Scope of merchant banking pdf

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That the applicant, his director, partner or principal officer has not at any time been convicted for any offence involving moral turpitude or has been found guilt of any economic offence. That the applicant has the professional qualification from an institution recognized by the Government in finance, law or business management. That the applicant is a fit and proper person. That the grant of certificate to the applicant is in the interest of investors. On the grant of a certificate the applicant shall be liable to pay the fees in accordance with Schedule II.

The application for renewal shall be dealt with in the same manner as if it were a fresh application for grant of a certificate. In case of an application for renewal of certificate of registration, the provisions of clause a of regulation 6 shall not be applicable up to June 30th, The Board on being satisfied that the applicant is eligible for renewal of certificate shall grant a certificate in form B and send intimation to the applicant.

The refusal to grant registration shall be communicated by the Board within thirty days of such refusal to the applicant stating therein the grounds on which the application has been rejected. Any applicant may, being aggrieved by the decision of the Board, under sub regulation:- 1 Apply within a period of thirty days from the date of receipt of such intimation to the Board for reconsideration for its decision.

Where a merchant banker fails to any annual fees as provided in sub-regulation 1 , read with Schedule II, the Board may suspend the registration certificate, whereupon the merchant banker shall cease to carry on any activity as a merchant banker for the period during which the suspension subsists.

They are as follows 1. Merchant Banker not to associate with any business other that that of the securities market. No merchant banker, other than a bank or a public financial institution, who has been granted certificate of registration under these regulations, shall after June 30th, carry on any business other than that in the securities market.

However, a merchant banker who prior to the date of notification of the Securities and exchange board of India Merchant Bankers Amendment Regulations, , has entered into a contract in respect of a business other that that of the securities market may, f he so desires, discharge his obligations under such contract.

Similarly, a merchant banker who has been granted certificate of registration to act as primary or satellite dealer by the Reserve Bank of India may carry on such business as may be permitted by Reserve Bank of India.

Maintenance of Books Every merchant banker shall keep and maintain the following books of accounts, records and documents: 1.

A copy of balance sheet as at the end of each accounting period; 2. A copy of profit and loss account for that period; 3. A statement of financial position. Every merchant banker shall intimate to the Board the place where the books of accounts, record and documents are maintained. Every merchant banker shall, after the end of each accounting period furnish to the Board copies of the Balance sheet, profit and loss account and such other documents for any other preceding five accounting years when required by the Board.

Submission of Half-yearly Results Every merchant banker shall furnish to the Board half-yearly unaudited financial results when required by the Board with a view to monitor the capital adequacy of the merchant banker. Preservation of Books of Account, Records The merchant banker shall preserve the books of accounts and other records and documents maintained under regulation 14 for a minimum period of five years. Appointment of Lead Merchant Bankers All issues should be managed by at least one merchant banker functioning as the lead merchant banker.

In an issue of offer of rights to the existing members with or without the right of renunciation, the amount of the issue of the body corporate does not exceed rupees fifty lakhs, the appointment of a lead merchant banker shall not be essential. Every lead merchant banker shall before taking up the assignment relating to an issue enter into an agreement with such body corporate setting out their mutual right, liabilities and obligations relating to such issue an in particular to disclosures, allotment and refund.

Restriction on Appointment of Lead Managers The number of lead merchant bankers may not, exceed in case of any issue of the following: Responsibilities of Lead Managers No lead manager shall agree to manage or be associated with any issue unless his responsibilities relating to the issue mainly, those of disclosures, allotment and refund are Size of Issue Number of Merchant Bankers Less than Rs.

Where there are more than one lead merchant bankers to the issue the responsibilities of each of such lead merchant banker shall clearly be demarcated and a statement specifying such responsibilities shall be furnished to the Board at least one month before the opening of the issue for subscription.

Underwriting Obligations In respect of every issue to be managed, the lead merchant banker holding a certificate under Category I shall accept a minimum underwriting obligation of five per cent of the total underwriting commitment or rupees twenty-five lakhs whichever is less.

