A Merchant bank is a bank or a fiscal establishment which is more concentrating on supplying fiscal services and advice to corporations and affluent persons, so we can state that a Merchant bank is that which supplying Private equity activities of banking. There are two types of Bankss which provides these private equity services and they are Merchant Bankss and Investment Banks and the chief difference between these Bankss is merchant bank put its ain capital in a client company whereas an investing bank is act as a distributer of the securities of the company in its capital raising function. First bank that supplying these services was set up on 13th November 1994 and its name was First Merchant Bank ( FMB ) . It is a registered commercial bank that ‘s established in Malawi Stock exchange. So, in short we can state that Merchant bank is the bank that engaged in supplying the concern of issue direction either by doing agreements sing merchandising, purchasing or subscribing to securities as director, adviser, adviser or rendering corporate consultative service in relation to such issue direction.
Aims of Merchant Banking in Predominating economic system: –
- To Analyze the function of Merchant Banking towards the development of Securities industry
- To analyse and modulate the maps of issue Management ordinances
- To execute the map of merchandiser banking as per the guidelines of regulations and ordinances of SEBI.
- To pull a decision and suggestions based on analysis and experiences.
Merchant Banking in India:
Merchant banking can be describe as a commercial activity that ‘s foremost introduced in India by publishing direction of public issue of capital and loan syndication. In 1969 ANZ Grindlays Bank introduced merchant bank services first clip in India. This bank besides provides direction consultancy services to medium and little sector.
The activities of merchandiser banking in India include the undermentioned services: –
- To pull off clients securities
- To pull off the portfolio of Customers
- To pull off the undertakings and guidance every bit good as assessment
- To pull off the underwriting of Shares and unsecured bonds
- To pull off the procedure of involvement and dividends
- To circumvention of the syndication of loan
Registration of Merchant bankers with SEBI: –
It is compulsory for a merchandiser bank to register with SEBI. Without keeping certification of beginning granted by SEBI. Following are some ordinances which are given by SEBI in order to be a Merchant Banker: –
- Merely a organic structure corporate other than a non-banking fiscal company shall be eligible to acquire registered as merchandiser banker.
- As a merchandiser banker, applier can merely execute the map that are connected with Security market.
- Applicant should hold proper substructure to put up Merchant bank.
- Two employees with anterior experience in merchandiser banking should be at that place in merchandiser bank.
- Applicant should non be involved in any security cozenage or in any proven guilt for offense.
- Minimal net worth of 5 crores should be there with applier at all the clip.
Classs of Merchant Bankers: –
Merchant bankers are classified in following 4 classs: –
- Merchant Banks that provides all the maps related to direction of Issue, advisory/consultancy services, portfolio directors, investment bankers and Portfolio directors. This type of merchandiser bankers comes under class 1
- Merchant Bankss that provides maps as investment bankers, advisers and advisers is comes under class 2
- Merchant Bankss that provides map of Investment bankers, advisers and Advisers these Bankss comes under class 3
- Merchant Bankss that can supply merely advisors and consultancy services to an issue comes under class 4.
Major Merchant Bankers in India: –
In India Merchant Banking is new Concept but still there are 135 Bankss who register as Merchant Bank under SEBI. It includes Public Sector, Private Sector and Foreign Bankers. Following are some illustrations of these Bankers: –
Public sector Merchant Bankers:
- SBI CAPITAL MARKETS LTD
- PUNJAB NATIONAL BANK
- BANK OF MAHARASHTRA
- IFCI FINANCIAL SERVICES LTD
- KARUR VYSYA BANK LTD,
- STATE BANK OF BIKANER AND JAIPUR
Private Sector Merchant Bankers:
- ICICI SECURITIES LTD
- AXIS BANK LTD. ( FORMERLY UTI BANK LTD. )
- BAJAJ CAPITAL LTD
- TATA CAPITAL MARKETS LTD
- ICICI BANK LTD
- RELIANCE SECURITIES LIMITED
- KOTAK MAHINDRA CAPITAL COMPANY LTD
- YES BANK LTD.
Foreign Players in Merchant Banking:
- GOLDMAN SACHS ( INDIA ) SECURITIES PVT. LTD.
- MORGAN STANLEY INDIA COMPANY PVT LTD
- BARCLAYS SECURITIES ( INDIA ) PVT. LTD
- BANK OF AMERICA, N.A
- DEUTSCHE BANK
- DEUTSCHE EQUITIES INDIA PRIVATE LIMITED
- BARCLAYS BANK PLC
- CITIGROUP GLOBAL MARKETS INDIA PVT. LTD.
