This facility is available only againstdebit cards issued in India.At present cash withdrawal facility using plastic cards is available only at

Automatic Teller Machines (ATMs) with the number of ATMs in thecountry at 44,857. There are 4,70,237 POS terminals in the country.This facility may be made available at any merchant establishmentdesignated by the bank and would be available whether the card holder


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makes a purchase or not.Morgan Stanley makes i-banking comeback

The joint venture between JM Financial and Morgan Stanley was inked in1997 and formalized in 1999. The JV had investment banking operations50Merchant Banking in Indiaother than equity broking, research, wealth management and advisory and

securities distribution operations. Post the split, JM Financial acquired theinvestment banking company together with its subsidiaries, which wereengaged in fixed income, equity broking, wealth management, advisory anddistribution businesses of $ 20 million. The Indian partner sold its 49%holding in JM Morgan Stanley Securities (JMSPL), the institutional equity

broking company to Morgan Stanley for $ 445 million.Bulge bracket investment banking major, Morgan Stanley has re-enteredinvestment banking business on its own, after parting ways with JMFinancialits former Indian partner.

PNB aims profit of 7,500crore by 2013The country's second largest public sector lender Punjab National Bank aimsto double its profit to Rs7,500 crore in the next four years."The bank has set a target to expand total business to Rs10crore and earn net

profit of Rs7,500 crore by 2013," said PNB Chairman and ManagingDirector K C Chakrabarty, who is charge of Deputy Governor of RBI.The growth driver would be better asset liability management, thrust onrecovery, focus on customers and financial inclusion, he had said. Besides,the bank plans to open new line of businesses in the current fiscal including

merchant banking subsidiary.PNB Investment Services aims to provide investment consultancy andmerchant banking services and would be operational in the next threemonths. Currently, these operations are run by a division of the bank.

ICICI Bank to oversee mergers and acquisitions

51Merchant Banking in IndiaICICI bank and its merchant banking arm, ICICI Securities (I-Sec), haveentered into an agreement, whereby all M&A deals will be done out ofICICI Bank. The agreement goes on to define an M&A deal as one whichinvolves change in management control.This arrangement replaces the earlier practice of both I-Sec and ICICI Bankworking together on M&A deals. Since a predominant number of people,who wish to be advised on M&A, also look for acquisition finance, it wasdecided that the business should be housed in the bank, I-Sec MD MadhabiPuri Buch told ET. Now, if a corporate is seeking a sell mandate or a buymandate, where the transfer of controlling interest takes place, the deal will

be done by ICICI Bank.ICICI Bank had initially entered the investment banking space in 2006. Over

the past couple of years, both the bank and its subsidiary have been vyingfor deals. The new deal has taken into effect between both the entities fromApril 1.

Birla Capital and Financial Services gets SEBI merchant banking


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license

Birla Capital & Financial Services Ltd has been granted a merchant-bankinglicense by the Securities and Exchange Board of India. The license willenable the company to offer a wide range of on-shore investment bankingadvisory and underwriting services in the Indian market.The company, which is a part of the Yash Birla conglomerate, will initiallyconcentrate on regulated services like initial public offerings, takeover,


buybacks, delisting and valuations. It also offers non-regulated services likePE Syndication, M&A Advisory and other corporate advisory.Birla Capital & Financial Services Ltd. is part of the 3,000-crore Yash BirlaGroup that has diversified interest in sectors like auto & engineering, textiles& chemicals and power & electrical, education & IT.

Primary market slowdown, affects merchant bankers wallet

The recent slowdown in the primary market has impacted not only investors

but merchant bankers as well, as there has been a significant decline ofnearly 60 per cent in their percentage fees so far this year."There is a clear drop in the merchant banking fees to Rs 216crore incomparison to Rs. 771crore for the calendar year 2007, indicating a drop of57.9 per cent on annualized basis," Nexgen Capitals, the merchant-bankingarm of brokerage firm SMC Global Securities.Merchant bankers are those who advise the issuer about the public offer andmanage the issue.The average percentage fees has declined to 1.21 per cent so far this year

from 2.24 per cent in 2007, the report added.Reliance Power IPO of Rs 11,563 crore during this year with the merchantbanking fee of Rs 50.6 crore, amounting to 0.44 per cent of the issue sizehad a great bearing on this trend.