If the lead merchant banker is unable to accept the minimum underwriting obligation, that lead merchant banker shall make arrangement for having the issue underwritten to that extent by a merchant banker associated with the issue and shall keep the board informed of such arrangement. Submission of Due Diligence Certificate The lead merchant bankers, who is responsible for verification of the contents of a prospectus or the Letter of Offer in respect of an issue and the reasonableness of the views expressed therein, shall submit to the Board at least two weeks prior to the opening of the issue for subscription, a due diligence certificate in Form C.

Payment of fees to the Board The draft prospectus or draft letter of offer referred to in regulation 24 shall be submitted along with such fees and in such manner as may be specified in Schedule IV. Continuance of Association of Lead Manager The lead manager undertaking the responsibility for refunds or allotment of securities in respect of any issue shall continue to be associated with the issues till the subscriber have received the share or debenture certificates or refund of excess application money.

Where a person other than the lead manager is entrusted with the refund or allot of securities in respect of any issue the lead manager shall continue to be responsible for ensuring that such other person discharges the requisite responsibilities in accordance with the provisions of the Companies Act and the listing agreement entered into but the body corporate with the stock Exchange.

Acquisition of shares Prohibited No merchant banker or any of its directors, partner manager or principal shall either on their respective accounts or through their associates or relative enter into transaction in securities of bodies corporate on the basis of unpublished price sensitive information obtained by them during the course of any professional assignment either from the clients or otherwise.

Information to the Board Every merchant banker shall submit to the Board complete particulars of any transaction for acquisition of securities of anybody corporate whose issue is being managed by that merchant banker within fifteen days from the date of entering into such transaction.

The fee shall be paid by the merchant a banker within fifteen days from the date of receipt of the intimation from the Board under sub regulation 1 of regulation 8. A merchant banker to keep registration in force shall pay renewal fee of Rs. The fee shall be paid by the merchant banker within fifteen days from the date of receipt of intimation from the Board under sub-regulation 3 of regulation 9.

Every Merchant banker shall pay registration fees as set out below: 1. Category I merchant banker; A sum of Rs. Category II merchant banker; A sum of Rs. Category IV merchant bankers ; A sum of Rs. Category I merchant bankers : A sum of Rs. Category II merchant bankers : A sum of Rs. Category III merchant bankers : A sum of s. Category IV merchant bankers : A sum of Rs. The merchant banker shall also comply with the award of the Ombudsman passed under Securities and Exchange Board of India Ombudsman Regulations, Such a code may extend to the maintenance of professional excellence and standards, integrity, confidentiality, objectivity, avoidance or resolution of conflict of interests, disclosure of shareholdings and interests etc.

It also includes filling up of application forms with significant information for obtaining funds from financial institutions and obtaining government approval. They assist the companies in raise funds from the market. Merchant banks act as an intermediary to transfer capital from those who own it to those who need it.

After taking action as per SEBI guidelines, the merchant banker organizes a meeting with company representatives and advertising agents to finalize arrangements relating to date of opening and closing of issue, registration of prospectus, launching publicity campaign and fixing date of board meeting to approve and sign prospectus and pass the necessary resolutions.

Pricing of issues is done by the companies in consultant with the merchant bankers. Capital structure is financed by long term sources which consist of debt and equity.

On the other hand, a financial structure which includes all forms debt and equity covers all financial resources. These include short term as well as long—term sources. Companies can appoint one or more agencies as managers to the issue. Portfolio management means maintaining proper combinations of securities in a mode that they give maximum return with minimum risk.

A takeover is the purchase by one company obtaining controlling interest in the share capital of another existing company. Merchant bankers act as the middlemen in setting negotiation between the two companies. Merchant bankers assist the management of the client company to successfully restructure various activities such as mergers and acquisitions, divestitures, management buyouts, joint venture among others.

Such loans may be obtained from a single development finance institution or a syndicate or consortium. Merchant bankers help corporate clients to raise syndicated loans from banks and other financial institutions. Apart from this they also explore the refinancing alternatives of the client, and evaluate cheaper sources of funds.

