Merchant Banking provides specialist services including portfolio management, project financing and counselling, issue management and underwriting, mergers, acquisitions, venture capital financing, leasing and so on. Merchant banking, although a non-banking financial activity, resembles banking function.
Revise Lecture 29 • Merchant Banking Merchant Banking – An Overview • • The financial services sector is an important constituent of the financial system and plays a significant role in the realm of economic development of a country Merchant Banking is a prominent component of the financial sector of our Merchant Banking – An Overview • Merchant Banking provides specialist services including portfolio management, project financing and counselling, issue management and underwriting, mergers, acquisitions, venture capital financing, leasing and so on Merchant Banking – An Overview • • Merchant banking, although a nonbanking financial activity, resembles banking function The function of merchant banking which originated, and grew in Europe, was enriched by American patronage, and these services are now being provided throughout the world by both banking and non-banking institutions Merchant Banking – An Overview • The word ‘Merchant Banking’ originated among the Dutch and the Scottish traders, and was later on developed and professionalized in Britain Merchant Banking – An Overview • • A set of financial institutions that are engaged in providing specialist services, which generally include the issue and underwriting, project financing, mergers, acquisitions, venture capital financing, acceptance of bills of exchange and other banking services, are known as ‘merchant bankers’ A merchant banker may specialize in one activity and take up other activities, which Merchant Banking – An Overview • In the U.S., investment bankers cater to the needs of business enterprises carrying out merchant banking functions The main functions of merchant banking are the following; Corporate counselling Project counselling Pre-investment studies Merchant Banking – An Overview Capital restructuring Credit syndication and project finance Issue management and underwriting Portfolio management Working capital finance Acceptance creat and bill discounting 10 Mergers, Amalgamations and takeovers Merchant Banking – An Overview 11 Venture capital 12 Lease financing 13 Foreign currency finance 14 Fixed deposit broking 15 Mutual funds 16 Relief to sick industries 17 Project appraisal 10 27 • Categories of Issue managers 28 Public Issue Management Categories of Issue managers • • • SECP has classified Issue managers into four categories as follows; Merchant banker who is authorized to act as issue manager, advisor, consultant, underwriter and portfolio manager Merchant banker who is authorized to act only as advisor, consultant, underwriter and portfolio manager 29 Public Issue Management Categories of Issue managers • • Merchant banker who is authorized to act as underwriter, advisor to an issue Merchant banker who is authorized to act only as advisor or consultant to an issue 30 Lecture 30 31 Public Issue Management • Role of Issue manager 32 Public Issue Management Role of Issue manager The merchant banker as an issue manager is helpful is the following ways; Easy floatation: • An issue manager acts as an indispensable pilot facilitating a public / right issue This is made possible with the help of a repository of special skills possessed by him to execute the33 Public Issue Management Financial consultant: • An issue manager essentially acts as a financial architect, by providing advice relating to capital structuring, capital gearing and financial planning for the company Underwriting: • An issue manager allows for underwriting the issues of securities made by34corporate Public Issue Management Market makers: • • Merchant bankers, an issue managers often act as the market makers for the issues lead managed by them They invest, continue to hold and provide, buy and sell quotes for the listed scrips of the company 35 Public Issue Management Due diligence: • • • The issue manager has to comply with SECP guidelines The merchant banker will carry out activities with due diligence and furnish a Due Diligence Certificate to SECP SECP has also prescribed a code of conduct for merchant bankers 36 • Activities involved in public issue management 37 Public Issue Management Activities involved in public issue management: • • There are several activities that have to be performed by the issue manager in order to raise money from the capital market Adequate planning needs to be done while chalking out an appropriate marketing strategy 38 Public Issue Management Activities involved in public issue management: • The various activities involved in raising funds from the capital markets are the following; Pre-issue Activities: Signing of MoU Obtaining appraisal note Optimum capital structure 39 Public Issue Management Activities involved in public issue management: Convening meeting Appointment of financial intermediary Preparing documents Due diligence certificate Submission of offer document Finalization of collection centres40 Public Issue Management Activities involved in public issue management: 10 Filing with RoC 11 Launching the issue 12 Promoter’s contribution 13 Issue closure 41 ... by both banking and non -banking institutions Merchant Banking – An Overview • The word Merchant Banking originated among the Dutch and the Scottish traders, and was later on developed and professionalized... financing and counselling, issue management and underwriting, mergers, acquisitions, venture capital financing, leasing and so on Merchant Banking – An Overview • • Merchant banking, although a nonbanking... bills of exchange and other banking services, are known as merchant bankers’ A merchant banker may specialize in one activity and take up other activities, which Merchant Banking – An Overview •