Merchant Banking merchant banking ...ppt

ppt for merchant banking

1. Merchant Banking
Services & Functions

2. Issue Management Intermediaries
•CCIs (Controller of Capital Issues)
•Development & Regulation by SEBI
•Focus :
Merchant Bankers / Lead Managers / Underwriters
Bankers to issue
Registrars & Share Transfer Agents
Debenture Trustee / Portfolio Managers

3. Merchant Bankers / Lead Managers
•Who is a Merchant Banker? – ROLE
•Major Services
•Merchant Bankers require compulsory
Registration with SEBI

4. Categories of Merchant Bankers
Category - I
Act as:
Advisors, Consultants, Managers,
Underwriters, Portfolio Managers
Responsibilities:
- Preparation of Prospectus
- Determining Financial Structure
- Final Allotment of Securities
- Refund of the subscription

5. Category – II
Advisors Consultants, Co-managers,
Underwriters & Portfolio Managers
Will not involve in Draft Prospectus,
Listing of Stock, etc.

6. Category – III
Advisors, Underwriters & Consultants
Category IV
Only Advisor & Consultant

7. Responsibilities of Lead Managers
•Enter into an agreement with issuing companies, Set their
mutual rights
•Accept minimum underwriting obligation of 5% of total
issue size
•Submit due-diligence Certificate to SEBI before opening
the issue
•Have to submit particulars of issue to ROC & Stock
Exchanges before the date of filing to SEBI

8. Underwriters
•Agree to take securities which are not fully
subscribed
•Take commitment for subscription

9. Bankers to An Issue
Activity:
•Acceptance of Application along with money
•Should Register with SEBI
•Bankers should not allow Blank Application
•Timing & Stamping

10. Brokers To An Issue
•Appointment of Brokers is not compulsory
•Organize preliminary distribution of securities
•Brokerage is generally fixed – 1.5%
of the issue size
•Canvassing Cost of Public Issues have
to be borne by Stock Brokers

11. Registrars & Share Transfer Agents
•Collect applications from investors
•Keep proper record of applications and
money received
•Assist companies for allotment of securities in
consultation with stock exchanges
•Share Transfer Agents are connected with
transfer of securities

12. Registrars & Share Transfer Agents
Divided in two categories
•Category - I
Carry Out activities as Registrars and
Share Transfer Agents
•Category - II
Carry out activity either as Registrar OR
Share Transfer Agent

13. Debenture Trustee
It is a Trustee for TRUST DEED needed for securing
Debentures by Company, Private Placement by Listed or
Unlisted Company
Who Can be a Debenture Trustee?
Banks, Public Financial Institution,
Insurance Companies, Corporate Bodies
- With a Capital of Rs. 1 Cr
Important Duties:
- Payment of Interest with Regular Time Intervals
- Redemption of Debentures

14. Issue Management - (Activities & Procedure)
- Filing Offer Documents
- Fast Track Issues
- For Shares listed on stock exchanges
more than 3 years
- Average Market Capitalization of
Public Shares is at least Rs.10,000 Cr
for 1 Year
- No prosecution proceeding issued by SEBI
- Entire shareholding of Promoter is held in
De-Mat as on Date.

15. Initial Public Offer (IPO)
By Unlisted Companies
•Requirements for IPO
- Company should have Net Tangible Assets
of at least Rs.3 Cr
- Should have track record of distributable profit for
at least 3 years out of immediately 5 years
- Should have a NET WORTH at least Rs. 1 Cr

16. Public Issue by Listed Companies
All Listed Companies are eligible on condition
Proposed Issue Size & Previous Issues made in
same Financial Year – dose not exceed 5 times of
its
Pre-issue NET WORTH
Eligibility norms fro IPOs are not applicable for
Private / Public Sector Banks
Infrastructure Companies
Right Issue by Listed Company

17. QIBs
PFI, Banks, Mutual Funds, FIIs, MFIs, VCs, FVCs, State Ind.
Develop. Corpn., Insurance Companies, Provident Funds,
Pension Funds, National Investment Funds

18. Other Investors
Retail – Individuals – “ R ”
(Investment upto Rs.2 Lakh)
HUF, TRUST, Partnership Firm “Non - QIB –R”,
Pvt. Ltd. Co., NRI, etc.

19. IPO Grading
Grade – 1, 2, 3, 4, 5

20. Pricing of Issues
•Differential Pricing
•Price Band (Bid Price): Rs.100 to 120
Bid Lot : Min No. of Shares to applied for
•Denomination of Shares
- If Issue price is Rs.500 or more
then Face Value - Can be less than Rs.10 --- 5 / 2 / 1
- If Issue Price is less than Rs.500
then Face Value - would be Rs.10 only

21. Deciding the Share Price
Premium
Face Value + Premium = Rs.10 + 100 = Rs.110
Rs. 5 + 145 = Rs.150
Rs. 2 + 178 = Rs.180
Rs. 1 + 749 = Rs.750

22. “CUT-OFF PRICE”
Only for Retail Investors

23. Promoter’s Contribution And
LOCK-IN Requirements
- Promoter should contribute at least 20% of the
post issue capital & will be locked for 3 yrs.
- Promoter should bring full amount of contribution
1 Day Before Public Issue Opens
•No Contribution is required
- When Company is listed for at least 3 yrs
- No Identifiable Promoter / Promoter Group Exists
- Right Issue

24. IDRs ( Indian Depository Receipts )
Instrument in the form of Depository Receipt Created
by Domestic Depositor(DD) against Equity Shares of
Company Incorporated outside India
Requirements:
- Pre-Issue Capital & Free Reserves – US$100mn
- Should have average turnover of US$500mn
- It should be a profit making company,
declaring minimum 10% dividend for last 5 years.

25. Procedure:
- Appoint Overseas Custodian Bank (OCB)
- Will have custodial arrangement with
Domestic Depository (DD) and Merchant Banker
for the Issue
- Company will deliver equity shares to OCB
who would authorize DD to Issue IDRs
- Automatic Fungibility of IDRs is not permitted

26. Book Building Process
Securities available to Public – “Net Offer to Public”
Offer to Public by Book – Building Process:
100 % Net Offer to Public
Public Offer (R) – 35 %
Non – QIB – (R) Offer 15 %
QIB Offer - 50 %**
** Not more than 50 % to QIBs

27. Book – Building Process
75% Net Offer to Public25% QIBs
50% Net Offer to Public50% QIBS

28. ASBA / SCSBS
•ASBA
Application Supported By Blocked Amount
•SCSBS
Self Certified Syndicate Banks

29. ASBA – Process
Bank A/c Blocked Amount for IPO
Rs.1,00,000
Rs.70,000 (Blocked Amount)

Shares allotted worth Rs.40,000
Rs. 40,000 Paid to IPO
Rs.30,000 Credited

30. Procedure for Bidding
•Anchor Investors
•Online Bidding
•By Investors
•By Brokers for Investors

31. GREEN SHOE OPTION (GSO)
•Promoter’s Lock-in Money
GSO (De-Mat A/c With Bank )
GSO ( ESCROW A/c with Bank )
•Stabilizing Agent ( SA )
(Market Maker)

32. Thank You!