Nomura launches its investing banking operations in India


Nomura Financial Advisory and Securities (India) Private limited ('NomuraIndia'), a wholly-owned subsidiary of Nomura Holdings, Inc. ('Nomura'),has launched its equity sales and trading and investment banking operationsin India.In October 2008, Nomura, a global investment bank, acquired the majorityof Lehman Brothers' employees in India, including the equities sales andtrading, equity research, fixed income liquid markets sales and trading, andinvestment banking teams.By integrating the former Lehman Brothers India franchise and obtaining itsmerchant banking licence and stock exchange memberships, Nomura Indiasaid in a statement it has significantly expanded its capabilities in Indiathrough a wide range of onshore financial solutions spanning securities

brokerage, securities underwriting and advisory services.54Merchant Banking in India

Association of merchant bankers in India (AMBI):


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Association of merchant bankers in India is a professional non-profitcompany setup to represent the industry. It is expected to set code of ethicsand facilitate dialogue between the industry and regulatory bodies. Trainingand awareness programs are also expected from AMBI. Because of lack ofsupport from the members and non-initiative from SEBI/government, AMBIis dormant at present.ARTICLES:-

AMBI -SEBI talks on SRO

ENS ECONOMIC BUREAU

MUMBAI, May 8: The Association of Merchant Bankers of India (AMBI)is proposing to have an exhaustive dialogue with the Securities and55Merchant Banking in IndiaExchange Board of India (SEBI) on its functioning as a self-regulatoryorganization (SRO).This follows a feeling among AMBI members that it is being sidestepped

when decisions relating to merchant bankers are being taken. AMBI wasgiven SRO status in 1995, but it has not really been officiating as one.Recently the association was really piqued when SEBI asked one of itsmembers to stop taking up further assignments without so much as giving itany notice. AMBI feels that the member should have been given a fairhearing and also feels that AMBI as the SRO should have been informedabout the decision. A committee has subsequently been set up by AMBI togo into the matter. Then there was the issue of asking all merchant bankersto furnish details of employees to SEBI. This was also demanded without

consulting/informing AMBI.The association has already made its disappointment clear to SEBI and theproposed dialogue is reportedly being undertaken to clear allmisunderstandings.56Merchant Banking in IndiaEXAMPLE:-

MERCHANT BANKING SERVICESINTRODUCTIONCanara Bank is also one of the leading Merchant Bankers in India, offeringspecialized services to Banks, PSUs, State owned Corporations, LocalStatutory bodies and corporate sector.Its SEBI registered Category I Merchant Banker / Underwriter to carry onIssue 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 handle57Merchant Banking in India

Capital Market"related assignments.They undertake "project appraisals" with resource raising plans from CapitalMarket/ Debt Markets and facilitate tie-ups with Banks / FinancialInstitutions and Potential Investors.


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Their uniqueness is extending services under single window conceptcovering the following areas:1. Merchant Banking2. Commercial Banking3. Investments4. Bankers to Issue - Escrow Bankers5. Underwriting

6. Loan SyndicationAs leading Merchant Bankers in India, they have associated with issuesranging from Rs.1crore to Rs.1500 crores, involving various types ofindustries, banks, statutory Bodies etc. and have an edge in handling PrivatePlacement issuesboth retail & HNIs.58Merchant Banking in IndiaSPECTRUM OF SERVICES:-

1. Equity Issue (Public/Rights) Management

2. Debt Issue Management3. Private Placements4. Project Appraisals5. Monitoring Agency Assignments6. IPO Funding7. Security Trustee Services8. Agriculture Consultancy Services9. Corporate Advisory Services10. Mergers and Acquisitions

11. Buy Back Assignments12. Share Valuations13. SyndicationISSUE MANAGEMENT SERVICES:-

1. Project Appraisal2. Capital structuring59Merchant Banking in India3. Preparation of offer document4. Tie Ups (placement)5. Formalities with SEBI / Stock Exchange / ROC etc.,6. Underwriting7. Promotion /Marketing of Issues8. Collecting Banker / Banker to an issue9. Post Issue Management10. Refund Bankers11. Handling of Dividend Warrant/Interest Warrant Payments12. Debenture TrusteeshipInvestment Criteria:-

