Merchant Banking

How, whys, whats ??????????????????

Origin

The origin of merchant banking can be

traced back to the period when people
used to deposit money and other valuables
with grain merchants in their locality for
safe custody before going on a trip.

Introduction

Merchant banks, development banks,

commercial banks and investment banks are
fraternal organisations and the dividing line
between them is very thin as their functions
mostly overlap.

The special role of

Merchant banks

Merchant banks offer a package of services:

Fee-based services: credit syndication, portfolio
syndication, portfolio management and
management of public issue.
Fund-based services: Investment in private
equity, structured equity and bridge financing.
They also invest in private or public companies to
finance growth and acquisitions etc.

Contd.

Pre-Independence period: East India House

which started in the nineteenth century gave a big
boost to merchant banking activities in India.
Post- independence period: Government of India
established IFCI, IDBI.
ICICI , LIC AND UTI gave a further boost to
capital market activities.
Merchant banking as a specialized business
started in India with the establishment of the
merchant banking division of National &
Grindlays Bank in 1969

Merchant banking in India

Securities and Exchange Board of India, Merchant

Bankers Rules 1992 defines merchant banker as
any person who is engaged in the business of issue
management either by making arrangements
regarding selling, buying or subscribing to
securities as manager, consultant or advisor or
rendoring corporate advisory services in relation to
such issue management.
In general, merchant banking can be viewed as the
operations that provide the support, knowledge
and resources to individuals and organizations for
starting , improving, expanding and sustaining
their business and investmens.

The concept of merchant

banking

Project counselling services

Corporate advisory services
Corporate restructuring services
Capital restructuring services
Credit management services
Issue management services
Portfolio management services
Private equity services
Mezzanine financing services
Structured products services

Merchant banking
services

SEBI has classified Merchant Bankers into four categories on

the basis of capital adequacy as provided below
category
I

Capital
adequacy
Rs. 5 crore

II

Rs. 50 lakhs

III

Rs. 20 lakhs

IV

Nil

Functions
Issue
manager,
advisor,
consultant,
underwriter and portfolio manager
Co-manager,
advisor,
consultant,
underwriter and portfolio manager
Advisor, consultant and underwriter
Advisor or consultant

Classification of merchant bankers

Thank you