Rehabilitation and turnaround management is another area of advice. A merchant banker advises the client on different hedging strategies and suggests the appropriate strategy. The distribution network of the merchant banker can be classified as institutional and retail in character. The institutional network consists of mutual funds, foreign institutional investors, private equity funds, pension funds, financial institutions etc. The size of such a network signifies the wholesale reach of the merchant banker.

The retail network is purely depends on networking with investors. Developments in Merchant Banking The recent developments in Merchant banking are due to certain contributory factors in India. It is expected that in upcoming financial years and in future is going to be party time for merchant banks, as many new issue are coming up. It is increasing the scope of merchant bankers in many ways.

New financial instruments are introduced in the market time and again. This basically provides more and more opportunity to the merchant banks. The mergers and corporate restructuring along with MOU and MOA are giving immense opportunity to the merchant bankers for consultancy jobs.

These subsidiaries offer more specialised services with professional expertise and skills. Many more subsidiaries are being set up by another nationalise banks.

Are some of the private sector firms of merchant bankers who have taken step to recognise their activities. Out of this Rs. It would also have line of credit from public sector banks, refinance facility from the RBI in order to meet the working capital requirement. DFHI aims at providing liquidity in money market as it deals mainly in commercial bills.

It helps the investor in taking investment decisions. The Setting up of SHC is bound to affect the capital market in future. So, the scope of work is limited. In efficiency of the clients are often blamed on to the merchant banks, so they are into trouble without any fault of their own. Poor New issues market in India is drying up the business of the merchant bankers. Thus the merchant bankers are those financial intermediary involved with the activity of transferring capital funds to those borrowers who are interested in borrowing.

Minimum net Worth of Rs. Future of Merchant Banking in India Investment banking India has always been very crucial for the smooth flow of market transactions between various investors, companies, firms and the government. These banks will have a role to play even in the future, irrespective of the economic conditions in the country. These firms also trade in equities and derivative products and also help companies with merger and acquisition deals. About a couple of years back, when the world economy was reeling under a recession, many investment banking firms either collapsed or were on the brink of closure.

Even a few firms in India were affected by this global downturn. This led to many skeptics writing off the revival of these firms. The economic downturn revealed that only the strong can swim against the tide and still remain afloat.

Those skeptical must realize that the market has its own upheavals and downturns. When you look at the financial strength of these companies, you just cannot ignore them.

No wonder, most of these firms bounced back once again. However, the future of Investment banking companies in India looks good, even though we may see new investment guidelines. They perform a detailed research of market performance and direct their clients which securities are to be purchased and which not. Customers make all decisions on their recommendations regarding when to buy a security, in what amount and when it should be sell.

Merchant bankers follows an innovative for delivering their services to people. Instead of same repetitive operations, it performs different analysis and researches to come up with innovative techniques. New ways of dealing with business affairs are found to come up with better results. Merchant banks have large numbers of highly professional decision makers.

The personnel working in these banks are skilled and knowledgeable in their fields that enable them to provide excellent management services. SEBI has allowed only the quality manpower to act as a merchant banker which provide consultant services on basis of their research and analysis.

Merchant bankers are characterized by rapid decision making due to the presence of efficient and innovative staff. They handle every matter of their client in a professional manner that leads to quick decision making.

All services are provided by these bankers with focused state of mind which helps in approaching problems and implementing decisions rapidly. There is a large density of information available with merchant bankers that enables them in taking strategic decisions. Large set of data is collected related to various areas like market conditions, legal laws, business internal affairs etc.

These information is then processed by them to arrive at better conclusion for helping their clients. Merchant bankers provide their professional services to their client in return for some financial consideration. This consideration is either in the form of fees or commission. This financial consideration is the reward for providing wide range of consultant services in field of management, finance, corporate and legal matters.

These type of banks have an intense contact with environmental conditions on a regular basis. Merchant banker properly studies market conditions for guiding their clients in decision related to creation of portfolio. While raising the funds for their customers, they properly analyses the market for choosing the most suitable source that fulfills their needs efficiently. Merchant banker take responsibilities of carrying out all the promotional activities of business enterprise.