A wide range of later stage opportunities are considered. Targetedcompanies include the following characteristics:1. Having weathered the start-up process and established a core businessmodel that is sustainable;


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2. Proven management team;3. If not already profitable, visibility to profitability within a 12-month

period;60Merchant Banking in India4. Having established business partnerships that give it a major position in amarket space;

5. Significant barriers to entry; and6. Technology or business that is scalable with global applications.They look for opportunities for synergistic consolidation and/or companiesthat are on the verge of extraordinary growth.STATE BANK OF INDIA

SBIs Merchant Banking Group is strongly positioned to offer perfectfinancial solutions to your business. They specialize in the arrangement ofvarious forms of Foreign Currency Credits for Corporate.They provide the resources, convenience and services to meet your needs by

arranging Foreign Currency credits through:61Merchant Banking in India Commercial loans Syndicated loans Lines of Credit from Foreign Banks and Financial Institutions FCNR loans Loans from Export Credit Agencies Financing of Imports.

They are internationally the most Preferred Bank by Export Credit Agenciesfor Guarantees in case of the Indian Clients or Projects.SBI being an Indian entity has no India exposure ceiling. Their Primaryfocus is On Indian Clients. SBIs seasoned Team of professionals providesyou with Insightful credit Information and helps you Maximize the Valuefrom the transaction.PRODUCTS AND SERVICES1] Arranging External Commercial Borrowings (ECB)2] Arranging and participating in international loan syndication3] Loans backed by Export Credit Agencies4] Foreign currency loans under the FCNR (B) scheme5] Import Finance for Indian corporates.62Merchant Banking in IndiaPUNJAB NATIONAL BANK

Indias one of the Leading Nationalized Bank established in 1895, servingover 3.5crore customers through 4520 branches and 439 extension countersis the largest amongst Nationalized Banks. The Bank has recently beenranked 21st among top 500 companies and 9th among top 50 brands by the

Economic Times. All the Branches of the Bank have been computerized.The Bank has a concept of "Any Time, Any Where Banking" through theintroduction of Centralized Banking Solution (CBS) and over 2511 officeshave already been brought under its ambit.


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63Merchant Banking in IndiaThe Bank is registered with SEBI as CategoryI Merchant Banker for

providing all the major Merchant Banking services. Our gamut of MerchantBanking services includes: Issue Management Servicesto act as Book Running LeadManager/Lead Manager for the IPOs /FPOs/Right issues/Debt issues

Project appraisal Corporate Advisory Services Underwriting of equity issues Banker to the Issue/Paying Banker Refund Banker Monitoring Agency Debenture Trustee Marketing of the issue through a strong network ofQIBs/HNIEs/Corporates and Retail investor. The Bank itself is one of

the major investor in the market having a treasury of 45000 crores.Their Software for handling the Refund Banker is one of the best systems inthe industry. Its unique features provides online payment of the instrument

by our 2470 branches in 733 centers, online status of paid instruments,100% reconciliation at any point of time etc.The Bank has an exclusive and specialized Capital Market Service Branch at

New Delhi for providing Merchant Banking Services to the Corporate64Merchant Banking in India

CONCLUSIONThe merchant banker plays a vital role in channelising the financialsurplus of the society into productive investment avenues. Hence beforeselecting a merchant banker, one must decide, the services for which he is

being approached. Selecting the right intermediary who has the necessaryskills to meet the requirements of the client will ensure success.It can be said that this project helped me to understand every detailsabout Merchant Banking and in future how its going to get emerged in theIndian economy. Hence, Merchant Banking can be considered as essentialfinancial body in Indian financial system.Market development is predicted on a sound, fair and transparentregulatory framework. To sustain the growth of the market and crystallize65Merchant Banking in Indiathe growing awareness and interest into a committed, discerning andgrowing awareness and interest into an essential to remove the tradingmalpractice and structural inadequacies prevailing in the market, and

provide the investors an organized, well regulated market.66

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