Merchant Banking

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Merchant Banking
            The term ‘Merchant Banking’ originated among Dutch & Scottish traders and later on developed and professionalized in Britain. “Merchant Bank is an organisation that underwrites securities for corporations, advices such clients on mergers and amalgamations and is involved in the ownership of commercial ventures.”
            In India, Merchant banks/bankers carryout the following services:
(1)   Corporate Counseling: guide the client on organisational goals.
(2)   Project Counseling: project financing.
(3)         Pre investment Studies: provides solution for explorative alternative avenues of capital investment.
(4)         Capital Restructuring: analysing capital structure ratio, asset restructure ratio and debt coverage ratio.
(5)         Credit Syndication and Project Finance: credit procurement and project financing.
(6)         Issue Management and Underwriting: management of public issues of corporate securities and mobilization of money from capital market.
(7)         Portfolio Management: decision relating to investment quantum, timing and type of securities for capital appreciation.
(8)         Working Capital Finance: finance for meeting day to day expenses of the business.
(9)         Accepting Credit Bill Discounting: in the money market where advances are made to business concern by accepting the discounted bill of exchange.
(10)     Amalgamation, Mergers and Takeovers: based on the company strength and weakness.
(11)     Venture Capital: funding of high risk and high reward projects.
(12)     Lease Financing: provide guidelines advise documentation services etc. for the viability of leasing.
(13)     Foreign Currency Finance: for export and import.(by providing loans)
(14)     Fixed Deposit Brokering: computation of amount that could be raised by a company in the form of deposits from the public and loans from the shareholders.
(15)     Relief to Sick Industries: the savings of innumerable investors for the purpose of channeling them into productive investments of a wide variety of corporate securities, restructuring their capital base, exploring the possibilities of mergers, assisting in obtaining funds from BIFR(Board for Industrial and Financial Reconstruction) and Sick Industrial Companies Special Provisions Act, 1985
(16)     Project Appraisal: providing Financial Appraisal, Technical Appraisal, and Economic Appraisal assistance.

Merchant bankers have to abide the code of conduct prescribed by SEBI and sec.9 provisions of SEBI (Merchant Bankers) Rules and Regulations, 1992

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