PROJECT ON Merchant Banking

Under the guidance of

MR.SUNIL SAGAR

Submitted by
AARTI SINGH REG NO. 521054933 BATCH 2010 2012

A PROJECT REPORT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION IN BANKING

STUDENT DECLARATION I here by declare that the project report entitled MERCHANT BANKINGsubmitted in partial fulfillment of the requirements for the degree of Master of Business Administration to Sikkim-Manipal University, India, is my original work and not submitted for the award of any other degree, diploma, fellowship, or any other similar title or prizes.

PLACE:MUMBAI

AARTI SINGH (NAME OF STUDENT)

DATE:

REG. NO.: 521054933

Examiners Certification

The project report of

(AARTI SINGH) MERCHANT BANKING

is approved and is acceptable in quality and form.

Internal Examiner

External Examiner

UNIVERSITY STUDY CENTRE CERTIFICATE

This is to certify that the project report entitled Merchant Banking submitted in partial fulfillment of the requirements for the degree of Masters of Business Administration of SikkimManipal University of Health, Medical and technological sciences Miss. Aarti Singh has worked under my supervision and guidance and that no part of this report has been submitted for the award of any other degree, diploma, fellowship or other similar titles or prizes and that the work has not been published in any journal or magazine.

Reg. No.: 521054933

CERTIFIED

BONAFIDE CERTIFICATE Certified that this project report titled MERCHANT BANKING work of AARTI SINGH 2012 who carried out the project work under my supervision.

SIGNATURE HEAD OF THE DEPARTMENT

SIGNATURE FACULTY IN CHARGE Academic Designation

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ACKNOWLEDGEMENT In making this project report a lot of people have contributed by giving me the required knowledge and time, I would like to thank all of them. I would like to express my gratitude and sincere thanks to all those who directly or indirectly help my Project a success for instilling confidence in me to carry out this study and extending valuable guidance and encouragement from time to time, without which it would not have been possible to undertake and complete this project. My gratitude to Mr. Sunil Sagar, Admistrative officer, Oceanic Exim Pvt Ltd.,where was project was undertaken for the support and assistance.

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INDEX

Topics Research Methodology Introduction Evolution & Emergence of Merchant Banking Need & Importance of Merchant Banking in India Objectives of Merchant Banking Role & Growth of Merchant Banking Merchant Banking Organisations Qualities of Merchant Banker Responsibilities of Merchant Banker Registration of Merchant Banker Business Development Approach & Strategy Services rendered by Merchant Banker Practical Illustrations based on ServicesCENTRUM Indian Scenario International Scenario Recent Trends Players in Market Future Development Challenges Ahead Conclusion Bibilography

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RESEARCH METHODOLOGY

The Primary source of information for this project is my personal interaction with the people in my organization who have Investment Banking experience.

The Secondary sources include: Information/books available in the Prin. L. N. Welingkar Institute Of Management Development and Research, Mumbai. Information from the internet Information from newspapers
Information from business magazines

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INTRODUCTION The term Merchant Banking has its origin in the trading methods of countries in the late eighteenth and early nineteenth century when tradetaking place was financed by bill of exchange drawn by merchant houses. At that time the merchants were merely financing their own activities. As international trade grew and other lesser-known names wanted to import goods from abroad, the established merchants lent their names to the newcomers by agreeing to accept bills of exchange on their behalf. The acceptance houses would charge a commission for this service and thus there grew up the business of accepting bills of finance trade not merely of themselves, but of others. Acceptance business thus became and to a degree always has been hallmark of true Merchant Banks. The second historical of Merchant Banks was the raising of capital for foreign Government. In many cases, the Merchant Banks have been trading in the countries concerned and gained the confidence of Governments and other authorities in those countries. Thus the second principal ingredient of Merchant Banking became and still is, raising capital through the issue of stocks and bonds. Therefore, Merchant Banks can be an accepting house or issuing house or both. Merchant Banking started in the beginning of 20th century in UK and USA. More recently, the services offered by Merchant Banks have entered into the other areas of operations. Their role is wide ranging and they can now provide most of the financial services required by a company, touching
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almost all aspects of establishing and running of industrial units on sound financial footing.

Dictionary meaning of merchant bank refers to an organization that underwrites corporate securities and advises such clients on issues like corporate mergers, etc. involved in the ownership of commercial ventures. This organization may be a bank, corporate body, firm or proprietary concern. In Indian context this definition suits well. Merchant banking in India started with management of public issues and loan syndication and has been slowly and gradually covering activities like project counseling, portfolio management, investment counseling and mergers and amalgamation of the corporate firms. Although, merchant banking organizations present a long list of services they contemplate to render to their clients but the main services so far being rendered by them are those as authorized by the Securities & Exchange Board of India (Merchant Bankers) Rules, 1992 as
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 service in relation to such issue management.

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EVOLUTION & EMERGENCE OF MERCHANT BANKING

The progress of any economy mainly depends on the efficient financial system of the country. The importance of the financial sector reforms affirms an effective means for solving the problems of economic, financial and social in India and elsewhere in the developing nations of the world. The progress of the Securities Industry of any country depends mainly on the flow of funds. In fact, capital generation is the lifeblood of the capital market without which the health and soundness of the financial system cannot be geared and for which well-developed capital market as well as money market is essential. Important reason for the growth of merchant banking has been the developmental activity throughout the country, exerting excess demand on the sources of funds for ever expanding industry and trade, thus, leaving a widening gap unabridged between the supply and demand of investible funds. All financial institutions had experienced resource constraint to meet the ever-increasing demand for funds from the corporate sector enterprises. In the circumstances corporate sector had the only alternative to avail of the capital market services for meeting their long-term financial requirements

through capital issues of equity and debentures. With the growing demand for funds there was pressure on capital market that enthused commercial banks, share brokers and financial consultancy firms to enter into the field of merchant banking and share the growing capital market. With the result, all the commercial banks in nationalized and public sector as well as private sector including the foreign banks have opened their merchant banking windows and are competing in this field. There has been a mushroom growth of financial consultancy firms and broker firms doing advisory functions as merchant bankers as well as managing public issues in syndication with other merchant bankers. Notwithstanding the above facts, the need of merchant banking institutions is felt in the wake of huge public savings lying still untapped. Merchant banks can play highly significant role in mobilizing funds of savers to investible channels assuring promising return on investments and thus can help in meeting the widening demand for investible funds for economic activity. With the growth of merchant banking profession corporate enterprises in both public and private, sectors would be able to raise required amount of funds annually from the capital market to meet the growing requirements for the funds for establishing new enterprises, undertaking expansion/modernization/diversification of the existing enterprises. This reinforces the need for a vigorous role to be played by merchant banks. Merchant banks have been procuring impressive support from capital market for the corporate sector for financing their projects. This is evidenced from the increasing amount raised from the capital market by the corporate enterprises year after year.
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Merchant bankers advise the investors of the incentives available in the form of tax reliefs, other statutory relaxations, good return on investment and capital appreciation in such investment to motivate them to invest their savings in securities of the corporate sector. Thus, the merchant bankers help industry and trade to raise funds, and the investors to invest their saved money in sound and healthy concerns with confidence, safety and organizations for higher yields.

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NEED & IMPORTANCE OF MERCHANT BANKING IN INDIA India has entered the 21st century as one of the Asias most dynamic economies. This is the part of the assessment made by International Financial and Capital Market Institutions based on Indias economic and financial reforms initiated in 1991 and brought to fruition in various budget. Infact, the achievement is the cumulative effect of yesteryears coupled with economic reforms in the Indian economy. The economic and financial liberalization, based on the firm pillars of fiscal discipline, structural reform and Securities Market reforms has yielded strong dividends to the economy. The Indian financial system, as it has evolved, is comparable in many respects with the financial system of the most advanced developing countries as well as some of the developed countries. It has a welldiversified structure of financial institutions and instrument and, in fact financial development has out-placed economic development. Indias capital market is among the largest in the developing world. The market is comprised of 24 stock exchanges transacting long-term debt; debentures and equity shares both electronic and physical forms. Derivatives financial instruments are also be added to the market shortly. The number of firms listed on the Indian Stock Exchange is more than the USA. Market Capitalisation of listed firms in 1980s was similar to Brazil, Malaysia, Singapore and Denmark. The capital market of the country, however, underwent dramatic changes since the beginning of 1980s basically because of a progressive realization that the command economy on which the emphasis was placed could not

lead to higher levels of economic development and that a slant towards a market-oriented economy is necessary. Government did this gradually by opening up progressively new sector of economic activity for the private sector. It is in the context of fast expanding economy and a liberalized and deregulated atmosphere that the growth of the Indian Stock Market activities has to be viewed. No wonder that the markets have registered a quantum jump judge by any standards. India is now a major player in the emerging markets of the world, next only to Mexico, Korea and Taiwan both in respect of market capitalisation and turnover. In view of multitude of enactments, rules and regulations, guidelines and offshoot press release instructions brought out by the Government from time to time imposing statutory obligations upon the corporate sector to comply with all those requirements prescribed therein, the need of skilled agency existed which could provide counseling in these matters in a package form. Merchant bankers, with their skills updated information and knowledge, provide this service to the corporate units and advise them on such requirements to be complied with for raising funds from the capital market under different enactments viz. companies Act, Income-tax Act, Foreign Exchange Regulation Act, Securities Contracts (Regulation) Act, and various other corporate laws and regulations.

