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INTRODUCTION OF MERCHANT BANKING

The word merchant bank does not have a fixed definition as this term is used differently in different countries. In United States these are called as Investment Banks and in UK they are called as accepting and issuing houses. The notification of Ministry Of Finance in India defines Merchant Banker as any person who is engaged in the business of issue management either by making arrangements regarding selling, buying, or subscribing to the securities as manager, consultant, adviser in relation to such an issue management. In general the merchant banks are the financial institution which provides financial services, solutions, & advice to corporate houses. Some of the world famous merchant banks are Goldman Sachs, Credit Suisse & Morgan Stanley etc. In India there are many banks which are into the field of merchant banking some of the banks are ICICI, State Bank Of India, Punjab National Bank etc. 1.1. Merchant Banking in India Merchant banking activity was officially commenced into the Indian capital Markets when Grindlays bank received the license from reserve bank in 1967. Grindlays started its operations with management of capital issues, recognized the requirements of upcoming class of Entrepreneurs for diverse financial services ranging from production planning and system design to market research. Apart from this it also provides management consulting services to meet the Requirements of small and medium sector rather than large sector.

Citibank Setup its merchant banking division in Indian in 1970. Indian banks Started banking Services from 1972. State bank of India started the merchant banking division in 1972

After that there were many banks which set up the merchant bank division such as;

ICICI Bank of India Bank of Baroda

Canara Bank Punjab National Bank UCO Bank

The Merchant Bank got more importance in the year 1983 when there was a huge boom in the primary market where the companies were going for new issue. Merchant banking activities are organized and undertaken in several forms. Commercial banks and foreign development finance institutions have organized them through formation divisions, nationalized banks have formed subsidiary companies, share brokers and consultancies constituted themselves into public limited companies or registered themselves as private limited Companies. Some merchant banking companies have entered into collaboration

with merchant bankers of foreign countries abroad with several branches. 1.1.1.Merchant Bankers in India As of now there are 135 Merchant bankers who are registered with SEBI in India. It includes Public Sector, Private Sector and foreign players some of them are Public Sector Merchant Bankers SBI capital markets ltd Punjab national bank Bank of Maharashtra IFCI financial services ltd Karur Vysya bank ltd, State Bank of Bikaner and Jaipur

Private Sector Merchant Bankers ICICI Securities Ltd Axis Bank Ltd (Formerly UTI Bank Ltd.) Bajaj Capital Ltd Tata Capital Markets Ltd ICICI Bank Ltd Reliance Securities Limited
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Kotak Mahindra Capital Company Ltd Yes Bank Ltd.

Foreign Players in Merchant Banking Goldman Sachs (India) Securities Pvt. Ltd. Morgan Stanley India Company Pvt. Ltd Barclays Securities (India) Pvt. Ltd Bank Of America, N.A Deutsche Bank Deutsche Equities India Private Limited Barclays Bank Plc Citigroup Global Markets India Pvt. Ltd. DSP Merrill Lynch Ltd FEDEX Securities Ltd

1.2.Services Provided by Merchant Banks Below mentioned are the major services offered by Merchant Bankers;

Project Counseling Management of debt and equity offerings Issue Management Managers, Consultants or Advisers to the Issue Underwriting of Public Issue Portfolio Management Restructuring strategies Off Shore Finance Non-resident Investment Loan Syndication Corporate Counseling and advisory services Placement and distribution

Project Counseling Project counseling comprises preparation of project reports, deciding upon the financing pattern to finance the cost of the project and appraising the project report with the financial institutions and banks. It also includes filling up of application forms with significant information for obtaining funds from financial institutions and obtaining government approval. Management of Debt and Equity offerings This is the major function of the merchant banker. They assist the companies in raise funds from the market. The main areas of work in this regard include;

Instrument designing Pricing the issue Registration of the offer document Underwriting support Marketing of the issue Allotment and refund Listing on stock exchanges.

