8/5/2009

1
MERCHANT BANKING & FINANCIAL SERVICES
UNI1 - 1
IN1kCDUC1ICN - MLkCnAN1 8ANkING
SLkVICLS & IUNC1ICNS CI MLkCnAN1 8ANkING
MLkCnAN1 8ANk IN INDIA
INDIAN IINANCIAL SS1LM
kLCLN1 DLVLLCMLN1 & CnALLLNGLS AnLAD
8
S.CnANDkAMCULI
LLC1UkLk- DCMS
Wbo Is a Mercbant Banker?
An organIzatIon tbat acts as an IntermedIary between tbe
Issuers and tbe uItImate purcbasers oI securItIes In tbe
prImary securIty market."
A mercbant banker Is an InstItutIon tbat beIps companIes
to raIse capItaI. It Is an organIzatIon tbat underwrItes
corporate securItIes, provIdes advIsory servIces to Its
cIIents."
Wbat Is Mercbant BankIng?
An organIzatIon tbat underwrItes corporate securItIes and
advIses cIIents on Issues IIke corporate mergers, etc
InvoIved In ownersbIp oI commercIaI ventures"
INTRODUCTION
any person wbo Is engaged In tbe busIness oI
Issue management eItber by makIng
arrangements regardIng seIIIng, buyIng,
underwrItIng or subscrIbIng to tbe securItIes as
underwrIter, manager, consuItant, advIsor or
renderIng corporate advIsory servIces In
reIatIon to sucb Issue management"
MERCHANT BANKING MAICk SLkVICLS kLNDLkLD 8 MLkCnAN1 8ANkING
1. Corporate Counse||ng
2. ro[ect counse||ng and re-|nvestment stud|es
3. Cap|ta| kestructur|ng
4. Cred|t synd|cat|on and pro[ect f|nance
S. Issue management and underwr|t|ng
6. ortfo||o management
7. Nonres|dent |nvestment
8. Work|ng cap|ta| f|nance
9. Acceptance cred|t and b||| d|scount|ng
10. Mergers, Ama|gamat|ons and takeovers
11. Venture cap|ta| f|nanc|ng
12. Lease f|nanc|ng
13. Iore|gn currency f|nance
14. I|xed depos|t brok|ng
1S. Mutua| funds f|otat|on and management
16. Arrange for rehab|||tat|on of s|ck pro[ects
Iunct|ons of Merchant 8anker
Management of debt and equ|ty offer|ngs
romot|ona| act|v|t|es
|acement and d|str|but|on
Corporate adv|sory serv|ces
ro[ect adv|sory serv|ces
Loan synd|cat|on
rov|d|ng venture cap|ta| and mezzan|ne f|nanc|ng
Leas|ng f|nance
8ought out dea|s
Non res|dent |nvestment
Adv|sory serv|ces re|at|ng to mergers & acqu|s|t|on
D|fference between commerc|a| & merchant banks
Commerc|a| banks accept depos|ts
and |end money |n the mode of
cash
Cffers portfo||o serv|ces to |ts
customers (|nd|v|dua|s and corporate)
kegu|atory body for C8 |n Ind|a |s
M|n|stry of f|nance ] keserve bank
of Ind|a
Invest the|r funds |n the formof
term|oan, work|ng cap|ta| etc.
Depos|t through non cash mode
of f|nance (secur|ty papers)
rov|des reta|| trade bank|ng
serv|ces to |ts customers
kegu|atory body for M8 |s
Secur|t|es Lxchange board of Ind|a.
Invest the|r funds most |n pro[ect
or|ented and secur|ty papers
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MLkCnAN1 8ANk kCCLSSING
Code of Conduct for Merchant 8ankers
1o roLecL Lhe lnLeresL of lnvesLors
MalnLaln hlgh sLandards of lnLegrlLy, dlgnlLy
and falrness ln Lhe conducL of lLs buslness
lulflll lLs obllgaLlons ln a prompL, eLhlcal and
professlonal manner
MalnLaln arms lengLh relaLlonshlp beLween lLs
merchanL banklng acLlvlLy and any oLher
acLlvlLy.
LIS1 CI 8ANkS IN INDIA
Centra| bank (1)
State 8ank of Ind|a & assoc|ates (a|so nat|ona||zed) (8)
Nat|ona||zed banks (19)
C|d pr|vate sector banks (18)
New pr|vate sector banks (8)
Iore|gn banks operat|ng |n Ind|a (29)
Merged or defunct banks (10)
1C1AL 8ANkS - 93
IINANCIAL INS1I1U1ICNS - Abbrev|ate
ICICI - Internat|ona| Cred|t & |nvestment
Corporat|on of Ind|a
ID8I - Industr|a| Deve|opment bank of Ind|a
nDIC - nous|ng Deve|opment I|nanc|a| Corporat|on
nS8C - nong kong and Shangha| 8ank|ng
Corporat|on
N8 - un[ab Nat|ona| 8ank
A8N AMkC - A|gemene 8ank Neder|and (A8N) and the
Amsterdamsche-kotterdamsche 8ank AMkC).
