23-05-2012, 01:32 PM
MERCHANT BANKING
MERCHANT BANKING.ppt (Size: 154 KB / Downloads: 27)
Merchant banking may be defined as an ‘institution which covers a wide range of activities such as underwriting of shares, portfolio management, project counseling, insurance etc…They render all these services for a fee
ORIGIN :
The term merchant banking originated from the London who started financing foreign trade through acceptance of bills
Later they helped government of under developed countries to raise long term funds
Later these merchants formed an association which is now called ”Merchant Banking and Securities House Association”
Merchant banking activity formally initiated into Indian capital markets when Grind lays bank received license in 1967.
It started off with capital issues, recognized the need of emerging entrepreneurs.
Diverse financial services ranging from production planning and system design to market research
Growth in India
State bank of India has started merchant banking division in 1972.
Initially its objective was to render corporate advice and assistance to small and medium entrepreneurs.
Commercial banks and foreign development financial institutions have organized them through separate divisions.
PORTFOLIO MANAGEMENT :
Portfolio refers to investment in different kinds of securities such as shares,debenture issued by different companies.It is a combination of assets but a carefully blended asset combination.
Portfolio management refers to maintaining proper combination of securities in a manner that they give maximum return
Investors are interested in safety,liquidity and profitability of his investment but they cant choose the appropriate securities.So merchant bankers help their investors in choosing the shares.They conduct regular market and economic surveys
NRI INVESTMENT :
NRIs has to follow lots of complicated rules for investing in the shares in India.Merchant bankers help them in choosing the shares and offer expert advice fulfilling government regulations thus mobilising more resources for corporate sector.
ADVISORY SERVICE RELATING TO MERGERS AND TAKEOVERS :
Merger is a combination of two or more companies into a singe company where one survives and other loses its existence
Takeover is the purchase by one company acquiring controlling interest in the share capital of another company
Merchant banker acts as middlemen between offeror and offeree,negotiates mode of payment and gets approval from government.
GUIDELINES FOR MERCHANT BANKERS :
SEBI’s authorization is a must to act as merchant bankers.Authorisation criteria include
Professional qualification in finace,law or business management
Infrastructure like office space,equipment and man power
Capital adequacy
Past track of record,experience,general reputation and fairness in all
transactions
Every merchant banker should maintain copies of balance sheet,Profit and loss account,statement of financial position
Half-yearly unaudited result should be submitted to SEBI
Merchant bankers are prohibited from buying securities based on the unpublished price sensitive information of their clients