Issue Management Management of issue involves marketing of corporate securities like equity shares, preference shares and debentures or bonds by offering them to

public. Merchant banks act as an intermediary to transfer capital from those who own it to those who need it. After taking action as per SEBI guidelines,

the merchant banker organizes a meeting with company representatives and advertising agents to finalize arrangements relating to date of opening and closing of issue, registration of prospectus, launching publicity campaign and fixing date of board meeting to approve and sign prospectus and pass the necessary resolutions. Pricing of issues is done by the companies in consultant with the merchant bankers.

Managers, Consultants or Advisers to the Issue The managers to the issue assist in the drafting of prospectus, application formsand completion of formalities under the Companies Act, appointment of Registrar for dealing with share applications and transfer and listing of shares of the company on the stock exchange. Companies can appoint one or more agencies as managers to the issue. Underwriting of Public Issue Underwriting is a guarantee given by the underwriter that in the occurrence of under subscription, the amount underwritten would be subscribed by him. Banks/Merchant banking institutions cannot underwrite more than 15% of any issue. Portfolio Management Portfolio indicates investment in different types of securities such as shares, debentures or bonds issued by different companies. Portfolio management means maintaining proper combinations of securities in a mode that they give maximum return with minimum risk. Restructuring strategies A merger is a blending of two companies into a single company where one survives and other loses its corporate existence. A takeover is the purchase by one company obtaining controlling interest in the share capital of another existing company. Merchant bankers act as the middlemen in setting negotiation between the two companies. Merchant bankers assist the management of the client company to successfully restructure various activities such as mergers and acquisitions, divestitures, management buyouts, joint venture among others. Off Shore Finance The merchant bankers help their clients in the following areas involving foreign currency.

Long term foreign currency loans Joint Ventures abroad

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Financing exports and imports Foreign collaboration arrangements

Non-resident Investment The services of merchant banker includes investment advisory services to NRI in terms of classification of investment opportunities, selection of securities, investment management, and operational services like purchase and sale of securities. Loan Syndication Loan syndication is an assistance provided by merchant bankers to get mainly term loans for projects. Such loans may be obtained from a single development finance institution or a syndicate or consortium. Merchant bankers help corporate clients to raise syndicated loans from banks and other financial institutions. Corporate Counseling and advisory services Corporate counseling involves the entire field of merchant banking activities such as project counseling, capital restructuring, public issue management, loan syndication, working capital, fixed deposit, lease financing acceptance credit, etc. Merchant bankers also provide customized solutions to their clients financial problems. Apart from this they also explore the refinancing alternatives of the client, and evaluate cheaper sources of funds. Rehabilitation and turnaround management is another area of advice. A merchant banker advises the client on different hedging strategies and suggests the appropriate strategy. Placement and distribution The merchant banker helps in distributing different securities like equity shares, debt instruments, mutual fund products, fixed deposits, insurance products, commercial paper, etc. The distribution network of the merchant banker can be classified as institutional and retail in character. The institutional network consists of mutual funds, foreign institutional investors, private equity funds, pension funds, financial institutions etc. The size of such a network signifies the wholesale reach of the merchant banker. The retail network is purely depends on networking with investors.

2. PROFILE OF BAJAJ CAPITAL

2.1. A Profile

Bajaj capital is a financial services company engaged in the business of Merchant Banking, Resource Mobilisation, Distribution of Financial products, Stock Broking, Money Market Booking, Investment Advisory and Financial Planning. Bajaj Capital is a Securities and Exchange Board of India (SEBI) approved Category I Merchant Banker/Investment Advisor, member of Delhi Stock Exchange and dealer on OTC Exchange of India.

The company was promoted in 1965 by Shri. K K Bajaj with an objective to provide professional guidance to investor on where, when and how to invest and to assist the corporate sector in its resource raising activities. Bajaj capital became the first company to set up Investment Centers al over India for this purpose. Today, Bajaj Capital has 80 officers in over 40 important Indian cities and has a team of around 500 employees nationwide.