8N AkI8AS- 8ank of ar|s & Nether|and
DLNA - Devkaran Nan[ee 8ank|ng Company Ltd
keg|strat|on of Merchant 8ankers
keg|strat|on w|th SL8I |s mandatory to carry out the bus|ness of
merchant bank|ng |n Ind|a.
1. Shou|d be a body corporate
2. Shou|d not carry on any bus|ness other than those connected
w|th the secur|t|es market
3. Shou|d have necessary |nfrastructure ||ke off|ce space,
equ|pment, manpower etc.
4. Must have at |east two emp|oyees w|th pr|or exper|ence |n
merchant bank|ng
S. Any assoc|ate company, group company, subs|d|ary or
|nterconnected company of the app||cant shou|d not have been a
reg|stered merchant banker
6. Shou|d not have been |nvo|ved |n any secur|t|es scam or proved
gu||t for any offence
7. Shou|d have a m|n|mum net worth of ks.S crores
IINANCIAL SS1LM
FINANCIAL
INSTITUTIONS
FINANCIAL
MARKETS
FINANCIAL
INSTRUMENTS
FINANCIAL
SERVICES
REGUALTORY
INTERMEDIARY
NON INTERMEDIARY
OTHERS
BANKING
NON BANKING
ORGANISED
UN ORGANISED
PRIMARY
SECONDARY
CAPITAL MARKETS
MONEY MARKETS
PRIMARY
SECONDARY
LONG TERM
SHORT TERM
MEDIUM TERM
AMC (Assent
Management
Company)
LMC ( Liability
Management
Companies)
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3
Ind|an I|nanc|a| System
IinanciaI Maikels - Maikel in vhich
financiaI assels aie ciealed oi liansfeiied.
These assels iepiesenl a cIain lo lhe
paynenl of a sun of noney soneline in
lhe fuluie and/oi peiiodic paynenl in lhe
foin of inleiesl oi dividend.
Ind|an I|nanc|a| System
An institutional framework existing in a country to enable
financial transactions
Three main parts
Financial assets (loans, deposits, bonds, equities, etc.)
Financial institutions (banks, mutual funds, insurance companies,
etc.)
Financial markets (money market, capital market, Forex market,
etc.)
Regulation is another aspect of the financial system (RBI,
SEBI, IRDA, FMC)
RBI - Reserve Bank of India
SEBI Securities & Exchange Board of India
IRDA Insurance Regulatory & Development Authority
CCNS1I1ULN1S CI IINANCIAL SLkVICLS
IINANCIAL SS1LM
CCNS1I1ULN1S CI IINANCIAL SLkVICLS
IINANCIAL SS1LM
INS1kUMLN1S Lqu|ty, Debt, hybr|d & Lxot|c |nstruments
MAkkL1 LALkS
8anks, I|nanc|a| Inst|tut|ons, mutua| funds, merchant
bankers, stock brokers, consu|tants, underwr|ters,
marker makers etc.
SLCIALISLD
INS1I1U1ICNS
Acceptance houses, D|scount houses, factors,
depos|tor|es, cred|t rat|ng agenc|es, venture cap|ta|
|nst|tut|ons.
kLGULA1Ck
8CDILS
Department of 8ank|ng & Insurance of the Centra|
Government, k8I, SL8I, 8oard of Industr|a| and
f|nanc|a| reconstruct|on etc.
8ANkING kCGkLSS IN INDIA
D|vers|f|cat|on |n bank|ng: 8ank|ng has moved
from depos|t and |end|ng to
Merchant bank|ng and underwr|t|ng
Mutua| funds
keta|| bank|ng
A1Ms
Internet bank|ng
Venture cap|ta| funds
Iactor|ng
Legal & 8egulaLory lramework
SLrucLural
8egulaLlon
rudenLlal
8egulaLlon
lnvesLor
proLecLlon
Merchant bankers
& stock
Brokings
institutions to
separate
all their fund based
activities
RBI has regulated
Non banking
finance
Companies to
raise
Public deposits
Investors are the
weakest participants of
the financial markets.
(malpractice, fraud,
collapse)
SEBI has stipulated
that all AMCs should
publish the half-early
NAVs for the persual of
investors
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