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OBJECTIVES OF MERCHANT BANKING Merchant Banker plays a vital role in the economic and financial development of the country. As a result of economic and financial liberalization new companies are formed and number of issues floated to raise resources from the investor community. Considering the significance of the issue the Government of India instituted SEBI in 1990 to regulate and control various market intermediaries. SEBI issued various rules and regulations for each and every segment of the capital market. To regulate Merchant bankers, with the twin objective viz., investor protection and development of the capital market, SEBI issued rules and regulations for Merchant Bankers. Subsequent amendments also have been made to these regulations to further strengthen this segment of the securities industry. These regulations (Merchant Banking) specified that every company desires to float an issue to the public should engage Merchant Banker (Registered under these regulations with SEBI) as Lead Manager. In this context Merchant Banker gained the importance in the Indian Securities industry. In the wake of economic reforms and financial liberalization the need for financial resources has significantly increased. As an intermediary-Merchant Banker plays a crucial role in exploring the ways and means for the funds. Besides, issue management, Merchant Banker also performs several other important functions like underwriting of securities, private placement of securities, corporate advisory services e.g., Takeovers, Acquisitions, Disinvestments Managing & International offerings of debt/equity, i.e. GDR, ADR, Primary dealership of government securities, Syndication of rupee, term loans, international financial advisory services, etc. which require special skills.

Having given a serious and careful thought to securities industry reforms, SEBI has taken efforts seriously to boost the splendid endeavor of securities market intermediaries. As a result, Merchant Bankers came into being to look after the promotion and administration of issues. It is well known fact that without adequate professional support of Merchant Bankers the securities industry cannot prosper. The bane of Indian capital markets today is lack of investor confidence. This is reflected in the poor performance in the primary and secondary markets. The cause for the existing situations are many but primarily arise on account of lack of liquidity, unscrupulous issuers and Merchant Bankers and poor or unappease issues. Merchant banking can solve this problem because investors would be dealing with reputed merchant bankers in the primary market rather than unknown issuers. The Merchant Banks, whatever are their issue management techniques have their own capital on hold. The issues are likely to be properly appraised and priced. Merchant banks would hold the issue until the market conditions are appropriate for issue, thus reducing risk exposure of investors to gestation for issue. Merchant Banks make the primary market for IPOs thus assuring protection to the issuers also about subscription. In sum, the quality of pricing appraisal and primary market functions will improve resulting in substantial improvement in investor confidence. The necessity of Merchant Banking is indicated in the view of the wide industrial base of the Indian Economy

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ROLE & GROWTH OF MERCHANT BANKING The role of merchant banker is dynamic in the wake of diverse nature of merchant banking services. Merchant bankers dynamism lies in promptly attending to the corporate problems and suggests ways and means to solve it. The nature of merchant banking services is development oriented and promotional to help the industry and trade to grow and survive. Merchant banker is, therefore, dedicated to achieve this objective through his dynamism. He is always awake to renew his skills, develop expertise in new areas so as to equip himself with the knowledge and techniques to deal with emerging new problems of corporate business world. He has to keep pace with the changing environment where Government rules, regulations and policies affecting business conditions frequently change; where science and technology create new innovations in production processes of industries envisaging immediate renovations, diversification, modernizations or replacements of existing plant and machinery or other equipments putting new demands for finances and necessitating overhauling of the capital structure of the firms. Merchant banker has to think and devise new instruments of financing industrial projects. He has to assume wider responsibilities of saving industrial units from going sick and guiding industries to be set up industrially backward areas to eliminate regional imbalances in industrial development of the country. He has to guide the wider section of the community possessing surplus money to invest in corporate securities and other productive investment channels. He has to help the industry in different forms to ensure that it runs risk free and devoid of uncertainty by

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assisting the has to watch the interest and win over the confidence of the Government, its agencies, along with the entrepreneurs, the investors and the whole community. He must bridge the communication gap between different sections and resolve the problem being faced in different areas concerned with the business world. To discharge the above role, a merchant banker has t be dynamic. For this reason, a merchant banker is sometimes, called M.B i.e. Moving Bottom, i.e., one who never sits at one place, always moving- attending meetings and meeting clients and constituents, doing business and getting business by attending meetings and conferences, imparting knowledge to others and acquiring new knowledge to maintain his supremacy in possession of latest information. His role depicts a personality cult, which is unique and envious to be followed by others. In the days ahead, merchant bankers have very significant role to play tuning their activities to the requirements of the growth pattern of corporate sector, the industry and the economy as a whole, which is, in it, a challenging task and to meet these challenges merchant bankers will have to be more vigorous and strategic in playing their role. They will have also to adopt new ways and means in discharging their role. Formal merchant banking activity in India was originated in 1969 with Merchant Banking Division set up by the Grindlays Bank, the largest foreign bank in the country. The main service offered at that time to the corporate enterprises by the merchant banks included the management of public issues and some aspects of financial consultancy. Other foreign banks like Citi Bank, Chartered Bank also assumed the merchant banking activity in India.
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State Bank of India started merchant banking in 1973 followed by ICICI in 1974. Both these Indian merchant bankers emerged as leaders in merchant banking having done significant business during the period of 1974-1987 in comparison to foreign banks. The early and mid-seventies witnessed a boom in the growth of merchant banking organizations in the country with various commercial banks, financial institutions, brokers firms entering in to the field of merchant banking. The early growth of merchant banking in the country is assigned to the Foreign Exchange Regulation Act, 1973 (FERA) where under large number of foreign companies operating in India were required to dilute their foreign holdings in order to continue business in the country. This had caused twopronged effect viz. firstly, in the form of spate in Foreign Exchange Regulation Act Issues eliciting interest of the investors by creating massive awareness about capital markets amongst the new class of investing public, secondly, merchant banking activity became attractive to banks and the firms of consultants and share brokers who entered into this fields vigorously to reap the advantages of the expanding capital markets.

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MERCHANT BANKING ORGANISATIONS In India, merchant banks operate in the form of divisions of Indian and Foreign banks and financial institutions, subsidiary companies established by banks like SBI Capital Markets Ltd., Canara Bank Financial Services Ltd., PNB Capital Services Ltd., BOI Finance Ltd., Indian Bank Merchant Banking services Ltd., etc., the firm organized by the stock brokers, stock exchange dealers, the financial and technical consultants and chartered accountants. Securities and Exchange Board of India (SEBI) has divided merchant bankers into four categories, which are as follows: -

CATEGORIES Category I

ACTIVITIES To carry on the activity of issue management and to act as adviser, consultant, manager, underwriter, portfolio manager.

NETWORTH Rs.1crore

Category II

To act as adviser, consultant, comanager, underwriter, portfolio manager.

Rs.50 lakhs

Category III

To act as underwriter, adviser or consultant to an issue.

Rs. 20 lakhs

Category IV

To act only as adviser or consultant to an issue

Nil

Merchant Bankers are classified into 4 categories as shown in the above table having regard to their nature and range of activities and their responsibilities to SEBI, investors and issuers of securities. The minimum net worth and initial authorization fee depends on the category. The first

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category consists of merchant bankers who carry on any activity of issue management, determining financial structure, tie-up of financiers, advisor or consultant to an issue, portfolio manager and underwriter. The second category consists of those authorized to act in the capacity of comanager/advisor, consultant, and underwriter to an issue or portfolio manager. The third category consists of those authorized to act as underwriter, advisor or consultant to an issue. The fourth category consists of merchant bankers who act as advisor or consultant to an issue. Practical Illustration Introduction to Centrum Centrum is jointly promoted by Mr. Chandir Gidwani, a Chartered Accountant, having more than a decade of experience in the financial services industry Centrum was incorporated in 1977. It is a SEBI registered Category I Merchant Banker, listed on The Stock Exchange, Mumbai (BSE). Over the last two decades, it has expanded into a full-service investment banking company. Today its primary role is that of a responsible intermediary with a strong professional base. Its forte is providing advisory and innovatively structured financial solutions in the area of fund raising, infrastructure development, government borrowing, corporate restructuring and money market intermediation. At the retail level, Centrum provides investment advisory service and distributes financial products like mutual funds, insurance products, etc. Centrum Capital Limited (CCL) is associated with the following companies: Centrum Direct Ltd. - Is the Foreign Exchange, Insurance & Retail Distribution business arm of CCL. The Company is a Full Fledged Money
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Changer authorised by Reserve Bank of India. It does money changing for retail and corporate travelers and is also involved in wholesale foreign exchange business like export of currency. Casby Logistics Pvt. Ltd. A firm incorporated in 1857, is one of the largest Stevedores of the Bombay Port. The business interests of the firm span transportation, clearing & forwarding, couriers, logistics and supply chain management services. They are the local partners for P&O Ports, Australia. Softchip Technologies Ltd. - Is an organization offering Hardware, Networking, Customized Software and Web Hosting Solutions for the growing IT market. It has a client base of over 400 corporate using the complete range of services. Softchip also has an Application Development division, offering a wide bandwidth of solutions, including e-business solutions, portal development, Corporate Intranet Mailing Systems and Web hosting solutions. It has set off at a steady pace and established itself in the industry, reflected by its expanding clientele, both domestic & overseas. Centrum Broking Pvt. Ltd. - It is the Secondary Market Broking arm of the Group, which offers competitive terms to investors and traders alike. The Company is a member of BSE and National Stock Exchange (NSE) on both cash and derivatives segments. It is also a Depository Participant under Central Depository Services Limited (CDSL) and a Portfolio Manager registered with Securities Exchange Board of India (SEBI).