Every day Bajaj Capital raises resources for over 1000 top Institutions/corporates for their fixed income and equity Indias largest distributor of financial products like Mutual funds and Insurance.

Bajaj capital services for government institutions/private corporates.

Merchant banking. Resources Mobilisation-Debt and Equity. Distribution of Mutual Funds. Distribution of Insurance.

Bajaj capitals services for individual and institutional investors.

Investment Advisory. Financial Planning.

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Stock broking Money Market Broking.

2.2. Important milestones

History of Indian Capital Market & Role of Bajaj Capital

Bajaj Capital has been there at every step, to contribute to the growth of the Indian Capital Market. Starting in 1965 when we innovated the Companies Fixed Deposit instrument to year 2000 when we are playing an active role in the growth Mutual fund Industry.

We are already gearing up for our next challenge, that is to work closely with private insurance companies for deepening Indias insurance market. 1964 - Bajaj Capital sets up its first Investment Centre in New Delhi to guide individual investors on where, when and how to invest. Indias first Mutual Fund, Unit Trust (UTI) of India is incorporated in the same year.

1965 - Bajaj Capital is incorporated as a company and in the same year innovates a new financial instrument Companies Fixed Deposits. EIL Ltd. (Oberoi Hotels, then known as Associated Hotels of India Ltd.) becomes the first company to raise Fixed Deposits.

1966 - Bajaj Capital expands its product range and includes all UTI schemes and Government saving schemes in addition to Company Fixed Deposits.

1969 - Bajaj Capital manages its first Equity issue (through associate company) of Grauer & Weli India Ltd., right from drafting of prospectus to marketing of issue. 1975 - Bajaj Capital starts offering need based investment advice to investors which would later be christened as Financial Planning in the investment world.

1981 - SAIL becomes the first government company to accept deposits, later followed by IOC, BHEL, BPCL, HPCL & others. Thus opening floodgates for growth of retail investment market in India. Bajaj Capital plays an active role in all the schemes as Principal Brokers. 1986 - Public Sector Undertakings (PSUs) start making Public issues of BondsMTNL, NHPC, IRFC offer a series of Bond Issues. Bajaj Capital tops ranking in most of them.

1987 - Launch of Public Sector Mutual Funds in India led by SBI. Bajaj Capital plays a significant role in fund mobilisation for all these players. 1991 - SBI issues India Development Bonds for NRIs. Bajaj Capital becomes the top mobiliser with collections over US $ 20 million.

1993 - Launch of first Private Sector Mutual Fund- Kothari Pioneer followed by Birla & Alliance in the following years. Bajaj Capital plays an active role and ranked among top mobilisers for all these schemes.

1995 - IDBI & ICICI start issuing their series of Bonds for retail investors. Bajaj Capital is Co-manager in all these offerings & rank constantly among top 5 mobilisers, on all India basis.

1997 - Private sector players lead revival of Mutual Funds in India through Open ended Debt schemes. Bajaj Capital consolidates its position as Indias largest retail Distributor of Mutual funds.

1999 - Bajaj Capital starts marketing Life & General Insurance Products of LIC & GIC (through associate firm) in anticipation of opening up of the Insurance Sector. Bajaj Capital achieves milestone of becoming top Pension Scheme seller in India & launches marketing of Health insurance schemes of GIC. 2000 - As a One stop Financial Supermarket; Bajaj Capital offers all Financial products including the full range of Investment and Insurance products. Bajaj
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Capital offers Full service Merchant Banking including structuring, management & marketing of Capital Issues. Bajaj Capital reinvents Financial Planning in its international sense and equips its full team of Investment Experts as Financial Planners. 2002 - The Company focuses on creating investor awareness for proper Financial Planning and need-based investing. To achieve this goal, the International College of Financial Planning, was set up to impart education in Financial Planning. The graduates of this institute become Certified Financial Planners (CFPs), a coveted professional qualification. 2004 - Bajaj Capital obtains the All India Insurance Broking Licence. Simultaneously, a series of wealth creation seminars are launched all over the country, making Bajaj Capital a household name. 2005 - Bajaj Capital launches its software-based programme aimed at encouraging scientific and holistic investing. 2007 - Bajaj Capital launches Stock Broking and Depository (Demat) Services (in one of its group company). 2008 - Bajaj Capital launches Just Trade, an online Platform for investing in Equities, Mutual Funds, IPO's 2013 - Bajaj Capital sets up its investment advisory company (Trade Name: White Sheep) to enter the space of investment advice.

