A RESEARCH REPORT ON

MERCHANT BANKING

SUBMITTED BY
CLIFFTON KINNY, T.Y.B.B.I
ROLL NO: 8251

UNDER THE GUIDANCE OF

PROF. SHIRLEY PILLAI

ST.ANDREWS COLLEGE OF ARTS, COMMERCE,

SCIENCE AND MANAGEMENT

2014-2015

DECLARATION

I, Vijay khimji mahida, Roll No. 90. student of The Sydenham College
of Commerce and Economic, churchgate Mumbai-20, in the Master of c
Commerce part-1. in Banking and Finance (Semester 1) , hereby declare
that I have completed

the research report on the topic of

MERCHANT BANKING in the academic year 2014-2015. The

information submitted is herein is true, to the best of my knowledge.

Stamp of College

Signature of student,

(CLIFFTON KINNY)
(St. Andrews College of Arts,
Commerce, Science and
Management)

Signature of
External Examiner

Signature of Coordinator

CERTIFICATE

I, SHIRLEY PILLAI here by certify that the following student of St.

Andrews College of T.Y.B.Com (Banking & Insurance) Semester (V)
has completed his research report on MERCHANT BANKING for
the academic year 2011-2012. Information submitted is true & original
to the best of my knowledge.

Stamp of college

Signature of Professor

(Professor SHIRLEY PILLAI)

(St. Andrews College of Arts,
Commerce, Science and
Management)

ACKNOWLEDGEMENT

It gives me immense pleasure in acknowledging the valuable & cooperative assistance extended to me by the various individuals who have helped
me successfully in completing this project.
First of all I would like to show my gratitude to my guide and coordinator
Professor SHIRLEY PILLAI for their assistance, encouragement and support on
the topic MERCHANT BANKING.
I would also like to express my gratitude to the employees working in various
banks for helping me in my survey to complete my project.
I would like to thank my parents, friends & colleagues who have supported me
during the making of this research report. The information provided by them has
helped me gain practical understanding of the subject.
I would like to thank the Mumbai University for giving me the opportunity to carry
out the research.
It is the encouragement of all these people that has helped me proceed towards
achieving my goals.

INDEX

SR.N
O
1

TOPIC
EXECUTIVE SUMMARY

PG.N
O
7

RESEARCH METHODOLOGY

INTRODUCTION

11

HISTORY AND MERCHANT BANKING IN INDIA

13

17

ORGANIZATIONAL SETUP OF MERCHANT BANKERS

IN INDIA
REQUIREMENT FOR SETTING UP A MERCHANT BANK
OUTFIT
MAIN OBJECTIVES OF MERCHANT BANKERS

10

SERVICES OF MERCHANT BANKERS

25

11

OBLIGATIONS AND RESPONSIBILITIES

37

12

CODE OF CONDUCT

38

14

PROBLEMS OF MERCHANT BANKING

39

15

CURRENT AFFAIRS

41

16

DIFFERENCE BETWEEN

45

17

CASE STUDIES

49

19
24

17.1

STATE BANK OF INDIA

50

17.2

ICICI BANK LTD.

57

17.3

PUNJAB NATIONAL BANK

61

17.3

UNION BANK OF INDIA

63

17.4

KOTAK MAHINDRA

65

17.5

IDBI BANK

68

18

ANALYSIS AND INTERPRETATION

74

19

CONCLUSION

85

18

BIBLIOGRAPHY

86

EXECUTIVE SUMMARY

Although merchant banking activity was ushered in two decades ago, it was only
in 1992 after the formation of Securities and Exchange Board of India that it is
defined and a set of rules and regulations governing it are in place. It is to be
emphasized that mere rules and regulations are not enough to evolve and nurture
sound traditions and practices in merchant banking and to build a vibrant capital
market. The quality of the projects that are proposed to be financed by capital
issues should be impeccable because it is the primary market that holds the key to
rapid capital formation, growth in industrial production and exports. The securities
sold to the public should represent genuine claims on future cash flows and viable
assets. Merchant bankers in India have a social responsibility to help build an
industrial structure, technologically second to none in the world and financially
viable.
Amidst the swift changes sweeping the financial world, Merchant Banking has
emerged as an indispensable financial advisory package. Merchant banking is a
service-oriented function that transfers capital from those who own to those who
can use it. They try to identify the needs of the investors and corporate sector and
advice entrepreneurs what to do to be successful. New players are entering in this
field day by day. Merchant Banking in India has a great demand over the globe. So
many companies in India are trying their hands in this field. Some companies have
built their strong image and some are still in process to leave their mark in the
international market.

RESEARCH METHODOLOGY
OBJECTIVES:
To develop the ability to study the functioning of Merchant Banking in
India & learn & apply multidisciplinary concepts, tools & techniques to
solve vital problems.
To familiarize with the various services provided by Merchant Bankers.
To compare the public & private sector company engaged in providing
merchant banking services on various grounds.
To find out the growth potential of the Merchant Banking public &
private sector companies.
To understand the rights & duties of a merchant banker and his
contributions to the overall banking system.
HYPOTHESIS
It would help us to develop the ability to study the functioning of Merchant
Banking in India & learn & apply multidisciplinary concepts, tools &
techniques to solve vital problems.
It familiarizes with the various services provided by Merchant Bankers.
They would help us to draw comparison between public & private sector
companies engaged in Merchant Banking activities.
Based upon the comparison, it would help us to determine which sector has
more growth potential & where should one invest his/her funds to maximize
the return at minimum risk.

RESEARCH DESIGN
A research design is an arrangement of conditions for collection and
analysis of data in a manner that aims to combine relevance to the research
purpose with economy ion procedure.
A sample design is a definite plan for obtaining a sample from a given
population.
For carrying out my research work I would follow Exploratory cum
Descriptive research design.
Universe and Survey Population Sampling
All the items under consideration in any field of inquiry constitute a
universe or population.
Here in this study universe and survey population sampling would be all the
public & private sector companies of India engaged in Merchant Banking
operations.
Sample Size
Sample size would be 7-8 public & private sector merchant banking companies.

