Setting up and management of merchant banking

Presented by Rajeswari.B

Merchant bank
transform the project ideas into industrial ventures. Undertaking various activities :
Market survey Choice of suitable location and size Preparation of document Obtain consent from authorities

 Help in taking important decisions; financial mix, management of public issues, credit syndication Success depends on quality of services and soundness of advices to clients

Qualities required of Merchant bankers

Ability to analyze; technical, financial, economic aspects concerning the formation of industrial projects Knowledge about capital market, trend in stock market, psychology of investing public, changing environment etc. Ability to build Bank-client relationship Innovative approach in developing capital market instruments Maintenance of high professional standards

Guidelines for merchant bankers

Merchant banking require authorization by SEBI a. Criteria
Professional qualification Infrastructure Two experienced employees Capital adequacy General reputation and fairness in all transactions.

Cont..
SEBI classifying the merchant bankers into four category.
1. Consists of merchant bankers who determine financial structure, tie-up of financiers and final allotment and to act in the capacity of managers, advisor, portfolio manager and underwriter. Minimum net worth Rs.1 cr 2. Consists of those authorized to act in the capacity of comanager/advisor, consultant etc. net worth Rs.50 Lakhs 3. Consists of merchant bankers who act as under writer . Net worth Rs.20 Lakhs 4. Consists of merchant bankers who act as advisor. Net worth is nil

 Initial authorization fee, annual fee, renewal fee collected by SEBI All issues must managed at least one authorized banker; sole manager, lead manager The lead merchant banker holding a certificate under category 1 shall accept minimum under writing obligation of 5% of Rs.25 Lakh Each merchant banker is required to furnish to the SEBI half yearly unaudited financial results The banker must perform duties with highest standard of integrity and fairness in all his dealings.

Cont..
SEBI will supervise the activities of merchant bankers SEBI has been vested with the power to suspend or cancel the authorization in case of violation of the guidelines. To ensure transparency and accountability in the operation of merchant bankers to protect the investors Inspection will be conducted by SEBI to ensure the regulations are properly complied with and to investigate the complaints from customers.