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QUALITIES OF MERCHANT BANKER Merchant bankers are individual experts who organize and manage the merchant banks. The operations of merchant banks are, therefore, influenced by the personality trait of these individuals. For the success of merchant banks operations, the qualities which merchant bankers should have are discussed below: LEADERSHIP Merchant banker should possess all relevant skills, update knowledge to interact with the clients and effectively communicate. Leadership is synonymous with followers who follow the one who leads. AGGRESSIVE ACTION- Aggressiveness is a personality trait of a good leader but in merchant banking it has a wider connotation. Aggressive merchant bankers are always looking for new business. Once a business opportunity has been located, the merchant banker has got to obtain the mandate for the merchant banking assignment from the clients at once which will depend upon his own communication skills, persuasiveness and the background of the organization to which he belongs. A good merchant banker is one who does not allow his client to think anything outside except what has been advised. Therefore, promptness in grasping the clients problems and providing better choice amongst alternative solutions evidence aggressive approach in the profession to hold the clients interest in entirely for the present as well as for the future.

 COOPERATION AND FRIENDLINESS- No doubt, these two characteristics are the symbols of good leadership but it hardly needs to be stressed that cooperation and friendliness coupled with persuasiveness are the main instruments with which a merchant banker mixes with the people, gather information, obtains business mandate and renders satisfactory services to the clients. Business of an honest business merchant banker spreads with geometrical propagation when he shares the thoughts of his clients with sympathetic gestures and offers pragmatic suggestions without greed or favours. Very often, rude, intemperate or indifferent disposition led to withdrawal of fortunate business opportunities forever. These are the vices unbecoming of a merchant banker and should be eschewed. Friendliness and cooperation must flow as natural traits in the merchant banker to win over the trust of the clients like a doctor or lawyer who retain their clients permanently. CONTACTS Success of merchant banker depends upon his sociable nature and the richness of wider contacts. A merchant banker is supposed to be acquainted deeply with all the constituents of merchant banking. The scope of contact encompasses intimate contiguity and acquaintances within his own organization, Central and State Government Offices where compliances under various relevant enactments are to be reported, Indian and foreign banks, financial institutions at Central and State levels, promoters/directors/owners and chief executives of the private and public enterprises which would be prospective beneficiaries of merchant banking services, printers, advertising agencies, brokers and stock exchange dealers, advocates

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and solicitors and members of the press whose services are availed of in executing merchant banking assignments. Merchant bankers should widen contacts and references and continue to maintain them with goodness, honor and humor by meeting people in person, through writing and in special gatherings. ATTITUDE TOWARDS PROBLEM SOLVING The most important personality trait of a merchant banker is his attitude towards problem solving. Even client coming to him has got to return fully satisfied having consulted a merchant banker. Positive approach to understand the view points of others, their difficulties and their adverse circumstances is possible only when a person is skilled in human relations particularly the inter-personal and intra-personal behavior. Effective communication and proper feedback are the prerequisite for creating a positive attitude towards problem solving which could be gained partly through learning process and partly as an in born quality. Many persons are effective in this trait without any training for reasons of cultivating a habit from environment in which they have been brought up at home, in school, college and office. This trait is a subject matter of personality development but is so important that it must be treated as a separate objective quality of a good merchant banker. INQUISITIVENESS

FOR

ACQUIRING

NEW

SKILLS,

INFORMATION AND KNOLEDGE Merchant Bankers lice on their wits they earn by giving information to needy clients. Therefore, they should keep abreast with latest information in the area of the
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service product, they market. This is possible if merchant bankers possess the quality of inquisitiveness. The above qualities of a merchant banker are only illustrative. All good qualities in merchant bankers are difficult to be defined so elaborately. Nevertheless, merchant banker should possess super business acumen, managerial abilities, administrative capacities and salesmanship so as to understand the problems and sell the service product to the needy clients.

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RESPONSIBILITIES OF MERCHANT BANKER To the Investors Investor protection is fundamental to a healthy growth of the Capital Market. Protection is not to be conceived as that of compensating for the losses suffered. The responsibility of the Merchant Banker in ensuring the completeness of the disclosures is of paramount importance in view of the fact that entire reliance is based on offer document either Prospectus or Letter of Offer because an independent agency like a Merchant Banker has done the scrutiny. Capital structuring The Merchant Bankers while designing the capital structure take into account the various factors such as leverage effect on earnings per share, the project cost and the gestation period, cash flow ability of the company, the cost of capital, the considerations of management control, size of the company, and general economic factors. These exercise are done mainly in order to meet the fund requirement of the company taking due cognizance of the investors preference. Project Evaluation and due Diligence Due diligence and project evaluation is another major responsibility of the Merchant Banker. Where the project has already been appraised by a bank/financial institution, the Merchant Banker relies on the said appraisal before accepting an assignment. However, where the project has not been appraised by as bank/financial institution, the Merchant Bank undertakes a

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detailed evaluation of the project before taking up an assignment for issue management. Legal aspect The factors that are looked into in case of the legal aspects are: Compliance with the SEBI guidelines and the various guidelines issued by the Ministry of Finance and Department of Company Affairs. Pending litigations towards tax liabilities or any criminal/civil prosecution any of the directors for any offenses. Fair and adequate disclosures in the prospectus. Pricing of the Issue The Merchant Banker looks into the various factors while pricing the issue. Some of the factors are past financial performance of the company, book value per share, stock market performance of the shares. The Merchant Banker has a vital role to play in pricing of the instrument. Marketing of the Issue Marketing of the issue is a vital responsibility of the Merchant Banker. The first stage is Pre-issue marketing for placement of the issue with the financial institutions, banks, mutual funds, FIIs and NRIs. The second stage is the marketing of the issue to the general public through various vehicles such as press, brokers, etc.

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Bought out Deals The concept of wholesale but out of public offerings by the Merchant Bankers started off with over the Counter Exchange of India where a Merchant banker acts also as a sponsor and either takes up the entire issue to be offered wholly of jointly with other co-investors and off-loads the same to the public at a later date by an offer for sale. Major amendments were made to the SEBI regulations regarding Merchant Bankers. The duration of this transaction period has not officially been announced.

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REGISTRATION OF MERCHANT BANKER The term Merchant Banking originated in the 18th and early 19th centuries in the United Kingdom when trade between countries was financed by bills of exchange drawn on the principal merchant houses. With the increase in international trade, the established merchants started the practice of lending their names to the new comers and accepting the bills of exchange on their behalf. They would charge a commission for the purpose and thus acceptance business became the hallmark of Merchant Bankers. Once these banks had gained the confidence of the government, they also entrusted with the job of issuing bonds in the London market. Although Merchant Banking activity ushered in two decades ago, it was only in 1992, in India, after the formation of SEBI that is defined and a set of rules and regulations governing it are in place. In fact, the origin of Merchant Banking is to be traced to Italy in late medieval times and France during the seventeenth and eighteenth centuries. Merchant Banker invested accumulated profits in all kinds of promising activities. Since they added banking business into the profession of Merchant activities and became a Merchant Banker. A distinction existed in banking systems between moneychanger and exchanger. Moneychangers concentrate on the mutual exchange of different currencies, operated locally and later accepted deposits for security reasons. With passage of time money changers evolved into public or deposit banks whereas exchangers, who operated internationally, engaged in bill-broking that raising foreign exchange and provision of longterm capital for public borrowers. The exchanges were remitters and Merchant Bankers. In the seventeenth century, a Merchant Banker was a
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dealer in bills of exchange who operated with correspondents abroad and speculated on the rate of exchange. Initially, Merchant Bankers were not banks at all and a distinction was drawn between banks, Merchant Banks and other Financial Institutions. Among all these, Institutions it was only banks that accepted deposits from public. A Merchant Banker is defined as any person who is engaged in the business of issue management either by making arrangements regarding selling, buying, or subscribing to securities, or acting as manager, consultant, advisor or rendering corporate advisory services in relation to issue management. No person s allowed carrying out any activity as a Merchant Banker unless he or she holds a certificate grated by SEBI. Registration with SEBI is mandatory to carry out the business of merchant banking in India. An applicant should comply with the following norms: The applicant should be a body corporate The applicant should not carry on any business other than those connected with the securities market The applicant should have necessary infrastructure like office space, equipment, manpower etc. The applicant must have at least two employees with prior experience in merchant banking Any associate company, group company, subsidiary or interconnected company of the applicant should not have been a registered merchant banker The applicant should not have been involved in any securities scam or proved guilt for any offence The applicant should have a minimum net worth of Rs.5 crores

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BUSINESS DEVELOPMENT APPROACH AND STRATEGY Merchant banking services are highly competitive business activities and to get business, merchant bankers have to stand on their heels and run to grab the business opportunity. Each of the officers in merchant banking department, division, cell or bureau or company should have the requisite skills of marketing and salesmanship to ensure that the opportunity once found is not lost without obtaining mandate from the client. Therefore, a merchant banker has got to be a social person with mixing nature and temperament of liking others. The sources for locating business opportunities would vary but merchant banker has give rise to new ideas, open avenues to new business and provide scope for additions in the existing business system by way of modification, modernization, diversification, expansion, amalgamation or reconstruction, etc. These sources of information could be the banker whose client is thinking in terms of such ideas; the financial and technical consultancy firms, which are working on such ideas for their clients; licensing authorities of the Central Government or Registration Departments of the State Governments which have been approached for grant of license or for registration of new business activity; financial institutions whose existing borrower clients are taking up new activities or expanding the existing works or which have been approached by the prospective borrowers with loan application for grant of financial facilities. A close liaison with these institutions could provide a clue for business opportunity for a merchant banker.

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Besides, the published information in different new dailies, weeklies and fortnightly or monthly magazines provide the source of business opportunity. Such information could be the speeches of business executives, proceedings of annual general meeting of companies specially Chairmans report highlighting future prospects for the company, personal interviews granted to the press people by the top business executives, trade exhibition disseminating useful information, opening opportunities for entrepreneurs to take up new activities, information published by Chamber of Commerce and Industry, house journal of prominent industrial houses, press releases by Government, import License or capital goods committees clearance, foreign collaboration permissions, etc. The basic approach for a merchant banker is to maintain close contact with other agencies involved in managing public issues like managing brokers, advertising agencies, firm of registrar to the issue, banks operating as bankers to the issue and advocates/solicitors who have expertise in the area of corporate law and consultancy. These agencies could give clue to the new business opportunity to be explored by the merchant banker.