METHODS OF DATA COLLECTION

Primary Data usually consists of the data that are collected afresh for the
first time and thus is original in character. Primary Data that used in the
study
Information gathered from various banks
Questionnaire
In my Questionnaire, there are 10 Questions

Secondary Data consists of data that is collected from some existing

literature. It has been already analyzed by someone else earlier and is
derived from that source. Secondary Data that used in the study are

Newspapers
Websites
Books
Analysis Pattern
Statistical Tools- graphs & charts
Cross Tabulation Of Data

INTRODUCTION
Financial services are an important component of financial system. The smooth
functioning of financial system depends upon the range of financial services
extended by the providers. Financial services in India have witnessed remarkable
changes in the recent past after the implementation of Liberalization,
privatization and globalization.
Funds are tapped from the capital market to finance various mega industrial
projects. In attracting public savings, merchant bankers play a vital role as
specialized agencies. The resources raising functions remains to be the primary
business of a merchant banker. The primary market holds the key to rapid capital
formation, growth in industrial productions and exports. There has to be
accountability to the end use of funds raised from the market. The increase in the
number of issues and amount raised the number of merchant bankers. Therefore,
the field became highly competitive market where it requires a specialized skill in
handling the situation. The merchant bankers have a social responsibility to in
building an industrial structure in India.
Merchant bankers assist corporate in raising capital. They assist in issue of Shares,
syndicating loans, public issue of debentures. They do not provide funds. They
only assist. They also actively arrange working capital, appraisal, Projects
scrutinize & persuade merger proposals.

The merchant banking has been defined as to what a merchant banker does. A
merchant Banker has been defined by Securities Exchange Board Of India
(Merchant Banker) 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 or acting as manager, consultant, advisor or rendering
corporate advisory services in relation to such issue management

HISTORY OF MERCHANT BANKING

ORIGIN OF MERCHANT BANKING
The origin of merchant banking is to be traced to Italy in late medieval times
and France during the seventeenth and eighteenth centuries. The Italian
merchant bankers introduced into England not only the bill of exchange but
also all the institutions and techniques connected with an organized money
market. Merchant banking consisted initially of merchants who assisted in
financing the transactions of other merchants in addition to their own trade.
In France, during seventeenth and eighteenth centuries a merchant banker (le
merchand Banquer) was not merely a trader but an entrepreneur par
excellence. He invested his accumulated profits in all kinds of promising
activities. He added banking business to his merchant activities and became a
merchant banker.

HISTORY
In late 17th and early 18th century Europe, the largest companies of the world was
merchant adventurers. Supported by wealthy groups of people and a network of
overseas trading posts, the collected large amounts of money to finance trade
across parts of the world. For example, The East India Trading Company secured a
Royal Warrant from England, providing the firm with official rights to lucrative
trading activities in India. This company was the forerunner in developing the
crown jewel of the English Empire. The English colony was started by what we
would today call merchant bankers, because of the firm's involvement in financing,
negotiating, and implementing trade transactions. The colonies of other European

countries were started in the same manner. For example, the Dutch merchant
adventurers were active in what are now Indonesia; the French and Portuguese
acted similarly in their respective colonies. The American colonies also represent
the product of merchant banking, as evidenced by the activities of the famous
Hudson Bay Company. One does not typically look at these countries' economic
development as having been fueled by merchant bank adventurers. However, the
colonies and their progress stem from the business of merchant banks, according to
today's accepted sense of the word. Merchant banks, now so called, are in fact the
original "banks". These were invented in the middle Ages by Italian grain
merchants. As the Lombardy merchants and bankers grew in stature on the back of
the Lombard plains cereal crops many of the displaced Jews who had fled
persecution after 613 entered the trade. They brought with them to the grain trade
ancient practices that had grown to normalcy in the middle and Far East, along the
Silk Road, for the finance of long distance goods trades.
Christians were strictly forbidden the sin of usury. The Jewish newcomers, on the
other hand, could lend to farmers against crops in the field, a high-risk loan at what
would have been considered usurious rates by the Church, but did not bind the
Jews. In this way they could secure the grain sale rights against the eventual
harvest. They then began to advance against the delivery of grain shipped to distant
ports. In both cases they made their profit from the present discount against the
future price. This two-handed trade was time consuming and soon there arose a
class of merchants, who were trading grain debt instead of grain.

MERCHANT BANKING IN INDIA

In India Merchant Banking activities started from the year 1967, following the
footsteps of similar activities in UK & USA. Currently Merchant Banking activity
has mushroomed in the Indian capital market with both public & private sector
settings up their respective merchant Banking divisions. Currently, the total no. of
merchant bankers in India are approx. 1450 with more than 930 registered with
SEBI. The SEBI authorized Merchant Bankers Include merchant Banking divisions
of All India Financial Institutions, nationalized & foreign banks, subsidies of the
commercial banks, private merchant banks engaged in stock broking, underwriting
activities & financial consultancy & investment advisory service firms.
Grindlays Banks 1967
Citi banks 1970
SBI 1973
ICICI - 1974
Merchant banking in India - an overview
Companies raise capital by issuing securities in the market. Merchant bankers act
as intermediaries between the issuers of capital and the ultimate investors who
purchase these securities.
Merchant banking is the financial intermediation that matches the entities that need
capital and those that have capital. It is a function that facilitates the flow of capital
in the market.