- DSP MERRILL LYNCH LTD
- FEDEX SECURITIES LTD
Analysis OF ARTICLES
ARTICLE 1: – Selling effectivity in Merchant Banking
In this article writer Alka Sharma discuss about the economic reforms that took topographic point in Indian fiscal sector. This type of reforms has deriving more importance as fiscal mediators and besides assist in opening new chance for growing and development of assorted fiscal services. As a consequence of this new reforms there is a displacement in fiscal services from quantitative to qualitative services. Fiscal establishment is extremely competitory due to which many fiscal establishments comes with new and modern services and its best illustration is Merchant Banking as about all the Bankss are supplying this type of services. In this article it has been farther explained that how efficaciously the Bankss supplying this services and how much competition is these Bankss confronting while supplying this services because these services is about same in all the Bankss and that ‘s why they are concentrating on different selling Strategy while supplying these services and how private and public Bankss differ in supplying these services this article besides farther tells that private Bankss are more successful while supplying these services
Article: – 2 Merchant Banking Services -Some ideas on Indian Scenario
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In this article writer DR. R.Srinivasan discuss about the merchandiser banking services in India and article Tells that this services foremost started in Italy and from there it is celebrated in all around the universe and now India is become major hub of supplying these services Indian bank are provided these services really successfully and they are regulated by SEBI. This article besides discuss the Services of merchandiser banker like Management of Debt, Placement and distribution, loan syndication services, undertaking advisory services and supplying venture capital.
Article 3: – Concluding regulation on Merchant Banking activities.
In this article writer discuss about the regulation of regulating merchandiser banking services it tells how merchant bank performed this services and how SEBI regulated the Bankss. This article besides discuss that a new competition has been started between the Bankss in order to pull more concern and the bank are more focusing on qualitative services like marketing web, Brand name, and consultative maps. Finally this article conclude that Merchant Banks following no unvarying scheme by supplying these services because they are contending on service bases.
Article4: – Merchant Banking Past and nowadays
This article begins by specifying merchandiser banking and provides a short history of it. The article so looks at the private equity market and alterations in stock exchange in India, analyzing that market in footings of its development, typical utilizations of financess, and signifiers taken by the investings. Discussed following is commercial bank engagement in merchandiser banking: the construction of commercial bank engagement, the development of that engagement, and the recent path record. The major commissariats of the SEBI, statute law which authorizes fiscal keeping companies to prosecute in merchandiser banking, is looked at following. The concluding subdivision focuses on the relationship among merchandiser banking, hazard, and the regulators.
Note: OE: Overall Excellence ; FSS: Financial Soundness ; QPS: Quality Product/Service ; QM: Quality Management ; INN: Innovativeness.Major services of Merchant Banking in Detail: –
Undertaking Guidance: – it is one degree Fahrenheit the of import map of merchandiser Bankss, it includes all the maps get downing from taking determination whether the undertaking is executable or non on the footing of fiscal cost and profitable range of the undertaking and this map besides includes giving fiscal aid to these undertakings with the aid of authorities and fiscal establishments.
Issue Management: – Now a yearss it is one of of import of Merchant Banks. Many companies issues at that place IPO, portions, unsecured bonds in order to raise their financess and Merchant Banks act as a intermediary between Public and cooperates aids in successfully issue of these securities. Merchant Banker has to execute this map as per SEBI guidelines. All the of import determinations like day of the month of gap and shutting of issue, enrollment of prospectus, establishing promotion run, repairing day of the month degree Fahrenheits board meeting and all other major determinations are taken by Merchant Banker.
Directors, Advisers and Advisers: – Merchant Bankss act as a advisers and advisers of corporate while publishing any type of securities. They performed the maps like drafting of prospectus, application signifiers and completion of formalities under Company Act 1956. Companies normally appoint one or two Merchant Banks for publishing their securities.
Underwriting of Public Issue: – By subventioning we mean warrant given by the investment banker in event of under subscription. Merchant Bankss perform this map now yearss and can non subscribe more than 15 % of any issue.
Portfolio Management: – Portfolio direction means to diversified the investing of the investors or to be after their investing in different type of securities like in portions, Mutual Fund, authorities securities etc. so has to derive better returns at a minimal hazard. This map is performed by all the Merchant Banks now a yearss.
Recognition Syndication: – Recognition syndication relates to activities connected with recognition procurance and undertaking funding, aimed at raising Indian and foreign currency loans from Bankss and fiscal establishments, are jointly known as ‘credit syndication ‘ .
Amalgamation and Acquisition: -This is a specialised service provided by the merchandiser banker who arranges for negociating acquisitions and amalgamations by offering adept rating sing the quantum and the nature of considerations, and other related affairs.
The assorted maps that form portion of this activity are as follows:
- Undertaking direction audit to place countries of corporate strength and failing in order to assist explicate guidelines and waies for future growing.
- Conducting explorative surveies on a planetary footing to turn up abroad markets, foreign coactions and prospective articulation venture associates.
