NAGINDAS KHANDWALA COLLEGE!!

GROUP MEMBERS

NAME ROLL NOS

KRISHNA MEHTA 314

RICHA MODI 317

PARITA PATEL 323

SNEHA RAHEJA 325

HISTORY OF MERCHANT BANKING

Merchant banking came into existence in 17th and 18th century in Italy and France.

Merchant banking officially came in India through Grindlays bank in 1967.

Merchant banking is known by different names in different places like in U.S.A-investment bank, U.K-accepting and clearing house.

Merchants formed an association which is called “Merchant banking and security house association”.

TRADITIONAL MERCHANT BANKING Merchant banking as evolved in Europe

pertained to an individual or a banking house whose primary function was to facilitate the business process between a product and financial requirements of it.

The merchant bankers acted as capital source whose primary activity was directed towards a commodity owner who was involved in buying and selling of goods.

MODERN MERCHANT BANKING

During 20th century merchant banks expanded their services.

They became increasingly involved in the actual running of the business for which the business was conducted.

Today merchant banks actually own and run business for their own account.

Modern skills include a management advisor, entrepreneur etc.

STATE BANK OF INDIA

State bank of India(SBI) is the nations largest bank. It was initially established as bank of Calcutta on 2nd June 1806.

The primary focus of SBI is on Indian clients. It mission was to become a professional merchant banker.

The services rendered by SBI are import finance for Indian corporate, foreign currency loans under various scheme.

CATEGORIES OF MERCHANT BANKERS

CATEGORIES ACTIVITY NET WORTHCATEGORY 1 TO CARRY ON

ACTIVITIES OF ISSUE MANAGEMENT, ACT AS ADVSIOR, CONSULTANT, MANAGER, UNDERWRITER.

1 CRORE

CATEGORY 2 TO ACT AS ADVISOR, CONSULTANT, CO-MANAGER, UNDERWRITER AND PORTFOLIO MANAGER.

50 LAKHS

CATEGORY 3 TO ACT AS ADVISOR, CONSULTANT AND UNDERWRITER TO THE ISSUE.

20 LAKHS

CATEGORY 4 TO ACT AS ADVISOR AND CONSULTANT TO THE ISSUE.

NIL

ROLE OF MERCHANT BANKS

Project Counselling

Loan Syndication

Issue Management

Underwriting of Public Issue

Managers, consultants or Advisors to the Issue

Portfolio Management

Corporate Restructuring

CORPORATE RESTRUCTURING

Corporate restructuring is the process of redesigning one or more aspects of a company.

It involves increasing or decreasing the layers of personnel between the top and the bottom of an organization, or reassigning roles and responsibilities.

CONTD… The process of reorganizing a company

may be implemented due to a number of different factors, such as positioning the company to be more competitive, survive a currently adverse economic climate, or poise the corporation to move in an entirely new direction.

Tata Motors acquisition of Jaguar Land Rover through Jaguar Land Rover Ltd. Is an example of Corporate Restructuring

MERCHANT BANK`S

CODE OF CONDUCT

A Merchant Bank shall make all efforts to protect the interests of investors

A Merchant Bank shall maintain high standards of integrity, dignity and fairness in the conduct of its business

A Merchant Bank shall fulfil its obligations in a prompt, ethical and professional manner.

CONTD…

A Merchant Bank shall always endeavour to render the best possible advice to the clients having regard to their needs

A Merchant Bank shall not make untrue statement or suppress any material fact in any documents, reports or information furnished to the Board.

Merchant Bank shall develop its own internal code of conduct for governing its internal operations

NORMS FOR REGISTRATION

NORMS FOR REGISTRATION

An applicant should comply with the following norms: 

The applicant should be a body corporate

The applicant should not carry on any business other than those connected with the securities market

CONTD…

The applicant should not have been involved in any securities scam or proved guilty for any offence

The applicant must have at least two employees with prior experience in merchant banking

The applicant should have a minimum net worth of Rs.5 cr

DIFFERENCE BETWEEN MERCHANT BANK AND

COMMERCIAL BANK

MERCHANT BANK

They Serve mainly large companies and very wealthy individuals

Merchant banking focuses on investing a depositor’s assets in a finance portfolio and managing these investments

Merchant banks are commonly called as “Investment Banks”

COMMERCIAL BANK

This is accessible to anyone for basic banking needs

A commercial bank can provide loans to individuals and small businesses

Typically referred to as “Banks”

MERCHANT BANK

Apart from raising funds by investing and managing the assets of wealthy clients, it also offers counsel and advice to large corporations

Advice used by corporation before merger and acquisition of, another corporation

Involves the provision of financial services and advice

Merchant banks were actually the original banks and were invented in the Middle Ages

COMMERCIAL BANK

It raises funds by collecting deposits from groups of people as well as interest charged on loans

It purchases bonds from governments and corporate entities

Involves the provision of financial services

The use of Commercial banks by the average citizen is a relatively new phenomenon

Problems of MERCHANT BANKERS

SEBI guidelines have authorized merchant bankers to undertake issue related activities only.

SEBI guidelines stipulate a minimum net worth of Rs. 1 crore for authorization of merchant bankers.

Non co-operation of the issuing companies.

Current Scenario

PNB aims profit of Rs.7,500 crore by 2013• The country’s second largest public sector lender Punjab

National Bank aims to double its profit to Rs.7500 crore in the next four years. “The bank has set a target to expand total business to Rs. 10crore and earn net profit of Rs.7,500 crore by 2013,” said PNB Chairman and Managing Director K C Chakrabarty, who is charge of Deputy Governor of RBI.

• The growth driver would be better asset liability management, thrust on recovery, focus on customers and financial inclusion, he has said.

CONTD…

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 and merchant banking services and would be operational in next three months. Currently, these operations are run by a division of a bank.

ICICI banks to oversee Mergers and Acquisitions

• ICICI bank and its merchant banking arm, ICICI Securities (I-Sec), have entered into an agreement, whereby all mergers & acquisitions deals will be done out of ICICI bank.

• The agreement goes on to define an mergers & acquisitions deals as one which involves change in management control.

• This arrangement replaces the earlier practice of both I-Sec and ICICI bank working together on mergers & acquisitions deals.

CONTD…

“Since a prominent number of people, who wish to be advised on mergers & acquisitions, also looks for acquisition finance, it was decided that the business should be housed in the bank,” MD Madhabi Puri told ET.

“Now, if a corporate is seeking a sell mandate or a buy mandate, where the transfer of controlling interest take place, the deal will be done by ICICI Bank” ICICI Bank had initially entered investment banking space in 2006.

Association of Merchant Bankers

• Association of Merchant Bankers in India is a Professional non-profit company setup to represent the industry.

• It is expected to set code of ethics and facilitate dialogue between the industry and regulatory bodies.

• Training and Awareness programmers are also expected from AMBI.

• Because of lack of support from the members and non-initiative from SEBI/Government, AMBI is dormant at present.