Merchant banker registered with SEBI:

Public Sector: - Commercial banks (24), Financial Institutions (6), State

Institutions (4)
Private sector: - International bankers (10), Banks (10), finance & investment (231)

ORGANIZATIONAL SETUP OF MERCHANT BANKERS

IN INDIA

In India a common organizational setup of merchant bankers to operate is in the

form of divisions of Indian and foreign banks and financial institutions, subsidiary
companies established by bankers like SBI, Canara Bank, Punjab National Bank,
Bank of India, etc. Some firms are also organized by financial and technical
consultants and professionals. Securities and Exchange Board of India has divided
the merchant bankers into four categories based on their capital adequacy. Each
category is authorized to perform certain functions. From the point of
organizational setup Indias merchant banking organizations can be categorized
into four groups on the basis of their linkage with parent activity. They are:
(A) Institutional Base
Where merchant banks function as an independent wing or as subsidiary of various
private/Central Governments/State Governments financial institutions. Most of the
financial institutions in India are in public sector and therefore such setup plays a
role on the lines of government priorities and policies.
(B) Banker Base
These merchant bankers function as division/subsidiary of banking organization.
The parent banks are either nationalized commercial bank or the foreign banks
operating in India. These organizations have brought professionalism in merchant
banking sector and they help their parent organization to make a presence in capital
market.

(C) Broker Base

In the recent past there has been an inflow of qualified and professionally skilled
brokers in various stock exchanges of India. These brokers undertake merchant
banking related operations also like providing investment and portfolio
management services.
(D) Private Base
These merchant banking firms are originated in private sector. These organizations
are the outcome of opportunities and scope in merchant banking business and they
are providing skill-oriented specialized services to their clients. Some foreign
merchant bankers are also entering either independently or through some
collaboration with their Indian counterparts. Private sector merchant banking firms
have come up either as the sole proprietorship or public limited companies. Many
of these firms were in existence for quite some times before they added a new
activity in the form of merchant banking services by opening new divisions on the
lines of commercial banks and All India Financial Institutions.

REQUIREMENTS FOR SETTING UP A MERCHANT

BANK OUTFIT

1. Formation of the Business Organization

SEBI act, 1992 does not prescribe any specific form of business organization to
carry on the activities as merchant banker. However, the types of organizations are
listed below:
a.

Sole proprietorship

b.

Partnership firm

c.

Hindu Undivided Family (HUF)

d.

Corporate Enterprises

e.

Co-operative Society
Generally it is preferred that the Merchant Banking outfit be a registered company.
Merchant Banks are generally setup as subsidiary companies of banks (Public or
Private). For example, SBI caps, ICICI Securities etc.
2. Adoption of a viable business plan
All the basic tests required to find out whether the business to be undertaken is
viable or not are also applicable to a Merchant Banking setup. Capital adequacy,
profitability, growth opportunities and current market size are some of the factors
which need to be looked into.

3. Registration of Merchant Bankers

a.

Application for grant of certificate

An application for grant of a certificate needs to be made to SEBI .
The application can be made for any one of the following categories of the
merchant banker namely:-

Category I, that is
(i) To carry on any activity of the issue management, which will inter-alia consist
of preparation of prospectus and other information relating to the issue,
determining financial structure, tie-up of financiers and final allotment and refund
of the subscription; and
(ii) To act as adviser, consultant, manager, underwriter, portfolio manager.

Category II, that is, to act as adviser, consultant, co- manager, underwriter,
portfolio manager;

Category III, that is to act as underwriter, adviser, consultant to an issue;

Category IV, that is to act only as adviser or consultant to an issue.

To carry on the activity as underwriter or portfolio manager a separate certificate of
registration needs to be obtained from SEBI.

a Application to conform to the requirements

The application should conform to all the requirements under the SEBI guidelines,
otherwise it may be rejected.
a Furnishing of information, clarification and personal representation
The Board may require the applicant to furnish further information or clarification
regarding matters relevant to the activity of a merchant banker for the purpose of
disposal of the application. The applicant or its principal officer may appear before
the Board for personal representation.
a Consideration of application
The Board shall take into account for considering the grant of a certificate, all
matters, which are relevant to the activities relating to merchant banker and in
particular the applicant complies with the following requirements, namely:

the applicant shall be a body corporate other than a non- banking financial
company

the merchant banker who has been granted registration by the Reserve Bank
of India to act as a Primary or Satellite dealer may carry on such activity subject to
the condition that it shall not accept or hold public deposit

the applicant has the necessary infrastructure like adequate office space,
equipments, and manpower to effectively discharge his activities

the applicant has in his employment minimum of two persons who have the
experience to conduct the business of the merchant banker

a person directly or indirectly connected with the applicant has not been
granted registration by the Board;

the applicant fulfils the capital adequacy requirement is as follows:

The capital adequacy requirement should not be less than the net worth of the
person making the application for grant of registration. The net worth shall be as
follows:-

Category

Minimum Amount

Category I

Rs. 5, 00, 00, 000

Category II

Rs. 50, 00, 000

Category III

Rs. 20, 00, 000

Category IV

Nil

The applicant, his partner, director or principal officer is not involved in any
litigation connected with the securities market which has an adverse bearing on the
business of the applicant and have not at any time been convicted for any offence
involving moral turpitude or has been found guilty of any economic offence

The applicant has the professional qualification from an institution

recognized by the Government in finance, law or business management

Grant of certificate to the applicant is in the interest of investors.

a Procedure for Registration

The Board on being satisfied that the applicant is eligible shall grant a certificate.
On the grant of a certificate the applicant shall be liable to pay the fees as
prescribed.
a Payment of fees and the consequences of failure to pay fees
Every applicant eligible for grant of a certificate shall pay such fees in such
manner and within the period specified.
Where a merchant banker fails to pay the Annual fees as provided in Schedule II,
the Board may suspend the registration certificate, whereupon the merchant banker
shall cease to carry on any activity as a merchant banker for the period during
which the suspension subsists.
The Merchant Bank can commence business on acquisition of a Certificate of
Registration from the SEBI after completion of the above mentioned formalities.

MAIN OBJECTIVES OF MERCHANT BANKERS

Merchant bankers render their specialized assistance in achieving the main

objectives which are presented below:
I.