- Obtaining blessings from stockholders, depositors, creditors, authorities, and other governments.
- Monitoring the execution of amalgamation and merger strategies.
- Identifying organisations with fiting features.
Venture Financing: -Venture capital is the equity funding for bad and high-reward undertakings. The construct of venture capital originated in the USA in the fiftiess, when concern barons like Rockefeller financed new engineering companies. The construct became more popular during the 1960ss and 1970ss, when several private endeavors undertook the funding of high-risk and high wages undertakings.
Lease Financing: -Leasing is an of import alternate beginning of financing a capital spending. It involves allowing out assets on rental for usage by the leaseholder for a peculiar period of clip.
Following are the of import services provided in respect to leasing:
- Supplying advice on the viability of renting as an alternate beginning for funding capital investing undertakings.
- Supplying advice on the pick of a favourable rental construction.
Off Shore Finance: – Following are the seaward maps performed by Merchant bankers: –
- Long-run foreign currency loans
- Joint venture abroad
- Financing Imports and Exports
- Foreign Collaboration agreements
The set of activities that is undertaken to guarantee the efficient running of a corporate endeavor is known as corporate guidance. It may include the rejuvenating of old line companies and ailing units, and steering the bing units in placing the countries or activities for growing and variegation. The merchandiser banker guides the clients on assorted facets like Location factors, organisational size, operational graduated table, pick of merchandise, market study, cost analysis, cost decrease, allotment of resources, investing determination, capital direction and outgo control, pricing, etc.
Examples of Best Merchant Banker: – ( BEST MERCHANT BANKERS IN INDIA )
SBI CAPITAL MARKET: -According to Business mentality magazines SBI capital Markets, Subsidiary of SBI is the oldest and best Merchant Banker in 2009. It chiefly offers services in Mergers and Acquisition, it besides offers services in Populaces and right offers, private arrangements and redemptions and it provides Project advisory in chiefly nucleus sector i.e. Telecom and Power sector. SBI caps have got this grasp after successfully making IPO in 2008.
KOTAK MAHINDRA BANK: – Harmonizing to Business mentality magazine Kotak Mahindra Bank because this bank manages 13 equity issue which includes ONGC, Biocon and Infosys ADR offerings.
How Merchant Banks Help In Establishing an Initial public offering: –
If we talk about the old method of publishing IPO, in this method merchandiser banker and issuer fixed the monetary value and so investor ‘s bargain IPO by make fulling the application signifier but this traditional method is changed due to altering function of Merchant Banks and altering scenario in Indian stock market. Recently Hughes package is used in order to establish an IPO. Following are new method of establishing an IPO now and how Merchant Banks helps in making that: –
- First of all Merchant bankers and Issuer fixed the monetary value by utilizing Bidding Method, in India Price has been fixed which seems to be below 50 % lower as compared to this monetary value which should be fixed, so, IPO is issued underpriced.
- Then Merchant Bankers Selects Syndicate members who help them in selling the issue
- Orders were so collected by Merchant bankers and so they submitted it to NSE by utilizing the computerized IPO system
- Then in following measure Investors could put, modify and delete orders in book edifice period.
- Then NSE system revealed this information to Merchant Bankers. Full database of the orders was passed on by NSE to Merchant Bankers.
CURRENT SCENARIO OF MERCHANT Banking
At present merchandiser Bankss following chief services and major Merchant Bankers in India is supplying these services
- Portfolio Management
- Recognition Syndication
- Acceptance Credit.
- Counsel onmergers and acquisitions.
- Insurance, etc.
Indian merchandiser Bankss initiate loans and so sell them to investors.As planning and industrial policy of the state envisaged the scene of up of new industries and engineering, greater fiscal edification and fiscal services are required.
There is a good proved link between economic growing and fiscal engineering. Economic development requires specialist fiscal accomplishments: nest eggs Bankss to marshal single nest eggs ; finance companies for consumer loaning and mortgage finance ; insurance companies for life and belongings screen ; agricultural Bankss for rural development ; and a scope of specialised authorities or authorities sponsored establishments. As new units have been set up and concern is spread outing, they require extra fiscal services. A public equity or debt issue is the logical beginning of fund in this state of affairs and merchant Bankss can tap this chance of growing. The countries of great range could be,
- Growth of Primary market:
- Entry of Foreign Investors:
- Development of debt markets:
- Corporate restructuring:
- The range could be extended to
If the primary market grows and figure of issues additions, the range of merchandiser banking will be enhanced.
Now India capital market straight taps foreign capital through euro issues.FDI is increased in capital market. So Merchant bankers are required to advice them for their investing in India. The increasing figure of joint ventures besides requires adept services of Merchant Bankers. If more and more NRIs take part in capital market, there will be great demand for merchandiser banker services. Changing policy of Financial Institutions: and the loaning policies of fiscal establishments are based on undertaking orientation, so the merchandiser banker services will be needed by corporate endeavor to supply adept counsel.