The basic strategy should be to get information, follow-up the same and materialize the business opportunity. To this end, the merchant bankers should frequently join clubs where the business magnates meet and freely mix with them, talk about their future business plans and converse with them on the issues of interest to them, join association or club of merchant bankers and be inquisitive to trace new opportunities for the merchant banking business, explore the possibilities of working with existing

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merchant bankers to the forthcoming public issues or other merchant banking activities. He should develop contacts with agencies like India Investment Centre which is helping the non-resident Indians in getting industrial licenses, Central government clearances, foreign collaboration or approval from such like institutions and thus he can get business in areas of credit-syndication, corporate/project consultancy, issue management,

portfolio management for NRIs, etc. In addition to above, merchant banker should take steps to promote new business in the following manner: Contact frequently the small business owners convince them of business growth through expansion of their activities by forming limited companies, polling resources together through merger and amalgamation, etc. Helping private limited companies to convert into limited companies and take up new activities/expansion/modernization/diversification programme etc. and assure them of the requisite help.

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SERVICES OFFERED BY MERCHANT BANKS Introduction Among the important financial intermediaries are the merchant bankers. The services of Merchant bankers have been identified in India with just issue management. It is quite common to come across reference to merchant banking and financial services as though they are distinct categories. The services provided by merchant banks depend on their inclination and resources - technical and financial. Merchant bankers (Category 1) are mandated by SEBI to manage public issues (as lead managers) and open offers in take-over. These two activities have major implications for the integrity of the market. They affect investors' interest and, therefore, transparency has to be ensured. These are also areas where compliance can be monitored and enforced. Merchant banks are rendering diverse services and functions, which are as follows:
Issue Management Underwriting Mergers & Acquisitions Project Counseling Loan Syndication Restructuring service

Corporate Advisory Services Factoring Services

Asset Securitization Forex Services Hire Purchase Lease finance Venture capital
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MERCHANT BANKING SERVICES: SCOPE In the present dynamic environment where public money is playing a vital role in financing a large number of projects, both in the public and private sectors, Merchant Banking has a significant role in managing the show and meeting the growing demands for funds by the corporate sector. Merchant Banking includes a whole gamut of activities which meet the needs of both corporate and individual investors and which range from identification, evaluation, promoting and financing of projects (both domestic and overseas) by raising resources in the equity and long-term loans, to organize and participate in international consortia, to raise foreign currency loans and to offer advisory services on various matters related to finance, investment, capital management, structure, mergers, amalgamation, takeovers and acquisitions. They also play a useful role in the portfolio management, money market operations, venture capital, leasing, etc. Merchant bankers act as a guide for the entrepreneurs who are unaware, or have little knowledge or experience, of the complexities involved in the above spheres. In addition to the above, the scope of Merchant Banking services has extended to providing advisory services to companies to increase or divest their stakes, public sector undertaking disinvestments, international issues, etc. With the OTCEI being operation now, Merchant Bankers will have a key role to play in terms of appraising the projects and offering two-way quotes for market making in case of entrepreneur going for listing in the above exchange.

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Merchant Bankers act as a critical link between the corporate who intend to raise funds and the investors who are interested to invest in securities Industry. Besides issue management, the Merchant Bankers also undertake the activities like underwriting connected with the public issue management business, Managing/advising on International offerings of Debt/Equity i.e., GDR, ADR, Bonds and other instruments, Private placement securities, Primary or Satellite dealership of government securities, Corporate Advisory services related to securities market (e.g., Takeovers, acquisitions, disengagement), Stock-Broking, Advisory Services for projects, Syndication of rupee term loans and International Financial Advisory Services. The services can be represented as follows: -

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SERVICES RENDERED BY MERCHANT BANKERS ISSUE MANAGEMENT The public issue of securities is the core of merchant banking functions. At one time it was considered as the sole function. Merchant bankers were identified as issue houses. It was later perceived that they provide other financial services. When companies seek to raise resources for implementation of a new project or finance expansion or modernization or diversification of an existing unit or fund long-term working capital requirement, they retain the services of a merchant banker. To a large extent the type of issue would vary with the purpose for which funds are raised. Merchant bankers when retained as managers to issue will have to assist the company in all the stages connected with public issue. The merchant bankers help corporates to raise money from the markets through the issue of shares, debentures, bonds etc. They are designated as managers to the issue. Their main business is to attract public money to capital issues. They usually render the following services: Preparing an action plan and budget for the total expenses for the issue. Drafting of prospectus and getting it approved from the Stock Exchanges. Obtaining consent/acknowledgement from SEBI. Appointing bankers, underwriters, brokers, advertisers, printers etc. Obtaining the consent of all the agencies involved in the public issue.

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Holding road shows, to sell the issue. These shows are held for the analysts, brokers & institutional investors. The purpose of these shows is to answer queries from these people about the company and the project for which the funds are being raised. Deciding the pattern of advertising. Deciding the branches where application money should be collected. Deciding the dates of opening and closing of the issue. Obtaining the daily report of application money collected at various branches. Obtaining subscription to the issue. After the close of the issue, obtaining consent of stock exchange for deciding basis of allotment etc. Corporate advisory services relating to the issue In India, the pricing of issues is now freely decided by the company, with valuable inputs from the merchant bankers, who have to sell the issue at the decided price. The pricing of the issue especially in a public issue is very important. The pricing has to be such, that the investors will be attracted to invest in the issue at that price, at the same time the company should get the premium that it is looking for. After all, the premium can play a very important role in deciding the companys capital structure, as larger the premium lesser will be the requirement for borrowed funds. The promoter also needs to decide whether to go in for a fresh issue or to go for a rights issue. However this will depend mainly on the quantum of funds that the company needs to raise. The success of the issue is dependent on

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the selection of the right type of security. In this matter, the expert advice of merchant bankers is of immense importance. In the issue management the merchant bankers have to coordinate with the various agencies to the issue. The success of the issue depends on the cooperation of all the agencies involved. Companies are free to appoint one or more agencies as Managers to an issue. SEBI guidelines insist that all issues should be managed by at least one authorized merchant banker, functioning either as the sole or lead manager to the issue. Ordinarily, not more than two merchant bankers should be associated as lead managers, advisors and consultants to a public issue. In issues of over Rs. 100 crores, the number could be up to a maximum of four. The responsibilities of merchant bankers in management of public issues are: We have seen that many unscrupulous promoters have raised money from the market. This has hurt the investors a lot and has also made investors nervous about stock market investments. This in turn affects the functioning of stock markets both the primary and the secondary markets. It is therefore necessary that merchant bankers are satisfied with the viability of the project, which they can then sell to the investors with confidence. It is therefore important for the reputation of merchant bankers, to only associate themselves with good issues. The merchant banker should act as the custodians of the investors money and this puts a lot of responsibility on them. To discharge this function the merchant bankers have to exercise due diligence independent by verifying
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the contents of the prospectus and the reasonableness of the views expressed therein. It is the responsibility of the merchant bankers to get the securities listed on all the stock exchanges mentioned in the prospectus. With the introduction of Demat accounts the complaints about allotment have surely gone down. It is the responsibility of the merchant bankers to ensure timely refunds and allotment of securities to the investors. The merchant bankers have to certify that they verified everything and that they believe it to be true. This assures the investing public about the safety of their investment. The precautions by the merchant bankers would ensure that all the fake companies, whose intention is to defraud the investors, dont have access to the market. UNDERWRITING Underwriting is like insurance against the failure of an issue. It is a guarantee to the issuing company, that the money that it requires for its project will definitely be raised. It means that even if the issue is not fully subscribed to by the public, the underwriters will make up the short fall. Underwriting involves the underwriter agreeing to subscribe directly, or to procure subscription for the unsubscribe portion of the issue, which is not taken up. For the risk that the underwriter takes, he is paid commission. Underwriting is a device that ensures the success of new issues. New companies entering the markets for the first time, always face number of problems in raising funds from the market. One of the biggest problems of
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course that the company is not well known to the investors and many of them will be unwilling to invest their money in such ventures. Many a times even existing companies may find it difficult to raise money, due to some reasons. Issuing companies therefore approach different underwriters with a request to underwrite the issue. Underwriters on their part need to satisfy themselves about the viability of the project and also about the integrity of the promoters of the company. It must be noted that when an issue is under subscribed, the underwriters will pick the shares and only if the project is good enough, then in future they can sell the shares in the market and get not only their money back, but can also make a decent profit as well. It is obligatory for the merchant bankers to accept a minimum 5% underwriting in the issue subject to a ceiling. By taking underwriting in an issue managed by them, they show their full commitment to the issue that they are managing. The SEBI has made it mandatory for issuing companies to underwrite all issues. MERGERS AND ACQUISITIONS

Mergers and Acquisitions (M&A) and corporate restructuring are a big part of the corporate finance world. Every day, Wall Street investment bankers

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arrange M&A transactions, which bring separate companies together to form larger ones. When they're not creating big companies from smaller ones, corporate finance deals do the reverse and break up companies through spinoffs, carve-outs or tracking stocks. Role of Merchant Banker Mergers & Acquisitions is an area where Merchant Bankers act as intermediaries in negotiating on one with corporate interested in hiving of divisions/companies which are not with in the purview of the long-term business strategy of the group/company, and on the other hand for Corporate interested in non organic growth by acquiring companies/units for reason strategic or non strategic in nature. Mergers can be beneficial for both the entities, as due to competition the companies unable to survive or prosper on their own may like to merge and face competition and achieve growth targets. Takeovers may be hostile or friendly in nature, hostile takeovers are without the consent of the company and company being takeover may work out an anti takeover strategy to counter the threat. Merchant Bankers provide following services in M&A: Identification of potential takeover targets. Financial & Technical appraisal of the merger/takeover proposal. Negotiation with the parties for arriving at the suitable price or exchange ratio. Assistance in obtaining necessary approval & addressing procedural & legal issues.