To carry on the business of merchant banking, assist in the capital formation,

manage advice, underwrite, provide standby assistance, securities and all
kinds of investments issued, to be issued or guaranteed by any company,
corporation, society, firm, trust person, government, municipality, civil body,
public authority established in India.

II.

The main object of merchant banker is to create secondary market for bills
and discount or re-discount bills and acts as an acceptance house.

III.

Merchant bankers another objective is to set up and provide services for the
venture capital technology funds.

IV.

They also provide services to the finance housing schemes for the
construction of houses and buying of land.

V.

They render the services like foreign exchange dealer, money exchange, and
authorized dealer and to buy and sell foreign exchange in all lawful ways in
compliance with the relevant laws of India.

VI.

They will invest in buying and selling of transfers, hypothecate and deal
with dispose of shares, stocks, debentures, securities and properties of any
other company.

SERVICES OF MERCHANT BANKERS:Business planning stage:

1) Project feasibility study

2) Advice on capital structuring

Equity raising:

3) Preparation of prospectus and

liaison with SEBI
4) Pricing decisions
5) Marketing in the capacity of lead
managers
6) Underwriters to the issue
7) Post issue management

8) Assistance in ADR/GDR
Debt raising:

9) Management of debenture issue

10)

Preparation

of

bankable

proposal and syndication of loan

Working capital raising:

11) Assistance in arranging optimal

capital finance

Strategic advice:

12)

Advice

on

mergers

and

acquisitions
13) Corporate structuring advice

SERVICES PROVIDED BY MERCHANT BANKS: (in detail)

The development activity through the country had exerted excess demand on the
sources of funds by the ever expanding industry and trade which could not be met
by the All India Financial Institutions. In these circumstances, the corporate sector
enterprises had the only alternative to avail themselves of the capital market
services for meeting the long-term fund requirements through capital issues of
equity and debentures. The growing demand for funds from capital market has
enthused many organizations to enter into the field of merchant banking for
managing the public issues.
The need of merchant banker is also felt in the wake of huge untapped public
savings as merchant bankers can play a highly significant role in mobilizing funds

from savers to invest in channels assuring promising return on investments and

thus narrow down the gap between demand for and supply of investible funds.
Merchant bankers not only provide advisory services to corporate enterprises
but also advise the investors of the incentives available in the form of tax relief
and other statutory obligations. 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 expectation of higher
yields.

Broadly a merchant banker can provide the following services:

1. Corporate Counseling
2. Project Counseling And Pre-Investment Studies
3. Credit Syndication And Project Finance

4. Issue Management
5. Underwriting
6. Bankers
7. Portfolio Management
8. Venture Capital Financing
9. Leasing
10. Non-Resident Investment Counseling And Management
11. Acceptance Credit And Bill Discounting
12. Advising On Mergers, Amalgamations And Take-Over
13. Arranging Offshore Finance
14. Fixed Deposit Broking
15. Relief To Sick Industries

Lets take a brief look at each of these functions:

Corporate Counseling
It includes a whole range of financial services provided by a merchant banker to a
corporate unit a view to ensure better performance, maintain steady growth and
create a better image among investors.

It covers the entire field of merchant banking activities i.e., project counseling,
capital restructuring, portfolio management and the full range of financial
engineering including venture capital, public issue management, loan syndication,
working capital, fixed deposits, lease financing, acceptance credit, etc. However,
the scope of corporate counseling is limited to suggestions and opinions leaving to
the client to take corrective actions for solving its corporate problems.
A merchant banker finds out the problems of enterprise, which shall include
organizational goals for the enterprise, size of the organization and operational
scales, choice of a product, pricing, etc, and suggests ways and means to solve
those problems.
Project Counseling
Project counseling is an important merchant banking service which includes
preparation of project reports, deciding upon the financing pattern to finance the
cost of the project, appraising the project report with the financial
institutions/banks.
Project reports are prepared to obtain government approval of the project, for
procuring financial assistance from financial institutions and banks, for ensuring
market for the proposed product, for planning public issues, etc.
Financing the project cost is an important aspect of project counseling. The two
sources of funds available to finance the project cost are internal sources of funds
(or owners' funds) which includes promoter's contribution and retained earnings;
and external sources of funds which refers to the borrowed funds in the form of
loans from banks, private investors and financial institutions and in the form of
debentures from the public.

Merchant banker has to decide the financing mix of the internal and external
sources of funds keeping in view the rules, regulations and norms prescribed by the
government or followed by the term lending financial institutions.
While rendering project counseling services, the merchant banker has to ensure
that the application forms for obtaining the funds from financial institutions are
filled in with relevant and appropriate information and before submitting the
application, the merchant banker has to appraise the project considering the various
aspects as to the type of the project, location, technical, commercial and financial
viability of the project.
Credit Syndication
Once the client company has decided about the project proposed to be undertaken,
the next step is looking for the sources wherefrom the funds could be procured to
implement the project.
Merchant banker has to locate the sources of funds and comply the formalities
required to procure the funds. This service rendered by the merchant banker in
arranging and procuring credit from financial institutions, banks and other lending
and investment organizations for financing the clients' project cost or meeting
working capital requirement is referred to as loan syndication or credit syndication.
Credit syndication in case of domestic borrowings is with the institutional lenders
and banks. Long and medium term funds are obtained from the All India Financial
Institutions like IFCI, IDBI etc., state level financial bodies like SFC, SIDC etc.,
commercial banks, mutual funds etc. Short-term funds are also required by the firm
for purchase of raw materials, payment of wages, salaries etc. Sources of financing
these short term requirements or working capital needs can be from internal

