MARKETING OF MERCHANT BANK SERVICES

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MARKETING OF MERCHANT BANK SERVICES
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SERVICES OF MERCHANT BANK

• 1)CORPORATE COUNSELLING-
• 2) PROJECT COUNSELLINGPROJECT REPORT,PATTERN OF
  FINANCING.. ASSISTANCER FOR APPROVAL AND FINANCE.
• 3) LOAN SYNDICATIONAPPROACH FINANCIAL
  INSTITUTIONS FOR LONG TERM LOANS
• 4) ISSUE MANAGEMENT IT INVOLVES MARKETING OF
  CORPORATE SECURITIES OFFERING THEM TO PUBLIC IT
  MANAGEMENT PRE-ISSUE AND POST ISSUE ACTIVITIES .
  PRE-SSIE MANAGEMENT IS DIVIDED INTO ISSUETHROUGH
  PROSPECTUS, OFFER OR PRIVATE PLACEMENT MARKETING
  AND UNDERWRITING PRICING OF ISSUE.

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DEFINITION

• NOTIFICATION OF MINISTRY OF FINANCE DEFINES
  MERCHANT BANKER AS
• ANY PERSON WHO IS ENGAGED IN BUSINESS OF ISSUE
  MANAGEMENT EITHER BY MAKING ARRANGEMENTS
  REGARDING SELLING,BUYING OR SUBSCRIBING TO THE
  SECURITIES AS MANAGER,CONSULTANT,ADVISOR OR
  RENDERING CORPORATE ADVISORY SERVICE IN RELATION
  TO SUCH ISSUE MANAGEMENT.
• THERE IS NO UNIVERSAL DEFINITION OF MERCHANT
  BANKING. IT IS AN INSTITUTION WHICH COVERS A WIDE
  RANGE OF FUNCTIONS SUCH AS MANAGEMENT OF CUSTOMER
  SERVICES, PORTFOLIO MANAGEMENT, CREDIT
  SYNDICATION, ACCEPTANCE CREDIT, COUNSELLING,
  INSURANCE ETC.

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ORIGIN OF MERCHANT BANKING

• MERCHANT BANKING ORIGINATED THROUGH ENTERING OF
  LONDON MERCHANTS IN FINANCING FOREIGN TRADE
  THROUGH ACCEPTANCE OF BILLS. LATER THESE
  MERCHANTS ASSISTED GOVT. IN RAISING LONG TERM
  FUNDS THROUGH FLOTATION OF BONDS. LATER ON THEY
  EXTENDED THEIR ACTIVITIES TO SYNDICATION OF LONG
  TERM/SHORT TERM FINANCE, UNDERWRITING, ACTING AS
  REGISTRARS, DEBENTURE TRUSTEES, PORTFOLIO
  MANAGERS, NEGOTIATING AGENTS FOR MERGERS AND
  TAKEOVERS. THUS THE INSTITUTION OF MERCHANT
  BANKERS CAME TO STAY.

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MERCHANT BANKING IN INDIA

• IN INDIA PRIOR TO ENACTMENT OF INDIAN COMPANIES
  ACT 1956 MANAGING AGENCY HOUSES WERE ISSUE HOUSES
  FOR SECURITIES. FEW SHARE BROKING FIRMS ALSO
  FUNCTIONED AS MERCHANT BANKERS.
• THE NEED FOR MERCHANT BANKERS WAS FELT WHEN
  NUMBER OF ISSUES IN PRIMARY MARKET WERE
  INCREASING. MERCHANT BANKING SERVICES WERE
  STARTED BY FOREIGN BANKS NATIONAL GRINDLAYS AND
  CITY BANK IN 1970, THE BANKING COMMISSION IN ITS
  REPORT 1972 RECOMMENDED THAT COMMERCIAL BANKS AND
  FINANCIAL INSTITUTIONS SHOULD START THEIR
  MERCHANT BANKING WING.THIS MARKED SPECIALISED
  MERCHANT BANKING DIVISIONS..

