Transcript
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Merchant Banking
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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.
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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
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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
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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.
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DIFFERENCE BETWEEN COMMERCIAL BANKING & MERCHANT
BANKING
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Merchant Banking
Services?
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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.
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Services of Merchant Banks
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Services of Merchant Banks
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Services of Merchant Banks
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CATEGORY OF MERCHANT BANKER
CATEGORY
1st
2nd
3rd
4th
MINIMUMNETWORTH
5 crore
50 lacs
20 lacs
Nil
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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.
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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
3. Rs.100 crores to Rs.200 crores 4
4. Rs.200 crores to Rs.400 crores 5
5. Above Rs.400 crores 5 or more asprescribed by
SEBI
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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
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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)
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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
Problems.?
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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
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Minimum net worth of Rs.1 crore
SEBI guidelines
stipulate that a
minimum net worth ofRs.1 crore for
authorisation of
merchant bankers.
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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.
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Merchant banking
Scope in India?
d
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Scope in India
d
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Scope in India
i di
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Scope in India
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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.
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Thank you...
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