sources like internal accruals from working or operations and short term loans
from friends and relatives; or from external sources like short term borrowings
from banks etc.
Issue Management and Underwriting
Management of capital issues is a professional service rendered by the skilled and
experienced merchant bankers. Previously, the managing agents for a particular
corporate used to manage public issues. The abolition of the managing agency
system, the growth in the public limited companies in number and size, the
imposition of new rules and regulations regarding the public issue of securities
made it necessary for merchant bankers to play a definite role in the management
of public issues.
Public issue management involves marketing of corporate securities by offering the
securities to the public, procuring private subscription to the securities and offering
securities to existing shareholders of the company.
As a manager to the public issue, the merchant banker, before the public issue has
to obtain the consent of the stock exchanges to the memorandum and articles of
association, appoint other managers, bankers, underwriters, brokers etc. ,advice the
company to appoint auditors, solicitors and board of directors, draft the prospectus
and obtain consent from the companies legal advisors, board of directors and other
concerned parties, file the prospectus with registrar, make an application for
enlistment with stock exchanges and finally advertise for the issue.
A merchant bankers post issue activities include final allotment and/or refund of
subscription amount, calculation of underwriters liability in case of under

subscription and complying the necessary statutory requirements for listing of

securities on the stock exchange.
Under writing of public issue
A fully underwritten public issue spells confidence to the investing public, which
ensures a good response to the issue. Keeping this in view companies, which float
a public issue usually, desire a full underwriting of the issue.
Underwriting is only the guarantee given by the underwriter that in the event of
under subscription, the amount underwritten would be subscribed in proportion by
the underwriter. An underwriter of the issue gets the following benefits:

It earns a commission of the commitment given.

It earns the right to be appointed as bankers of that issue.

It expands its clientele by underwriting more and more issues.

Bankers to the Issue
The merchant banker can automatically become the banker to the issue in the
following cases:

The bank is a broker to the company

It has given underwriting commitments.

It acts as a manger to the issue

The function of a banker to the issue is to accept application forms from the
public together with subscription money and transfer them to the account of the
controlling branch.
Portfolio Management
Portfolio refers to investment in different types of marketable securities or
investment papers like shared, debentures and debenture stocks, bonds etc. from
different companies or institutions held by individuals firm or corporate units.
Portfolio management refers to managing efficiently the investment in the
securities held by professionals to others.
Merchant bankers take up management of a portfolio of securities on behalf of
their clients, providing special services with a view to ensure maximum return by
such investments with a minimum risk of loss of return on the money invested in
securities.
A merchant banker while performing the services of portfolio management has to
enquire of the investment needs of the client, the tax bracket, ability to bare risk,
liquidity requirements, etc. they should study the economic environment affecting
the capital market, study the securities market and identify blue chip companies in
which money can be invested. They should keep record of latest amendment in
government guidelines, stock exchange regulations, RBI regulations, etc.

Advisory Services Relating To Mergers and Takeovers

A merger is defined as a combination of two or more companies into a single

company where one services and other looses their corporate existence. A merger
is also defied as an amalgamation wherein the shareholders of the combining
companies become substantially the shareholders of the company formed.
A takeover is referred to as an acquisition, which is the purchase, by one company
of a controlling interest in the share capital of another existing company.
Merchant bankers are the middlemen settling negotiations between the offered and
the offeror. Their role is specific and specialized in handling the mergers and take
over assignments. Being a professional expert, the merchant banker is apt to
safeguard the interest of the shareholders in both the companies and as such his
assistance is useful for both the companies, i.e. the acquirer as well as the acquired
company.
Based on the purpose of business objective, the search of the acquirer company
will start for a merger partner company. If the objective of merger is growth
oriented i.e. seeking expansion in production and market segments, utilization of
existing companies or optimum utilization of resources, then the acquirer company
will select a business related company as a merger partner.
If the objective is diversification in production line or business activities, then it
will select a non-related company as a merger partner.
Once the merger partner is proposed the merchant banker has to appraise the
merger/takeover proposal with respect to financial viability and technical
feasibility. He has to negotiate with the parties and decide the purchase
consideration and mode of payment. He has to comply with the legal formalities
like getting approval from the Government/ RBI; drafting the scheme of

amalgamation; getting approval of company Board, financial institution, high court

if required; arranging for the meeting etc.
Venture Capital Financing
Financing an emerging high-risk project is called venture capital financing. Many
merchant bankers are entering into this area by also financing viable upcoming
projects. The financing is by subscription to the equity capital, while repayment is
by selling the equity through stock market when the shares are listed.
Leasing
Is there another lucrative area of financing where merchant bankers are turning?
Leasing is a viable source of financing while acquiring capital assets. The services
include arrangement for lease finance facilities for leasing companies, legal;
documents and tax consultancy.
Non Resident Investment
To attract NRI investments in the primary and secondary markets, the merchant
bankers provide investment advisory services to the NRIs in terms of identification
of investment opportunities, selection of securities, portfolio management, etc. they
also take care of operational details like purchase and sale of securities securing the
necessary clearance from RBI under FERA for repatriation of dividends and
interest, etc.

Acceptance Credit and Bill Discounting

Though merchant bankers world over specialize in acceptance credit and bill
discounting, these services are not currently provided by merchant bankers in India
the principal reasoning being the lack of an active market for commercial bills.
Arranging Offshore Finance
The merchant bankers also help their clients in the following areas involving
foreign currency financing:
1.

Financing Of Exports And Imports

2.

Long Term Foreign Currency Loans

3.

Joint Ventures Abroad

4.

Foreign Collaboration Arrangements

The assistance rendered as in the case of financial services covers appraisals,
negotiations, compliance with procedural and legal aspects etc.
Management of Fixed Deposits of Companies
Recently, merchants bankers have begun to structure and mobilize fixed deposits
for their corporate clients. They take care of the procedural and legal aspects, and
also mange the collection and subsequent servicing of the deposits. Advice with
regard to the amount to be raised, interest charges, terms of deposits and other
related issues are also offered to the client.

Relief to Sick Industries

The services offered by merchant bankers to sick industries can be
summarized as follows:
1.

Assessment of capital requirements and counseling on capital restructuring;

2.