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BEGINNING

• TO BEGIN WITH MERCHANT BANKING SERVICES WERE
  OFFERED ALONGWITH OTHER TRADITIONAL BANKING
  SERVICES. IN MID 80S BANKING REGULATION ACT WAS
  AMENDED PERMITTING COMMERCIAL BANKS TO OFFER A
  WIDE RANGE OF FINANCIAL SEERVICES THROUGH THE
  SUBSIDIARIES.
• SBI WAS THE FIRST AND THEN ICICI,BANK OF INDIA,
  BANK OF BARODA,CANARA, PUNJAB,UCO BANK FOLLOWED.
  THE MERCHANT BANKING GAINED PROMINENCE DURING
  1083-84 DUE TO NEW ISSUES BOOM

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MERCHANT BANKS AND COMMERCIAL BANKS

• DIFFERENCE IN APPROACH,ATTITUDE AND AREAS
• COMMERCIAL BANKS DEAL WITH DEBT AND DEBT RELATED
  FINANCE. MERCHANT BANK IS EQUITY AND EQUITY
  RELATED FINANCE.
• COMMERCIAL BANKS ARE ASSET ORIENTED, DECISIONS
  ARE BASED ON DETAILED CREDIT ANALYSIS. MERCHANT
  BANKS ARE MANAGEMENT ORIENTED
• COMMERCIAL BANKS ARE MAINLY FINANCIERS.
  ACTIVITIES OF MERCHANT BANKEERS ARE PROJECT
  COUNSELLING,CAPITAL RESTRCTURING, AMALGAMATIONS,
  TAKEOVERS

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SERVICES OF MERCHANT BANKS

• 1) CORPORATE COUNSELLING
• 2) PROJECT COUNSELLING PREPARING PROJECT REPORT,
  DECIDING FINANCE PATTERN, ASSISTING FOR SANCTIONS
  BY GOVT.OFFICE AND FINANCIAL INSTITUTIONS.
• 3) LOAN SYNDICATION
• 4) ISSUE MANAAGEMENT MARKETING OF CORPORATE
  SECURITIES, ISUE FUNCTIONS NORMALLY DIVIDED INTO
  PRE-ISSUE AND POST ISSUE FUNCTIONS . PRE ISSUE
  FUNCTIONS ARE DIVIDED INTO I) ISSUE THROUGH
  PROSPECTUS, OFFER AND PRIVATE PLACEMENT.II)MARKETI
  NG AND UNDERWRITINGAND III) PRICING OF ISSUES.

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POST ISSUE MANAGEMENT

• THE POST ISSUE MANAGEMENT CONSISTS OF COLLECTION
  OF APPLICATION FORMS AND STATEMENT OF AMOUNTS
  RECEIVED FROM BANKEERS, SCREENING OF
  APPLICATIONS, DECIDING ALLOTMENT PROCEDURE,
  MAILING ALLOTMENT LETTERS/SHARE CERTIFICATES AND
  REFUND ORDERS
• REGISTRAR TO ISSUE PLAYS MAJOR PART IN THE ISSUE
  HE HAS TO SUBMIT BASIS OF ALLOTMENT TO THE STOCK
  MARKET.AFTER IT IS APPROVED BY THE STOCK MARKEET
  THE REGISTRAR HAS TO ENSURE THAT ALLOTMENT
  LETTER/REFUND ORDERS ARE SENT WITHIIN 70 DAYS OF
  THE CLOSE OF THE ISSUE
• UNDERWRITING OF THE PUBLIC ISSUE
• MANAGERS,CONSULTANTS OR ADVISORS TO THE ISSUE .