If the debt market is enhanced, there will be enormous range for Merchant bankers. Now NSE and OTCEI are planned to raise their fund through debt instruments.
Due to liberalisation and globalisation Companies are confronting batch of competition. In order to vie, they have to travel for restructuring, amalgamation, acquisitions or disinvestments. They may offer good chances to merchant bankers
- Reding the company on designing of its Capital Structure.
- Reding the company on the instrument to be offered to the populace.
- Pricing of the instrument.
- Reding the company on Legal/ regulative affairs and interaction with SEBI/ ROC/ Stock
- Exchanges and other regulative governments.
- Helping the company in marketing the issue.
- In steering the fiscal excess of the general populace into productive investing avenues.
- To organize the activities of assorted mediators to the portion issue such as the registrar, bankers, advertisement bureau, pressmans, investment bankers, agents etc.
- To guarantee the conformity with regulations and ordinances regulating the securities market
THE FACTORS ON WHICH GROWTH OF MERCHANT BANKING DEPENDS:
- Planing and industrial policy of the state i.e. India in this instance
- Predominating Economic status of the state
- Regulatory system of the market and economic system prevailing in India
- Assurance of the people, bargainers, purchasers, sellers, concern houses, fiscal establishments etc
- The economic environment of the outside universe.
- Competition among the bing participants and the approaching entrants.
Canara Bank is one the best commercial bank in India it was amongst the oldest Indian Bank in India. Its caput office in India is in Banglore, India this bank is present wholly around the universe i.e. in London, Hong Kong, Moscow, Shanghai, Doha and Dubai. It is really good known for its centricity, at present it occupies premier place in the comity of Indian Bankss. It has shown really good net incomes and its current growing is really good. Canara Bank has launched several new revolution in the banking industry: –
- It introduce Inter-City ATM web
- It obtains ISO enfranchisement for a subdivision
- It introduced Bank ‘s Citizen Charter
- It issued recognition card for husbandmans
- It besides provides Agriculture consultancy services
Merchant Banking Servicess by Canara Bank: –
In India Canara bank is one of the Best Merchant banker and it provides best merchandiser banking services as comparison to its rivals. It besides holds SEBI enrollment certification and act as a banker to an issue and has the web of sole capital market services to manage collection, refund and paying Banker assignments. It besides undertakes undertaking assessment and helps in raising capital from capital/ debt issue.
Canara Bank is one of the taking Merchant banker and has been associated with the issues runing from 1 to 1500 crores which involves issues of assorted types of industries, Bankss and statutory organic structures etc. and helps in managing issues of both retail and HNS. Following are the major merchandiser banking services provided by Canara Bank: –
- EQUITY ISSUE MANAGEMENT
- DEBT ISSUE MANAGEMENT
- Private Placement
- Undertaking APPRAISAL
- Monitoring AGENCY ASSIGNMENTS
- IPO Support
- SECURITY TRUSTEE SERVICES
- AGRICULTURE CONSULTANCY SERVICES
- Corporate ADVISORY SERVICES
- Amalgamations AND ACQUISITION
- BUY BACK ASSIGNMENT
- Share VALUATION
- ESOS CERTIFICATION
INDBANK set up in 1907 and its caput one-fourth is at Chennai. It is no. 1 merchandiser banker in India it has 1667 subdivisions and of the biggest public sector bank is India. It is nationalized and had subdivisions all over the universe i.e. 229 subdivisions in 69 states.
Merchant Banking services provided by this bank: –
- It acts as a map of lead director, Co-manager, adviser, agreement for public and right issue.
- It besides performs the map of Merger and acquisition and besides redemption of securities under SEBI ordinance 1996
- Merchant banking services of INDBANK besides includes following Advisory services: –
- Evaluation of portions and other fiscal instruments
- Syndication of loans
- Undertaking Counseling and feasibleness surveies
Performance on the bases of last three old ages: – ( 2006 to 2009 )
If we compare these two Banks on the footings of their profile so there is no uncertainty Indbank is far in front as comparison to Canara Bank because of two grounds: –
- First this bank is Government bank and their capital base is much higher as comparison to Canara Bank.
- Second Indbank is older than Canara bank and it is good established.
But if we compare it on the bases of public presentation in supplying these Merchant Banking services so in instance of equity issue, Allottess and M & A ; A Canara bank is in front of Indbank whereas In instance of AVG IPO IND bank is in front of Canara bank. So, we can state that these Bankss are really near on the bases of competition if we compare their public presentation. So, it is really difficult to compare these two Bankss but we can state that they are really near to each other.