Appraisal of technological, environmental, financial and other factors

causing sickness;

3.

Preparations of programs and packages for rehabilitation of sick units;

4.

Providing necessary assistance where the rehabilitation package involves

mergers or amalgamation;

5.

Obtaining necessary approval for implementation the rehabilitation package

from the statutory authorities;
Monitoring the implementation of the scheme of rehabilitation

OBLIGATIONS AND RESPONSIBILITIES

Merchant bankers have the following obligations and responsibilities.

1.

Merchant banker should maintain proper books of accounts, records and

submit half yearly/annual financial statements to the SEBI within stipulated period
of time.

2.

No merchant banker should associate with another merchant banker who is

not registered in SEBI.

3.

Merchant bankers should not enter into any transactions on the basis of
unpublished information available to them in the course of their professional
assignment.

4.

Every merchant banker must submit himself to the inspection by SEBI when
required for and submit all the records.

5.

Every merchant banker must disclose information to the SEBI when it

requires any information from them.

6.

All merchant bankers must abide by the code of conduct prescribed for
them.

7.

Every merchant banker who acts as lead manager must enter into an
agreement with the issuer setting out mutual rights, liabilities, obligations, relating
to such issues with particular reference to disclosures allotment, refund etc.

CODE OF CONDUCT

According to the 13 Regulation of the SEBI of 1992 (Merchant bankers),

every merchant banker should comply with following codes of conduct. They
are:
a)

The merchant banker must observe high integrity and fairness in all his
dealings.

b)

He shall render at all times high standard of services, exercise due diligence,
exercise independent professional judgment.

c)

If necessary, he must disclose to his clients the possible source of conflict of

duties and interests.

d)

The merchant banker should not indulge in unfair practice or unfair

competition with other merchant bankers.

e)

He should not make any exaggerated statement about his capacity or

achievement.

f)

He should always Endeavour to give the best possible advise and prompt
efficient and cost effective service.

g)

He should maintain the secrecy of all the confidential information received

during the course of service to his client.

h)

He should not engage in the creation of a false market or price rigging or

manipulation.

PROBLEMS OF MERCHANT BANKING

Restriction of merchant banking activities:
SEBI guidelines have authorized merchant bankers to
undertake issue related activities and made them restrict their
activities or think of separating these activities from present
one and float new subsidiary and enlarge the scope of its
activities.
Minimum net worth of Rs.1 crore:
SEBI guidelines stipulate that a minimum net worth of Rs.1
crore for authorization of merchant bankers.

Non co-operation of issuing companies:

Non co-operation of the issuing companies in timely
allotment of securities and refund of application money is
another problem faced by merchant bankers.
Merchant Bankers Commission:
Maximum :- 0.5%
Project appraisal fees

Lead Manager :- 0.5% up to Rs.25 crores

- 0.2% more in excess of Rs.25 crores
Underwriting fees
Brokerage commission :- 1.5%
Other expenses :- Advertising
- Printing
- Registrars expenses
- Stamp duty

In spite of problems popping up, merchant banking in India has vast

scope to develop because of lot of domestic as well as foreign businesses
booming here. Indian economy provides an amicable environment for
these firms to set up, flourish and expand here.

CURRENT AFFAIRS
RBI allows cash withdrawal from merchant banker terminals
Besides ATMs, customers can now also withdraw cash up to Rs1000 from
terminals at different merchant establishments, the Reserve Bank. As a further step
towards enhancing the customer convenience in using the plastic money, it has
been decided to permit cash withdrawals at POS (point of sale) terminals. To start
with, this facility will be available for all debit cards issued in India, up to Rs1000
per day," RBI said in a statement issued here.
The use of debit cards at POS terminals at different merchant establishments has
been steadily increasing, it said. This facility is available only against debit cards

issued in India.
At present cash withdrawal facility using plastic cards is available only at
Automatic Teller Machines (ATMs) with the number of ATMs in the country at
44,857. There are 4,70, 237 POS terminals in the country.
This facility may be made available at any merchant establishment designated by
the bank and would be available whether the card holder makes a purchase or not.
Morgan Stanley makes i-banking comeback
The joint venture between JM Financial and Morgan Stanley was inked in 1997
and formalized in 1999. The JV had investment banking operations other than
equity broking, research, wealth management and advisory and securities
distribution operations. Post the split, JM Financial acquired the investment
banking company together with its subsidiaries, which were engaged in fixed
income, equity broking, wealth management, advisory and distribution businesses
of $ 20 million. The Indian partner sold its 49% holding in JM Morgan Stanley
Securities (JMSPL), the institutional equity broking company to Morgan Stanley
for $ 445 million.
Bulge bracket investment banking major, Morgan Stanley has re-entered
investment banking business on its own, after parting ways with JM Financial
its former Indian partner.
PNB aims profit of 7,500crore by 2013
The country's second largest public sector lender Punjab National Bank aims to
double

its

profit

to

Rs7,500

crore

in

the

next

four

years.

"The bank has set a target to expand total business to Rs10crore and earn net profit
of Rs7,500 crore by 2013," said PNB Chairman and Managing Director K C
Chakrabarty, who is charge of Deputy Governor of RBI.

The growth driver would be better asset liability management, thrust on recovery,
focus on customers and financial inclusion, he had said. Besides, the bank plans to
open new line of businesses in the current fiscal including merchant banking
subsidiary.
PNB Investment Services aims to provide investment consultancy and merchant
banking services

and would be operational in the next three months. Currently,

these operations are run by a division of the bank.

ICICI Bank to oversee mergers and acquisitions
ICICI bank and its merchant banking arm, ICICI Securities (I-Sec), have entered
into an agreement, whereby all M&A deals will be done out of ICICI Bank. The
agreement goes on to define an M&A deal as one which involves change in
management

control.

