Merchant Banking

INTRODUCTION Merchant Banking although a non banking financial activity, resembles banking function. The functions of merchant banking which originated and grew in Europe was enriched by American and these services are now being provided through out the world by both banking and non banking institutions.

FUNCTIONS OF MERCHANT BANKING Corporate Counselling Merchant Bankers render advise to corporate enterprises from time to time in order to improve performance and build better image/reputation among investors and to increase the market value of its equity shares. Counselling is provided in the form of opinions, suggestions and detailed analysis of corporate laws as applicable to the business unit.

Project Counselling It covers the study of the project and providing advisory services on the project viability and procedural steps to be followed for its implementation. It covers the following aspects.

Capital Restructuring Services Examination of capital structure of corporate unit to decide the extent of capitalisation. In case of bonus issue it helps the clients in preparing the Memorandum for Controller of Capital Issue(CCI) and in obtaining his extent. For sick units, it suggests appropriate capital structure which help the unit in survival. It advises on mergers, takeovers and amalgamation. It also identify the areas of diversification.

Portfolio Management Merchant Bankers advise their clients, mostly institutional investors regarding investment decisions as to the quantum of security and type of security in which to invest. It takes into account following factors: Objectives of the investments Tax bracket applicable to the investor Need for maximising return Capital appreciation

Loan/Credit Syndication Merchant Bnakers provide specialised services in preparation of the project, loan applications for raising short term as well as long term credit from various banks and financial institutions for financing the project or meeting the working capital requirements.

Lease Finance Merchant Bankers also provide leasing and finance facilities to their customers. Leasing is an arrangement that provides a firm with the use and control over the assets without buying and owning the same. Merchant Bankers assist their clients by providing finance for the acquisition of asset taken on lease.

Venture Capital Many merchant bankers maintain venture capital funds to assist the entrepreneurs who lack capital to be risked. Specialized Services Merchant Banks also provide corporate advisory services on issues like mergers and amalgamation, takeovers, tax matters, management audit, etcs