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 PROJECT COUNSELLING

Introduction Project counseling is very important and lucrative merchant banking services which only very few merchant bankers having advantages of knowledge, skills and experience over others are able to render satisfactorily. The corporate seek advice in respect of identification of profitable investment opportunities in the related business areas (like forward/backward integration) or as part of diversification process. The merchant bankers carry out detailed studies on product demand patterns, cost structures, etc., to enable the corporate in preparation of feasibility study. It may involve arrangement of a foreign collaboration, advice on technical parameters and also legal issues. Scope of services Project counseling services are needed by industrial entrepreneurs in India in the following areas: Preparation of project report Deciding upon the financing pattern to finance the cost of the project. Aspects of project appraisal with financial institutions/banks.

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Project report Project report consists of technical process, location, management profile, means of financing, reports on market surveys and market explorations. Merchant bankers advise the clients on project preparation. Merchant bankers, on behalf of their clients, engage technical consultants specialized in the specific area, and marketing experts to prepare technical feasibility report and market survey reports. Merchant bankers maintain the list of such experts approves by financial institutions and assign the work to these experts. Project report purpose Project report about the proposed activity is prepared to obtain government approvals particularly in the following areas: Grant of industrial license to undertake specified industrial activity. Foreign investment and technology tie-up. Grant import license for importing raw material, plant, machinery and equipments. Grant of foreign exchange allocation for import of capital goods or raw materials, etc. Grant of subsidies and other concessions from the government at center or state levels or from government sponsored agencies, etc. LOAN SYNDICATION Loan syndication refers to assistance rendered by merchant banks to get mainly term loans for projects. Such loans may be obtained from a single development finance institution or a syndicate or consortium as in the case
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of large term loans. Merchant banks can also help corporate clients to raise syndicated loans from commercial banks. Scope of service Once the client company has decided about the project proposed to be undertaken, the next step is looking for the sources where from funds could be procured to implement the project. The responsibility of locating the sources of finance, approaching these sources by putting in requisite prescribed applications and complying with all the formalities involved in the sanction and disbursal of loan rests with the merchant bankers who provide the service of loan/credit syndication. Loan syndication in the case of domestic borrowing is undertaken with the institutional lenders and the banks. Amongst institutional lenders the following institutions are the main suppliers of the long and medium term funds with which the merchant bankers contact, liaison and arrange loans working for and on behalf of their clients. 1. All India financial institutions i. ii. iii. Industrial Finance Corporation of India (IFCI) Industrial Development Bank of India (IDBI) Industrial Credit & Investment Corporation of India Ltd (ICICI)

2. State level financial bodies i. ii. iii. State Financial Corporations (SFCs) State Industrial Development Corporations (SIDCs) State Industrial & Investment Corporations (SIICs)

3. All India level investment institutions i. Life Insurance Corporation of India (LIC)

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ii. iii.

Unit Trust of India (UTI) General Insurance Corporation of India (GIC) & its subsidiary companies.

4. Commercial banks: Commercial banks join in consortium loan being provided by the above institutions. 5. Mutual Funds & Venture Capital Funds: these funds generally invest in equity but mutual funds contribute to the issues of

Debentures/Bonds on private placement basis as well as subscribe to public issues.

RESTRUCTURING SERVICES Merchant bankers assist the management of the client company to successfully restructure various activities, which include mergers and acquisitions, divestitures, management buyouts, joint venture among others. To help companies achieve the objectives of these restructuring strategies, the merchant banker participates in different activities at various stages which include understanding the objectives behind the strategy (objectives could be either to obtain financial, marketing, or production benefits), and help in searching for the right partner in the strategic decision and financial valuation of the proposal.

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 CAPITAL ASSISTANCE

In providing financial assistance, merchant banks offer a full understanding of all facets of the capital markets. This includes all types of debt and equity financing available from both the domestic and international markets. A merchant banker, cognizant of capital costs, looks for the best sources of capital, including its restrictions and dollar limitations. It should be understood that interest rates are not the only definition of capital costs. Restrictions on availability, prepayment terms, and operating effectiveness can often outweigh what might appear to be inexpensive capital with low interest rates. Too often, capital includes costs, which force an entrepreneur or a business to undertake undesirable actions. In the shortrun, some actions might be necessary, but often in the long run are detrimental. The traditional merchant banker understands these capital limitations and can structure a transaction, which is beneficial to all sides of the table -- not just the capital source. He also knows how to substitute one type of capital for another, sometimes utilizing internal sources from asset repositioning or cash creation from improvements in working capital. He understands fully the risk versus return elements necessary to complete the capital procurement process.
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 CORPORATE ADVISORY SERVICES

Merchant bankers offer customised solutions to solve the financial problems of their clients. Advice is sought in areas of financial structuring. Merchant bankers study the working capital practices that exist within the company and suggest alternative policies. They also advise the company on rehabilitation and turnaround strategies, which would help companies to recover from their current position. They also provide advice on appropriate risk management strategies like hedging strategies. FACTORING SERVICE Factoring involves the outright sale of account receivable. By such sale a client (the exporter or manufacturer) transfers his/her ownership of the accounts to a factor (an organization, firm). The factor buys all the clients outstanding invoices and takes over all the subsequent dealings with the buyer/importer/customer. It is short-term debt financing. Here three parties are involved
The factoring organization /firms The manufacturer/exporter/seller The importer/customer/buyer

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Role of Merchant Banker in Factoring The merchant banker may act as factor organization with a view to earning a great amount of commission. The factor provides the following services: (a) Financing (b) Advisory services if necessary (c) Collection of bills/Account Receivable against sales proceeds. (d) Maintenance of sales ledger (e) Requires RBI approvals (f) Covering losses if there are any
ASSET SECURITIZATION

It is a process through which some inactive assets (mortgage assets) are converted into cash/active assets. It is long-term debt financing. Here assets are converted into long-term bonds. The whole process is done by the Special Purpose Vehicle (SPV). In this approach, the merchant banker for issuance of security bonds against the assets with a matching of time and terms between mortgage property and security bonds. Here the selection of asset is generally considered on the basis of the following: (i) Quality of assets (ii) Certainty of repayment (iii) Good ranking from the credit rating agency.
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The process of asset securitization takes place in the following firms: Originating Institutions/Firm Special Purpose Vehicle (SPV) Merchant Banker (MB) FOREX SERVICES

This aspect of banking is becoming increasingly important as the forex flow in the country is increasing and the international markets are funding the operations of the corporate in India. The success of any business is measured by the fund management; this makes treasury management as a very critical finance function. Management of treasury profit center requires a wide variety of knowledge in the area of global money markets and financial instruments such as deposit certificates, treasury bills, forecasting, source evaluation and cost of domestic and foreign currency funds. Treasury and risk management ensures cost effectiveness in planning strategies in this era of deregulation.

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Role of merchant banker in Forex function

The currency values, interest rates, share index and commodities affect the financial derivatives like futures, swaps and other tools of risk management. Corporates therefore employ well-trained professionals to manage treasury and forex functions so that they can ensure competent management. Thus, this service is provided to Corporates through merchant bankers. Merchant bankers assess various markets to advice Corporates or other banks that needs currency. Merchant bankers constantly update about the policies of the regulatory bodies, monitors the current prices, makes predictions based on the analysis of trends etc
HIRE PURCHASE SERVICE

Hire-purchase involves a system under which term loans for purchases of goods and services are advanced to be liquidated in stages through a contractual obligation. The goods whose purchases are thus financed may be consumer goods or producer goods or they may be simply services such as air travel. Hire-purchase credit may be provided by the seller himself or by any financial institution. However, unlike in other countries, the emphasis in India is on the provision of instalment credit for productive goods and services rather than for purely consumer goods. Suppliers of hire-purchase finance include retail and wholesale traders, commercial banks.

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Role of Merchant Banker Merchant Banker undertakes the activity of financing for hire-purchase activities. The merchant banker looks more to the credit-worthiness and business morality of the buyer than the value of security.

LEASE FINANCE COMPANIES Lease finance companies provide finance to acquire the use of assets for a stipulated period of time without owning them. The user of the asset is known as the lessee, and the owner of the asset is known as the Lessor. Leasing is medium-term arrangement for finance. Role of Merchant Banker Merchant Bankers helps in assessing the credit risk of industrial borrowers. The merchant bankers provide help in evaluating lease proposals. He analyse the merits and demerits of lease finance with reference to a given proposal and leave it to their clients to decide on the appropriate source and type of finance, thus enlarging their range of choices and the variety of services available to them. VENTURE CAPITAL Venture capital is money provided by professionals who invest alongside management in young, rapidly growing companies that have the potential to develop into significant economic contributors. Venture capital is an important source of equity for start-up companies. Professionally managed

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venture capital firms generally are private partnerships or closely-held corporations funded by private and public pension funds, endowment funds, foundations, corporations, wealthy individuals, foreign investors, and the venture capitalists themselves. Role of Merchant Banker Merchant Bankers assist ventures proposals of technocrats, with high technology, which are new, and high risk. To seek assistance from venture capital funds or companies. They also provide technical, financial & managerial services & help the company to set up a track record. The assistance should mainly be for equity support, through loan support to supplement this may be extended.