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PORTFOLIO MANAGEMENT

• IT REFERES TO INVESTMENT IN DIFFERENT KINDS OF
  SECURITIES ISSUED BY DIFFERENT COMPANIES AND
  SECURITIES ISSUED BY GOVERNMENT
• PORTFOLIO MANAGER HAS TO CONDUCT REGULAR MARKET
  AND ECONOMIC SURVEYS REGARDING
• 1) MONETARY AND FISCAL POLICIES OF GOVT.
• 2) FINANCIAL STATEMENTS OF DIFFERENT COMPANIES
• 3) MOVEMENT OF SHARE MARKET
• 4) CHANGING PATTERN OF INDUSTRIES
• 5) COMPETITION WITHIN INDUSTRY
• PORTFOLIO MANAGEMENT HAS BECOME NECESSARY
  FOR MANY NEW INVESTORS.

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MERCHANT BANKERS AS LEAD MANAGERS

• AS PER SEBI GUIDELINES IT IS MANDATORY THATALL
  PUBLIC ISSUES SHOULD BE MANAGED BU MERCHANT
  BANKERS IN THE CAPACITY OF LEAD MANAGERS. ONLY IN
  CASE OF RIGHTS ISSUE NOT EXCEEDING 50 LAKHS SUCH
  AN OBLIGATION IS NOT NECESSARY.THE NUMBER OF LEAD
  MANAGERS DEPENDS ON SIZE OF THE ISSUE.
• LESS THAN 50 CRORES2, 50 TO 100 CRORES 3, 100
  TO 200 CRORES 4, 200 CRORES TO 400 CRORES 5,
  ABOVE 5 CRORES 5 OR MORE AS PRESCRIBEB BY THE
  SEBI.
• DUTIES AND RESPONSIBILITIES OF LEAD MANAGERS
• 1) AGEEMENT WITH ISSUING COMPANY- WHICH IS TO BE
  SUBMITTED TO SEBI AT LEAST ONE MONTH BEFORE THE
  ISSUE OPENS.
• 2) EVERY MERCHANT BANKER MUST HAVE REGISTRATION
  OF SEBI
• 3) LEAD MANAGER CANNOT UNDERTAKE WORK IF THE
  COMPANY IS ITS ASSOCIATE.

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• 4) IF MORE THAN ONE LEAD MANAGEERS THEN
  RESPONSIBILITIES OF EACH MUST BE CLEARLY DEFINED
  IN THE AGREEMENT
• 5) THE LEAD MANAGER IS UNDER OBLIGATION TO ACCEPT
  MINIMUM UNDERWRITING OBLIGATION OF 5 OF THE
  ISSUE OR 25 LAKHS WHICHEVER IS LESS.
• 6) DUE CARE AND DILIGENCE IN VERIFYINHG THE
  PROSPECTUS.OR LETTER OF OFFER7 LEAD MANAGER HAS
  TO GIVE DUE DILIGENCE CERTIFICATE THAT PROSPECTUS
  OR LETTER OF OFFER IS IN CONFORMITY WITH
  DOCUMENTS RELEVANT TO ISSUE, DISCLOSURES ARE
  TRUE,FAIR, ADEQUATE AND ALL LEGAL REQUIREMENTS
  ALL DULY COMPLIED WITH..
• 7) EVERY LEAD MANAGER HAS TO SUBMIT ALL
  PARTICULARS OF ISSUE,PROSPECTUS TO THE SEBI AT
  LEAST TWO WEEKS BEFORE THE DATE OF FILING WITH
  THE REGISTRAR OF COMPANIES OR REGIONAL STOCK
  EXCHANGE OR BOTH

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• 8) ANY SUGGESTIONS MADE BY SEBI MUST BE PROPERLY
  INCORPORATED
• 9) IN CASE OF DEVELOPMENT THE LEAD MANAGER HAS TO
  ENSURE THAT UNDERWRITERS CONTRIBUTE THE AMOUNT OF
  THEIR LIABLITY
• 10) EVERY LEAD MANGER IS RESPONSIBLE FOR TIMELY
  REFUND OF ANY EXCESS APPLICATION MONEY
• 11) IT IS HIS DUTY TO MAIL SHARE/DEBENTURE
  CERTIFICATE IMMEDIATELY ON ALLOTMENT OR INFORM IT
  TO THE DEPOSITORY PARTICIPANT .