2.3. Reasons for choosing bajaj capital SEBI licensed Category I Merchant Banker, ARN Holder, DP of NSDL. Nearly 50 years of experience in helping people protect and grow their wealth. We help in need analysis, scheme selection and efficient execution through our proprietary 360 degree financial assessment tool. We offer an incredibly diverse range of financial products and personalized services.
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Over 120 offices in 70 cities across India, to maintain a consistency of relationship and experience.

Strong team of qualified and experienced professionals including CA's, MBA's, MBE's, CFP's, CS's, Legal Experts and others.

Our Group Company(ies) include, Bajaj Capital Insurance Broking Limited, is an IRDA-licensed Composite Insurance Broker; Just Trade Securities Limited, member of NSE and BSE; Bajaj Capital Investment Centre Limited, which facilitates realty solutions.

Serving over 10 lakh clients.

2.3. Mission &vision 1.Mission Statement Bajaj Capital aims to be the most useful, reliable and efficient provider of Financial Services. It is our continuous endeavour to be a trustworthy partner to our clients, helping them protect and grow their wealth, and achieve their life goals. 2.Aim/objective of bajaj capital

To serve our clients with utmost dedication and integrity so that we exceed their expectations and build enduring relationships.

To offer unparalleled quality of service through complete knowledge of products, constant innovation in services and use of the latest technology.

To always give honest and unbiased financial solutions and earn our cilent's everlasting trust.

To serve the community by educating individuals on the merits of investments and in turn help shape a financially responsible citizen.

To create value for all stake holders by ensuring profitable growth. To build an amicable environment that accords respect to every individual and permits their personal growth.

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To utilize the power of teamwork to function as a family and build a seamless organization.

3.Vision Statement Our vision is to be the most preferred Investment Services Company in India by providing clients with informed choices of lasting value, protect and grow wealth for them, to make their tomorrow better than today. 2.4.SWOT analysis SWOT Analysis 1. Diverse range of financial products 2. Known for transparent functioning 3. State of art I. T solutions for customers like just trade Strength 4. Has over 200 branches across states 1. Less penetration in rural areas 2. Lack of awareness due to Low publicity Weakness 3. People with conservative mindsets prefer gold investment 1. Tapping the growing rural market opportunities Opportunity 2. Earning Urban Youth looking for investment options 1. Stringent Economic measures by Government and RBI Threats 2. Entry of foreign finance firms in Indian Market

3. MERCHANT BANKING SERVICE OFFERED BY BAJAJ CAPITAL TO ACCEL FRONTLINE LIMITED

Accel Frontline Limited, an Information Techology services provider specializing in consulting, infrastructure, applications, outsourcing and support services, proposes to enter the capital market on 28th September 2006 with an IPO of 5,635,950 equity
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shares of Rs.10 each through 100% book building process in the price band of Rs 75 to Rs 90 The issue closes on 5th October 2006. The issue would constitute 25.04% of the fully diluted post issue paid-up capital of the company. SBI Capital Markets Ltd. is the BRLM and Bajaj Capital Ltd. is the co-BRLM for the issue and Intime Spectrum Registry Ltd. is the registrar. The equity shares are proposed to be listed on the NSE and BSE. The public issue comprises of a fresh issue of 5,175,667 equity shares by Accel Frontline Ltd. and an offer for sale of 460,283 equity shares by Intel Pacific, INC. 50% of the offer to the Public shall be allocated on a proportionate basis to Qualified Institutional Buyers ("QIBs"), out of which 5% will be available for allocation to mutual funds registered with Securities and Exchange Board of India ("SEBI") and the remaining QIB portion shall be available for allocation to the QIB bidders including mutual funds, subject to valid bids being received at or above the Issue Price. Further, atleast 15% of the offer to the public shall be available for allocation on a proportionate basis to Non-Institutional Bidders and at least 35% of the offer to the public shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid bids being received at or above the Issue Price. Accel