This arrangement replaces the earlier practice of both I-Sec and ICICI Bank
working together on M&A deals. Since a predominant number of people, who
wish to be advised on M&A, also look for acquisition finance, it was decided that
the business should be housed in the bank, I-Sec MD Madhabi Puri Buch told ET.
Now, if a corporate is seeking a sell mandate or a buy mandate, where the transfer
of controlling interest takes place, the deal will be done by ICICI Bank.
ICICI Bank had initially entered the investment banking space in 2006. Over the
past couple of years, both the bank and its subsidiary have been vying for deals.
The new deal has taken into effect between both the entities from April 1.
Birla Capital and Financial Services gets SEBI merchant banking
license
Birla Capital & Financial Services Ltd has been granted a merchant-banking
license by the Securities and Exchange Board of India. The license will enable the

company to offer a wide range of on-shore investment banking advisory and

underwriting services in the Indian market.
The company, which is a part of the Yash Birla conglomerate, will initially
concentrate on regulated services like initial public offerings, takeover, buybacks,
delisting and valuations. It also offers non-regulated services like PE Syndication,
M&A Advisory and other corporate advisory.
Birla Capital & Financial Services Ltd. is part of the 3,000-crore Yash Birla Group
that has diversified interest in sectors like auto & engineering, textiles & chemicals
and power & electrical, education & IT.
Primary market slowdown, affects merchant bankers wallet
The recent slowdown in the primary market has impacted not only investors but
merchant bankers as well, as there has been a significant decline of nearly 60 per
cent in their percentage fees so far this year.
"There is a clear drop in the merchant banking fees to Rs 216crore in comparison
to Rs. 771crore for the calendar year 2007, indicating a drop of 57.9 per cent on
annualized basis," Nexgen Capitals, the merchant-banking arm of brokerage firm
SMC Global Securities.
Merchant bankers are those who advise the issuer about the public offer and
manage the issue.
The average percentage fees has declined to 1.21 per cent so far this year from 2.24
per cent in 2007, the report added.
Reliance Power IPO of Rs 11,563 crore during this year with the merchant banking
fee of Rs 50.6 crore, amounting to 0.44 per cent of the issue size had a great
bearing on this trend.
Nomura launches its investing banking operations in India

Nomura Financial Advisory and Securities (India) Private limited ('Nomura India'),
a wholly-owned subsidiary of Nomura Holdings, Inc. ('Nomura'), has launched its
equity sales and trading and investment banking operations in India.
In October 2008, Nomura, a global investment bank, acquired the majority of
Lehman Brothers' employees in India, including the equities sales and trading,
equity research, fixed income liquid markets sales and trading, and investment
banking teams.
By integrating the former Lehman Brothers India franchise and obtaining its
merchant banking licence and stock exchange memberships, Nomura India said in
a statement it has significantly expanded its capabilities in India through a wide
range of onshore financial solutions spanning securities brokerage

, securities

underwriting and advisory services.

THE DIFFERENCE BETWEEN

Investment banks and Merchant banks
Merchant banks and investment banks, in their purest forms, are different
kinds of financial institutions that perform different services. In practice, the
fine lines that separate the functions of merchant banks and investment banks tend
to blur. Traditional merchant banks often expand into the field of securities
underwriting, while many investment banks participate in trade financing
activities.

In theory, investment banks and merchant banks perform different functions.

Pure investment banks raise funds for businesses and some governments by
registering and issuing debt or equity and selling it on a market. Traditionally,
investment banks only participated in underwriting and selling securities in large
blocks. Investment banks facilitate mergers and acquisitions through share sales
and provide research and financial consulting to companies.
Traditionally, investment

banks did

not

deal

with

the

general

public.

Traditional merchant banks primarily perform international financing

activities such as foreign corporate investing, foreign real estate investment,
trade finance and international transaction facilitation.
Some of the activities that a pure merchant bank is involved in may include issuing
letters of credit, transferring funds internationally, trade consulting and coinvestment

in

projects

involving

trade

of

one

form

or

another.

The current offering of investment banks and merchant banks varies by the
institution offering the services, but there are a few characteristics that
most companies that offer both investment and merchant banking share.
As a general rule, investment banks focus on initial public offerings (IPOs) and
large public and private share offerings. Merchant banks tend to operate on smallscale companies and offer creative equity financing, bridge financing, mezzanine
financing and a number of corporate credit products. While investment banks tend
to focus on larger companies, merchant banks offer their services to companies that
are too big for venture capital firms to serve properly, but are still too small to

make a compelling public share offering on a large exchange. In order to bridge the
gap between venture capital and a public offering, larger merchant banks tend to
privately place equity with other financial institutions, often taking on large
portions of ownership in companies that are believed to have strong growth
potential.
Merchant banks still offer trade financing products to their clients. Investment
banks rarely offer trade financing because most investment banking clients have
already outgrown the need for trade financing and the various credit products
linked to it.

Merchant banks and Commercial banks

Merchant banks

Commercial banks

1) Assist in raising capital in the form of Provide funds in the form of

equity, preference shares, and syndicated term loan and working capital.
loan working capital instruments.

2) Advisor not financer.

Financing is the main business.

3) Do not accept chequable deposits.

Demand deposits are the key

feature.

4) Mainly fees based business.

Mainly fund based business

5) Being advisors, they are closer to the Being lenders, they are more
customers and get to know risks of the cautions, assess risks in lending
transaction s properly. They work on risks proposal and cannot afford to be
shields i.e. mitigation measures

grossly relationship based and

close to the customer.

6) Most of work they get is about Commercial

banks

majority

management of equity issues in the business is of terms lending and

capacity of lead manager, underwriter, bank deposits.
piercing of issue, book running, and
liaisoning with SEBI.