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PRACTICAL ILLUSTRATIONS BASED ON SERVICES-CENTRUM ISSUE MANAGEMENT Centrum Broking Pvt. Ltd. - It is the secondary market broking arm of the Group, which offers competitive terms to investors and traders alike. The Company is a member of BSE and National Stock Exchange (NSE) on both cash and derivatives segments. It is also a Depository Participant under Central Depository Services Limited (CDSL) and a Portfolio Manager registered with Securities Exchange Board of India (SEBI). PRE ISSUE Due Diligence Preparation of the Prospectus/Information

Memorandum Arranging Firm Allotments Statutory approvals Liaising with Rating agencies/ Debenture Trustee / Stock Exchange. Press and Broker conferences IPO Funding Printing & Distribution stationery POST ISSUE Finalizing Basis of Allotment Documentation with depositories Credit into investor accounts Listing approvals from the stock exchanges Post issue research support

 PROJECT FINANCE SERVICES The Project Finance, Centrum Group offers the services of Project appraisals, Syndication of term loans and Working Capital limits. In essence, the Group provides 'capital distinguished by knowledge'. Therefore its services cover a wide spectrum: Structuring & Syndication Lease & Hire Purchase Money Markets Structuring of Short Term Finance Solutions Placement of Preference Shares/ Non-Convertible

Debentures Securitisation of Debt

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Project Finance Group (PFG) highlights Volume in excess of Rs.3500 crores successfully syndicated in the current period from July 2003 to June 2004. Chunk of proposals are in the Power sector where we have syndicated loans for thermal as well as hydel projects. Apart from this, Centrum has also done work in Irrigation, Urban Development, Roadways, Hospitality, Entertainment,

Pharmaceuticals, Logistics, Processed Foods, Specialty Chemicals, Renewable Energy, FMCG, Mining Successfully syndicated deals across a variety of banking products like Working Capital, FCNR Loans, Project Loans, Debt Swaps, Short Term and Medium Term Corporate Loans, Unsecured Loans, and Securities Debt. Established excellent relationships across a wide spectrum of Private and Public Sector Banks and FIs like Bank of India, Dena Bank, Union Bank of India, Central Bank of India, UTI Bank, PNB, OBC, UCO Bank, Canara Bank, Indian Overseas Bank, Dhanalaxmi Bank, LIC, State Bank of Indore etc. From a humble beginning, have emerged as one of the largest bigticket loan syndicators in the private sector.

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 DEBT & EQUITY SERVICES

This encompasses both Debt and Equity solutions provided by Centrum

Broking Ltd. Debt Primary Debt Placement Secondary Debt Services The Centrum Group's services are a form of repackaging. Investments or fund raising programs may be encumbered by factors like tax structures, regulatory constraints, credit ratings, yield mismatch. The Centrum Group offers services to convert these hurdles into opportunities by structuring the underlying investment in innovative ways that fits the requirement of our clients. Equity Private Equity and Venture Capital Syndications Initial Public Offers (IPOs)
Advisory Services Share Buybacks

Mergers, Acquisitions & Takeovers Identifying and structuring synergistic amalgamations; Offers pricing and execution

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MERCHANT BANKING: INDIAN SCENARIO Merchant banking is an area that we need to build and grow in the years to come. As India forms part of the global village, it becomes increasingly necessary for us to look at this business in a more holistic manner. Obviously, international players with strong domestic partners such as DSP Merrill Lynch, JM Morgan Stanley, Kotak Mahindra Capital, together with experienced organisations like Enam and institutional backed investment bankers such as ICICI Securities, etc., are the ones who have expertise, muscle, and placement power in a greater measure than relatively new entrants. The red hot economy is the obvious starting point. India is likely to end the year with GDP growth in excess of 7 percent. Companies and private equity investors are sitting on large piles of cash. In 2004, deal activity was largely restricted to the IT and Telecom sectors. Thus, while there is a steady flow of deals, there is now a shortage of talent to do the job. Merchant Banking activity was formally initiated into the Indian capital markets when Grindlays Bank received the license from Reserve Bank in 1967. Grindlays which started with management of capital issues, recognized the needs of emerging class of entrepreneurs for diverse financial services ranging from production planning and system design to market research. Apart from meeting specially, the needs of small-scale units it
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provided management constancy services to large and medium sized companies. Following Grindlays Bank, Citi Bank set-up its Merchant Banking division in 1970. The division took up the task of assisting new entrepreneur and existing units in the evaluation of new projects and raising funds through borrowing and issue of equity. Management consultant services were also offered. Consequent to the recommendations of Banking Commission in1972, that Indian bank should start Merchant Banking Division in 1972. In the initial years the SBIs objective was to render corporate advice and assistance to small and medium entrepreneurs. The economic reforms initiated by the Government since July 1991 in the fields of industry, trade and financial sector have paved the way for rapid development of the economy. Several projects have been conceived since then and almost all the major groups in the country have announced their intentions to set-up mega projects in infrastructure sector envisaging investment of thousands of crores. With several large projects set-up and many more on the drawing board, the demand for a complete range of Merchant Banking services encompassing project advisory services, issue management and financial advisory services for corporate sector has increased considerably. This has led to a sharp growth in the Merchant Banking business in the last 2 years.

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MERCHANT BANKING: INTERNATIONAL SCENARIO

The Merchant Banking scenario in developed countries like USA and UK are different from Indian Merchant Banking activities. The Merchant banker is also called as Investment Bankers. A brief outline of Merchant Banking in USA and UK has shown in the following paragraphs. Merchant Banks in UK In United Kingdom, Merchant Banks came on the scene in the late eighteenth century and early nineteenth century. Industrial revolution made England into a powerful trading nation. Rich merchant houses that made their fortunes in a colonial trade diversified into banking. Their principle activity started with the acceptance of commercial bills pertaining to domestic as well as international trade. The acceptance of the trade bills and their discounting gave rise to acceptance houses, discount houses, and issue houses. Merchant Bankers initially included acceptance houses, discount houses and issue houses. A Merchant Banker was primarily a merchant rather a banker but his customers entrusted him with funds. Merchant Banks in UK:

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a) Finance foreign trade, b) Issue capital, c) Manage individual funds, d) Undertake foreign security business, and e) Foreign loan business.

They also used to finance sovereign government through grant of long-term loans. Since the end of Second World War commercial banks in Western Europe have been offering multiple services including Merchant Banking services to their individual and corporate clients. British have banks set-up division or subsidiaries to offer their customers Merchant Banking services. Merchant Banking in USA Merchant banks make the primary markets in USA, arrange mergers and acquisitions, undertake global, custody, proprietary trading and market making, niche business, fund management and advisory services to governments and firms. The increased regulation and control of domestic operations gave a fillip to large US banks to undertake Merchant Banking functions in international capital markets. The US investments Banks have extended their operations to the international level. They are largely responsible for the development of the Euro-dollar market in the securities and globalisation of capital markets. They have a prominent presence in London and other European financial centers. Merchant Banks have today a strong parent, a strong balance sheet and a strong international network to play a global role.

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RECENT TRENDS

Merger & Acquisition transaction -- Merchant banks' services not taxable The Finance Ministry has excluded services provided by merchant banks and other agencies in a merger and acquisition (M&A) transaction from the scope of taxable services provided by a `management consultant.' The rationale accorded is that the role of such agencies is limited to compliance of any statute or regulation -- such as takeover regulations of the Securities and Exchange Board of India (SEBI) -- and not governed by any contractual relationship with the advisee company. Merchant banks do not provide any consultancy on an M&A transaction, but merely verify and submit a report to the authorities concerned, according to the Central Board for Excise and Customs (CBEC). Barring the services of merchant banks, any service rendered in relation to an M&A transaction will be covered under the scope of taxable service provided by the management consultant and will be liable to service tax, the Board has ruled. Industry representatives held that services provided in respect of M&A cannot be construed as a management consultancy service, but were in the nature of financial advisory service. They further opined that acquisition or divesting of shareholdings was a purely financial transaction and distinct from the advice or service provided
prior to taking a decision to divest, merge or acquire an organisation.

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RAPID RISE IN VALUATION IMPEDES M&As The surging stock market is creating an unusual problem: Mergers & Acquisitions (M&A) deals are becoming tougher to close as the two parties to a deal keep looking over their shoulders to figure out how the market is pricing their shares. The key to any deal is valuation. And when the market booms, agreed valuations for proposed M&A are thrown into disarray. In this scenario, M&A rankings will change depending on who has been able to close deals faster. In the first nine months of 2005, (ended September), Kotak Mahindra/Goldman Sachs topped the heap by executing 13 deals valued at $2.53 billion (about 11,000 crore). This bank was ranked No. 4 last year in the process, the investment bank has increased its share by 420 basis points from 13.1% for last year to 17.3% now. Morgan Stanley retained its No 2 position, having sewn up 11 deals worth $2.23 billion so far. Its market share is up 50 basis points to 15.2%. Stock prices have gone up because of profitability. Indian companies are also looking at overseas opportunities. M&A are also getting hit because more & more companies are opting for the global depository receipts/foreign currency convertible bonds issue to sate their capital needs. The analyst sees pharmaceuticals, information technology & engineering specifically auto ancillaries as the areas where an increasing amount of M&As will take place in India. Rapid valuation changes do cause some delays, but in the end, the deals go through if there are benefits to both parties. Infrastructure related business, airlines and the auto component sectors as being prime for acquisitions. The availability of foreign capital has also nullified the need to gain financial leverage through M&As.
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PLAYERS IN MERCHANT BANKING ENAM ENAM was founded in1984 to provide knowledge-driven financial services at the time when Indian economy investors faced a bewildering array of options. ENAM is the one of the largest underwriters in India. ENAM offers promising & exciting companies the opportunity of assessing the public market equity finances. ENAMs long-term association with capital markets & primary markets has provided it with deep insights of the functioning of Indian financial institutions. The merchant banking services provided by ENAM are: Equity debt/syndication: Raising capital through a private placement of a companys securities is an effective & timely offering to a public offering. ENAM represents the clients in the private placement of debt and equity with institutional & high net worth investors. Corporate Restructuring: - ENAM provides client with strategic and practical solutions to financial challenges. Their restructuring services includes Mergers & Acquisitions, Takeovers, Debt restructuring, Buyers services etc. ENAM also provide the seed stage services, value creation services and IPOs advisory services which are represented below:

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ICICI SECURITIES

ICICI Securities Limited is a leader across the spectrum of Merchant Banking. We are experienced in every aspect of the business from domestic and international capital markets advisory, to M&A advisory, Private Equity syndication, Restructuring and infrastructure advisory. Our investment banking team, based across key cities in India and New York, London, and Singapore consists of professionals with expertise across a range of industries. ICICI SECURITIES provide following services:

Mergers and Acquisitions: - ICICI Securities Limited is amongst the first Indian investment Banks to form a dedicated M&A practice and continues to be a leader by providing innovative and unique solutions to achieve varied objectives of the client. They offer a full range of advisory services, which include joint ventures, mergers, acquisitions, and divestitures. Equity Capital Markets: - ICICI Securities Limited is at the forefront of capital markets advisory having been involved in most major book building and fixed price offerings over the last decade. It is amongst the leading underwriters of Indian equity and equity-linked offerings. Infrastructure Advisory: - ICICI Securities Limited has a dedicated infrastructure vertical focused on assisting clients in identifying and capitalising on the opportunities thrown up by the all pervasive boom in the Indian infrastructure sector.

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Dealing with Bulls and Bears: - ICICI Securities Limited assists global institutional investors to make the right decisions through insightful research coverage and a client focused Sales and Dealing team. The equity group leverages research and distribution reach to domestic and foreign institutional investors in case of public offerings. Thus the quality of analysis and client servicing standards, are a testimony to the quality of ICICI SECURITIES team.

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KOTAK SECURITIES LIMITED

Kotak Securities Limited, a subsidiary of Kotak Mahindra Bank, is the stock broking and distribution arm of the Kotak Mahindra Group. The company was set up in 1994. Kotak Securities is a corporate member of both The Bombay Stock Exchange and The National Stock Exchange of India Limited. Its operations include stock broking and distribution of various financial products - including private and secondary placement of debt and equity and mutual funds. Currently, Kotak Securities is one of the largest broking houses in India with wide geographical reach. The company has four main areas of business: Kotak Institutional Equities: - Kotak Institutional Equities, among the top institutional brokers in India. It mainly covers secondary market broking and the marketing of equity offerings, including IPOs, to domestic and foreign institutional investors.
Structured Finance (Project Finance & Advisory Business): -

KMCC has developed expertise in various vertical segments in the infrastructure sector including power, oil, gas, ports, automobiles, steel & metals and hotels, by offering structured finance solutions. Some of the transactions executed by this team include: Advisor to Ford on financial closure for its Car project in India. Advisor to one of the largest LNG projects on the Western coast of India. Financial advisors and loan syndications to British Gas and GAIL.

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Mergers & Acquisitions: -In the area of Mergers & Acquisitions, we provide our clients expertise and a comprehensive set of services that help them achieve their strategic and financial objectives. Our spectrum of services include: Divestments Spin-Offs / Restructuring & Joint Ventures / Strategic Alliances

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CITIGROUP Citigroup Corporate and Investment Banking achieve the extraordinary for our clients around the world. No financial institution is more committed to advancing the goals of its clientsour diverse and talented staff in more than 100 countries advises companies, governments and institutions on the best ways to realize their strategic objectives. We create solutions for and provide the broadest possible capital and market access to thousands of issuer and investor clients. And no institution better executes the increasingly complex payment and cash management solutions required in today's global economy. The features Citigroup are as follows: Over the years, Citigroup has established a track record of outstanding business milestones such as Cash Management, pioneered by Citigroup in 1986 and utilized by over 900 Corporates with throughputs totaling around $ 35 billion (8% of India's GDP). It is India's largest foreign bank in the FX (foreign exchange) market with a 14 per cent market share. As the leading custodian, Citibank has over $22 billion of custody assets under management.

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DSP MERRILL LYNCH LTD DSP Merrill Lynch Limited (DSPML), among India's leading investment banking and brokerage company, is a culmination of a long standing relationship between DSP Financial Consultants Ltd., and Merrill Lynch & Co., the leading international capital raising, financial management and advisory company. DSPML is a full service investment bank and broking company with leadership position in M&A, Capital Raising, Securities Research, Equity & Debt Brokering, and Investment Advisory services. Euro money Magazine has ranked DSPML as the "Best Domestic Securities firm in India" for the last four consecutive years. This Transaction heralds DSPML as a key player in the private equity market. The service features of DSPML are as follows: DSPML has consistently been rated as one of India's leaders in origination, distribution, and trading of equity and debt securities. DSPML has consistently brought reputable issues to the capital markets. A diverse client base made up of India's most prestigious private and public sector corporations and multinational corporations have rendered DSPML a commanding presence in the Indian capital market. Through direct market's group, DSPML offers investors access to every major initial or subsequent public offering.

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DSP Merrill Lynch is the leading underwriter of Indian equity and equity-linked offerings across domestic and international markets. By leveraging their extensive knowledge of local markets and global resources, they have delivered innovative and customized solutions to their clients.

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UPFC (Uttar Pradesh Financial Corporation) Introduction to Scheme for merchant banking & financial services Decades ago UPFC has taken a humble step for the industrial development of U.P. by providing term loan assistance to small & medium scale units. Since then it has acquired a matured professional approach in Industrial Financing, several small-scale units nurtured by UPFC has groomed into big enterprises. In order to meet the challenges of liberalized policy of the Government & Changed economic Scenario, UPFC has started Merchant Banking & other financial Services to serve its valued clients. UPFC, a category-I Merchant Banker with unmatched expertise in project appraisal and term lending offers a whole gamut of Merchant Banking Services. 1. Issue management: UPFC provides expert services to manage public issues of the companies successfully; it has already managed Public Issues as a lead Manager with great success. 2. Underwriting: In order to provide a protective umbrella to the public issues of its clients, UPFC also underwrites the issue. 3. Subscription to equity share: UPFC subscribes to the equity shares reserved under FI quota, to enable the company to market the public issue effectively. 4. Advisory services: UPFC, with its long experience, advises its clients for various advisory services such as capital Structuring, loan syndication etc.

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5. Project certification: UPFC also certifies the projects going to capital markets for raising funds. This is a specialized activity of the Corporation. 6. Other financial services: As a part of its commitment to provide professionalized financial services to its clients, UPFC also offers Bill Discounting, Equipment Leasing & Hire Purchase Services, Shortterm loan, Brand Equity loan, etc to meet diversified requirements of it's clients

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JM Morgan Stanley Investment Banking focuses on capital raising, mergers, acquisitions, restructuring and financial advisory and private equity for Indian corporates in the international and domestic capital markets. Through innovation and value-added services, the firm has contributed immensely to the overall development of the capital market and mergers and acquisitions in India. It has the merchant banking and underwriting licenses from the Indian securities market regulator, the Securities and Exchange Board of India. Some of the recent transactions of JM Morgan Stanley: US$ 20MM fund raising for Nipuna Services (a BPO subsidiary of Satyam Computer Services) Rs.3,219 MM preferential allotment of equity shares/ warrants in Bajaj Auto Finance Limited to financial investors and the promoter, Bajaj Auto Limited. The services of JM Morgan Stanley are: Has a dedicated group that regularly interacts with over 40 financial investors in India as well as overseas. Offers research-based investment advisory and equity broking services to corporates, high net-worth individuals and retail investors across a wide range of financial products. Known for lead managing some of the most complex and innovative and large equity and debt offerings in India and abroad by the Indian issuers. A robust deal-flow across sectors has allowed them to build significant traction with the financial investors. This helps in raising private equity capital for the companies.
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MERCHANT BANKING-FUTURE DEVELOPMENT Time and again the Merchant banking Industry in India witnessed, experienced and underwent significant changes. The very purpose for which these firms commenced their services should be taken care of and they should mould their policy decision and activities to move in tune with the main objectives of Investors protection and to create healthy environment in capital markets. No doubt, Merchant Banking firms are subject to a host of control measures, regulations and rules framed and guided by SEBI. To some extent, frequent changes and /or amendments to policies and control measures, though needed for smooth working of the securities Industry, proves to be detrimental to the very existence of the Merchant Banking system in the country. The SEBIs Act 1992 confers power upon SEBI to supervise and control the affairs of the Merchant Banking firms in India. It exercises control over the all activities of the Merchant Banking firms through different measures. Assessment of the Merchant Banking firms performance is beset with many difficulties on account of the diverse commercial objectives that influence their performance. Notification of Merchant Banking Regulations and amendments to it from time to time by SEBI brought the Merchant Banking Industry to anew dimension. Various studies had been undertaken in India for evaluating the performance of Merchant Banking firms and the implications of these on securities industry. Not a single study has emerged so far, pertaining to the evaluation of Merchant Banking firms and in-depth study on their activities as well as operational and financial performance in the light of changing regulatory environment.
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In recent past, the small investor has turned his back on the primary capital market. Issue after issue as failed to capture his imagination, rekindle his enthusiasm, and reinforce his faith. He has lost all hopes of appreciation of his investment. And this when all these years millions have thought capital market, ate capital market and dreamt capital market. It needed an extraordinary effort and skill to drive the small investor away! High premiums, false premiums and grey market operations. The professed protector of his interests first laid down the dictum of proportionate allotment, then of minimum subscription, all working against his interests. This would make an observant student of the stock market infer that there is some game plan afoot to dethrone the small investor from his prominence; he was believed to be the king. In the primary sector, he enjoyed tremendous power as he took his own investment decision. With the coming to SEBI, an organisation that was ostensibly brought into existence to guard the interest of the small investor, hopes ran high that the small investor would now have a safe playing field. But these hopes were soon belied. Far from guarding the interests of the investing public, SEBI embarked on a course of action, which has positively hurt them. The latest fiat of EBI bans corporate advertising after the receipt of acknowledgement card by a company wanting to go public. SEBIs this action has caused the closure of an information window. Now 50 million potential investors are deprived of official and authentic information given by the Issuer. It is hard to understand reasons for this drastic and totally uncalled for action. While there has been no official explanation for this fiat, there is reason to believe