Frontline Ltd. proposes to invest net proceeds of the issue to fund regional and global expansion plans and acquire and invest in strategic businesses. It also has plans to expand and improve its ESS and BPO infrastructure. The company's total income for the year ended 31st March 2006 touched Rs.1,704.29 million and PAT at Rs 97.11million as against total income of Rs. 1,368.18 million and PAT of Rs. 42.16 million for the previous year.

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Book Name of the issue running LTP lead manage r Date of issue No. Of members No. of bidding centres

Issue size (lakh shares) Price range

Issue price ( )

Date of listing

SBI Capital Accel Frontline 44.15 Limited 28/09/ 56.359 5 Rs.75 to Rs. 90 75 30Oct2006

Markets 2006 Ltd., Bajaj Capital Ltd. to 05/10/ 2006 92 50

4. ACCEL FRONTLINE LIMITED

Company Profile Accel Frontline Limited is a leading provider of Integrated IT services to small, medium and large enterprises. The company with an employee strength of about 3000, operates in 7 countries and offer the following services,

Engineering and R&D services Outsourced Product Development (OPD) IT Infrastructure Management (RIMS) Managed Services Enterprise Applications for Banking, Telecom and Manufacturing

Company Overview An ISO 9001: 2000 Certified company with 100+ locations in India, offering IT Infrastructure services. Accel Limited bought back BT's Stake and becomes the majority share holder with 70.44% stake in 2011.
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In 2011, the company Integrated Ushus technologies , a group company engaged embedded software to strengthen its software services portfolio.

In 2012, in a move to consolidate its IT business activities, it decided to merge Accel Frontline Services Limited which is a leading player in Warranty Management Solutions with itself. With this merger which is under implementation, the company will have strong presence as a consolidated IT Services Provider in India. Accel Frontline Limited, formerly known as Accel ICIM Frontline Limited, is an endto-end information technology (IT) services provider. It operates in four business units. The IT Infrastructure Solution unit helps customers to assess, build, deploy and optimize IT infrastructure for mission critical applications. This unit offers technology products and solutions, data/storage consolidation management, enterprise network deployment, disaster recovery/business continuity platform, and IT security consulting and implementation. The IT Infrastructure Management Services unit is engaged in system integration, facilities management, software services and outsourcing. The Enterprise Software Solutions unit specializes in providing enterprise resource planning consulting, application management, custom application development and Web services. The Business Process Outsourcing Services unit provides warranty outsourcing and technical helpdesk services to 10 IT and telecom product companies.

5. PROCEDURES FOR IPO

Issuers Issuers desirous of using NSE's online IPO system are required to comply with the following procedures: 1. Submit a written request as per prescribed format (Letter1, Letter2, BRLM) for usage of electronic facilities and software of NSE 2. Give details regarding Book Running Lead Manager, Co Book Running Lead Managers and Syndicate Members. 3. Pay the requisite charges to NSE.

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Trading Members

The Book Running Lead Manager will give the list of trading members who are eligible to participate in the Book Building process to the Exchange. Members have to submit a one time undertaking to the Exchange. Eligible trading members have to give in theprescribed format details of the user IDs that they would like to use.

Subscribers Subscribers can approach any of the approved trading members for submitting bids in the NEAT IPO system. On line transaction registration slip are generated automatically after entering the bids in to the system which acts as proof of the registration of each Bid option.

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