Merchant banking

Merchant banking

1. MERCHANT BANKING

PRASHANT S. PAWAR
MBA (G) – B
ROLL NO. 89

2. CONTENTS


DEFINATION

HISTORY

INTRODUCTION & CONCEPT

OBJECTIVES OF MERCHANT BANKS

ACTIVITIES OF MERCHANT BANKS

3. DEFINATION OF MERCHANT BANKING

A merchant bank is a financial institution which provides
capital to companies in the form of share ownership instead
of loans.

A merchant bank also provides advisory on corporate
matters to the firms.

In other words,
The merchant banks are those financial intermediary
involved with the activity of transferring capital funds to those
borrowers who are interested in borrowing.

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4. HISTORY

Merchant banks first arose in the Italian states in the Middle
Ages, when Italian merchant houses—generally small,
family-owned import-export and commodity trading
businesses—began to use their excess capital to finance
foreign trade in return for a share of the profits.


Merchant Banking, as the term has evolved in Europe from
the 18th century to today, pertained to an individual or a
banking house whose primary function was to facilitate the
business process between a product and the financial
requirements for its development.
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5. Merchant Banks - Concept
Definition

In the Indian context, merchant banking is understood to
be non-fund based and non-banking services.

Rule 2(e) of SEBI (merchant bankers) Rules 1992, defines
who a merchant banker is. “merchant banker means 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, advisor or rendering corporate advisory
services in relation to such issue management”

Merchant bankers are neither merchants nor bankers.


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6. Merchant Banking in India
Till early 1960s there was no merchant banking in
the Indian banking system. It was the Grindlays
Bank which started merchant banking services as
far back as 1967 in India. Others to follow were
Citibank (1970), SBI (1972)

The boom in the capital market in mid 1970s
encouraged other banks and financial institutions
to set up MB divisions.

Private financial brokers also started private MB
organizations
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7. Merchant Banking in India
Merchant Banking Divisions
Foreign
Banks
Indian
Banks
Financial
Institutions
Private
Merchant
Bankers
Subsidiary
Division in
Bank
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8. Merchant Banking and Corporates
Objectives of
Merchant
Banking
Guidance
Project

Formulations
Implementation
Modernization
Diversification
Mobilizing

Resources
Raising

Working

Capital
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9. Merchant banking V/s Commercial banking


A bank can undertake merchant
banking business, but an MB can not
undertake banking business.

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10. Activities of Merchant Bankers
Some of the important functions of a MB are


Project counseling or reinvestment studies for
investors

Identify promising projects

Prepare feasibility studies – economic and
financial

Prepare in-depth project reports

Assist investors in obtaining licenses

Give guidance on amalgamations, mergers and
takeovers
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11. Activities of Merchant Bankers
Some of the important functions of a MB
are

Provision of working capital

Foreign Currency Loans

Portfolio Management
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12. PRASHANT S. PAWAR