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that it may be based on a wrong perception of the role for corporate advertising. All this has been done perhaps because the corporate and intermediaries is to follow the practices of Western capital markets here, oblivious of the fact that our capital markets are altogether different in structure, in systems and in the number of participants. A vibrant capital market has to be knowledge driven and not regulator driven; it has to be in tune with the spirit of a liberal and progressive economy. Freedom of commercial expression could be exploited by some to serve their own ends, just a s freedom of speech and expression could be abused but this has not led our Government to put arbitrary restrictions on our freedom. Merchant Bankers have reason to believe they will be handicapped without the marketing support. But the worst sufferer would be the investor, especially the small investor it is this class, which forms the backbone of the capital market. As a result of the ban, the small investor would be deprived of the opportunity to study the corporate profile of the Issuer. In the absence of adequate information, they will have to depend on manipulated facts and information fed by unreliable sources. Besides, there are larger issuers arising out of SEBIs action. From the point of view of liberalisation of the economy, SEBI has taken a retrograde step. A market economy flourished through bigger markets, higher sales and lesser profits. To achieve this performance, a company needs an aggressive marketing plan and advertising effort is the main thrust to such a plan. No marketing plan can be worthwhile unless it is backed by an effective
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advertising plan. The ban imposed by SEBI nips the marketing plan in the bud. The Indian primary capital market is basically a retail market. It consists of innumerable investors who take own individual investment decisions. Whatever, the system, it is this market that will bring in the funds. If these markets destabilized, the investors will look for alternative avenues to invest their funds. SEBI in its one of the first documents on SEBI and Investor Protection, Development and Regulation of Securities Market clearly specifies significance of regulating capital market and its future plans for fulfilling the twin objectives viz., Development of capital market and investor protection are explained in introductory paragraphs. It speak out that, The decade of the 1980 witnessed a phenomenal growth and development of the securities market, demonstrated its potential not only to mobilize the savings of the household sector but also to allocate it with some degree of efficiency for industrial development. Several factors contributed to the spectacular growth of the market. The dilution of the holdings of the multinational companies at affordable prices in the latter part of the 1970s had generated considerable interest, which was, carried well into the next decade. Several companies came in the early part of the 1980s and successfully raised large resources from the market especially through debt instruments, which further sustained investor interest. There were several changes in Government policy, which significantly influenced industry and aided the market. India was then entering the phase of liberalization and decontrol which was to accelerate and gather momentum in the 1980s.

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By the end of the decade, the securities market in India came to be firmly integrated with the financial system of the country. With the corporate sector increasingly relying on the securities market for meeting their long-term requirement of funds, the securities market their long-term requirement of funds; the securities market competed on equal terms with the Development Financial Institutions, which were the traditional purveyors of long-term capital. The emergence of the securities markets into the main stream of the financial system of the country was thus one of the major economic processes of the 1980s an inevitable outcome of the maturing process of the financial system. They brought about notable changes in the capital structure of the companies across industries, gave birth to new intermediaries and institutions in the securities market and created a new awareness and interest in investment opportunities in the securities market among investor. In spite market, its quality lagged far behind and there was absence of adequate professionalism and fair competition among the various players in the market. Besides, the regulatory framework then prevailing was fragmented difficult, if not effective.

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CHALLENGES AHEAD Merchant bankers have to tap the opportunities lying ahead with the developing pace of the economy. These opportunities arise in the form of challenges before the merchant bankers to test their skills, expertise and efforts to attune their activities with the program of economic development of the country, adopt new instruments and innovative means of financing to meet the growing financial requirements of the corporate clients. Some of the areas of challenges, which have been explored on the basis of research, are classified as under: Merchant bankers will have to conduct management of capital issues in a different fashion than what is being done at present. If small industries are to be provided the full benefit of their services of corporate counseling, project counseling and loan syndication then besides distributions of their securities to the public and arranging long-term institutional or banking finance for them, it would be necessary for merchant banks to make out-right purchase of capital issues in Toto and to retain the purchased equity of the company till the implementation of the project, commencement of production and profitable working of the company when the issue may be treated as good for marketing to the general public, may be on premium, so as to make capital gains on that. This course of action will benefit the small industries in many ways; firstly, they will have the quick liquidity and secondly, their project will be implemented under the skilled supervision and expert guidance of the merchant bankers. Besides, the investing public will be interested in purchasing the issue at premium, having foreseen the dividend paying capacity of the company.

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If the planned objective of economic decentralization and rapid development of rural economy is to be achieved merchant bankers will have to make expert efforts in the interest of the national economy by mobilizing the savings from the rural sector and creating avenues for its investment in rural areas in industry, trade and commerce in different shapes and different magnitudes encouraging the local people to espouse entrepreneurship in industrial undertakings in higher degree so as to reduce their dependence on land farming to other means of rural avocations. Alternatively, this poses a big challenge for the merchant bankers to manage the surplus money available with the villagers by holding portfolio on their behalf or by channelising it directly to industry in the shape of fixed deposits, etc. Increasing number of sick industries is the ever-growing threat for the industrial economy of the country. Merchant bankers have to find out ways and means for rehabilitating the sick industries and also devise the manner by which the running industry might be saved from going sick. They should so closely associate with the units so as to smell developing weakness in the management of the enterprise and suggest timely action to check any mismanagement leading to sickness of the industrial unit. Management buyout is one of the techniques that have been successfully tried in European countries as well as in USA, to check sickness in industry. This device encourages the executive staff of the company to purchase the shareholdings of the proprietors and promoters and run the factory on professional basis. Venture capital funds contribute substantially in this area of finance.

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The millions of small savers are unable to manage their savings in India in both rural and urban areas. There are mainly the people from the middle class and lower middle class. Merchant bankers must devise ways and means to provide services for portfolio management to these citizens. This may be by taking recourse to encouraging the mutual funds. Public and private sector institutions engaged in trade, commerce and industry have many times surplus funds lying with them awaiting opportunity outside. These funds should be tapped by the merchant bankers from time to time by mobilizing them to deficit areas on profitable return basis playing the interest rate games as is done in SWAP deals in international finance. In the international field, where the public and private enterprises are entering to raise foreign currency resources, Indian counterparts have to depend upon the assistance of foreign merchant bankers. Indian merchant bankers, therefore, will have to sharpen their skills and attain the requisite expertise in the field of international merchant banking. Attention is required to be gathered to the point that the banks and the financial institutions which are running the Merchant Banking Divisions can think in terms of taking up the activity of providing acceptance credit and rediscounting facility to certain number of their clients on experimental basis on the lines of the traditional activity of European merchant bankers. This will help for creation of secondary market for commercial papers as well.

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To tap the latest technology available internationally and procure the transfer of the technology to India, merchant bankers should frequently makeexploring tours to foreign countries, organize meetings and conferences with the Chamber of Commerce and Industry and other commercial, industrial and financial organizations so as to enthuse the foreigners to take interest in investment activity in India. Merchant bankers, therefore, have to take latest information about the economic, social and political environment of our country to foreign countries and apprise the foreigners with the facilities and relaxations in various rules and regulations of the Government and the policy framework available for their benefit in case they choose to invest in India or lend their technological expertise to Indian entrepreneur and/or to collaborate in any other useful manner. The challenges noted above are only indicative of the expected role of merchant bankers and in no way be considered as exhaustive and final. These challenges continue to stand before the merchant bankers to meet the test of time and shall grow in number with the growing requirements of financial services for the corporate sector and the community as a whole.

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CONCLUSION The merchant banker plays a vital role in channelising the financial surplus of the society into productive investment avenues. Hence before selecting a merchant banker, one must decide upon the services for which he is being approached. Selecting the right intermediary who has the necessary skills to meet the requirements of the client will ensure success. It can be said that this project helped me to understand every details about Merchant Banking and in future how its going to get emerged in the Indian economy. Hence, Merchant Banking can be considered as essential financial body in Indian financial system. Market development is predicated on a sound, fair and transparent regulatory framework. To sustain the growth of the market and crystallize the growing awareness and interest into a committed, discerning and growing awareness and interest into a essential to remove the trading malpractice and structural inadequacies prevailing in the market, and provide the investors an organized, well regulated market place in future.

BIBILOGRAPHY Websites

www.capitalcorpMerchantbanking.com www.confidentialbanking,com www.sebi.gov.in www.economictimes.com www.en.wikipedia.org www.otcei.com www.upfcindia.com www.books.google.co.in

Books
Merchant Banking In India K.C. Gupta & Joginder Singh

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