CASE STUDIES

BRIEF ANALYSIS OF SOME MERCHANT BANKS OF INDIA

SBI Bank of India

ICICI Bank Ltd.
Punjab National Bank
Union Bank of India
Kotak Mahindra
IDBI BANK

SBI Merchant Banking Group is strongly positioned to offer perfect financial

solutions to your business. We specialize in the arrangement of various forms of
Foreign Currency Credits for Corporate.
State Bank of India is the nation's largest bank. Tracing its roots back some 200
years to the British East India Company (and initially established as the Bank of
Calcutta in 1806), the bank operates more than 13,500 branches and over 5,000
ATMs within India, where it also owns majority stakes in seven associate banks.
State Bank of India has more than 50 offices in nearly 35 other countries, including
multiple locations in the US (California), Canada, and Nigeria. The bank has other
units devoted to capital markets, fund management, factoring and commercial
services, and brokerage services. The Reserve Bank of India owns about 60% of
State Bank of India.
SBI being an Indian entity has no India exposure ceiling. Our Primary focus is On
Indian Clients. SBIs seasoned Team of professionals provides you with Insightful
credit Information and helps you Maximize the Value from the transaction.

OUR PRODUCTS AND SERVICES

Arranging External Commercial Borrowings (ECB)
Arranging and participating in international loan syndication
Loans backed by Export Credit Agencies
Foreign currency loans under the FCNR (B) scheme
Import Finance for Indian corporate

SBI CAPITAL MARKETS LIMITED (SBICAPS) is India's leading

investment bank and project advisor, assisting domestic companys fundmobilization efforts for last many years.
We began operations in August 1986 as a wholly owned subsidiary of the State
Bank of India, which is the largest commercial bank in India. In January 1997,
fresh equity shares were issued to Asian Development Bank (ADB) and ADB now
holds 13.84% stake in the equity of SBICAPS. The distinguished parentage (with a
86.16% stake) together with the long standing association of an internationally
renowned financial institution like the Asian Development Bank further enhances
our image as a truly 'World Class Investment Bank'.

Our Mission - To provide Credible, Professional and Customer Focused worldclass investment banking services.

Our Vision - To be the best India based Investment Bank.

SBI Group:

The largest commercial bank group in India

Position in the domestic banking sector as on 31 March 2008:
15.44% of the aggregate deposits.
15.28 % of total advances.
The only Indian Bank to find a place in the Fortune Global 500 List.
First Indian Bank to take up merchant banking in 1986.

SBI Capital Markets Limited:

No. 1 in Asia Pacific for Project Advisory. Rating by Thomson Project
Finance International.
No. 1 in IPOs, managed 700+ issues (since 1989 source Prime Database).
The only Indian Merchant Banker in the Global 10, Thomson Project
Finance International 2007.
Pioneer in Privatization.

Subsidiary:

SBICAPS Ventures Ltd.

SBICAP Securities Ltd.
SBICAPS (UK) Ltd.
SBICAP Trustee Company Ltd.

Associates Bank:-

State Bank of
Bikaner &
Jaipur

State Bank of
Saurashtra

SBI Factors
& Comm.
Services Ltd.

SBI
(California)

State Bank of
Hyderabad

State Bank of
Travancore

SBI Funds
Management
(P) Ltd.

SBI
International
(Mauritius)
Ltd.

State Bank of
Indore

SBI Capital
Markets Ltd.

SBI DFHI
Ltd.

IndoNigerian
Merchant
Bank

State Bank of
Mysore

SBICI Bank
Ltd.

SBI Life
Nepal SBI
Insurance Co. Bank Limited
Ltd

Commercial
Bank of India
LLC

Key Personnel:Board of Directors

Committee of
Directors

Audit
Committee

Management Team

Shri O. P. Bhatt
(Chairman)

Shri R. Sridharan
(Chairman)

Dr. R. H. Patil

Dr. R. H. Patil

Shri D.
Sundaram
(Chairman)
Shri R.
Sridharan

Shri S.
Vishvanathan
(MD & CEO )
Shri M. K. Nag
(Executive Vice
President)

Shri R. Sridharan

Shri S. Vishvanathan
(MD & CEO)

Shri Bansi S. Mehta

Dr R. H. Patil

Smt. Bharati Rao

Shri D. Sundaram
Shri Ajay Sagar
Dr. Swati A. Piramal
Shri S.
Vishvanathan
(MD & CEO)

Promoters Share: -

Performance:-

Awards: Asia Pacific Bank of the Year Award 2009 for Leadership in Project Finance
by Thomson Reuters (PFI)
India Loan House 2009 for Leadership in Loan Syndication by Thomson
Reuters (IFR Asia)
Asia Pacific Oil and Gas Deal of the Year 2009 for Cairn India by Thomson
Reuters (PFI)

 African Power Deal of the Year 2009 for Morupule B by Thomson Reuters
(PFI)
Indian Power Deal of the Year 2009 for Sasan by Euromoney
Indian Upstream Oil & Gas Deal of the Year 2009 for Cairn India by
Euromoney
Indian Road Deal of the year 2009 for Yamuna expressway by Euromoney
Indian Telecom Deal of the Year 2009 for Aircel by Euromoney
SAFA Best Presented Accounts Award 2008
Award for Excellence in Financial Reporting

SERVICES:-

Project Advisory & Structured Finance

SBICAP has built a formidable presence in the area of Project Finance Advisory
and Funds Syndication with several prestigious mandates in almost every sector of
the industry to its credit.

Our product portfolio includes:

Project Appraisal
Structured Finance and Syndication
Infrastructure Project Advisory
Securitization
Debt & Equity Syndication

Capital Markets
Capital Markets Group handles transactions in the capital markets space across
multiple instrument structures.

Our product and solutions bouquet includes:

Managing Initial Public Offerings and Follow-on Public offerings and
Offers-for-Sale
Managing Rights Offering, be it the traditional or the structured formats
Qualified Institutional Placements
Open offers, Buyback and Delisting of securities
Offerings of convertible securities
Public offering of Corporate structured bonds
Arranging Private Equity to include growth capital, pre-IPO convertibles,
private investments in public equity (PIPES), mezzanine debt and equity,
and equity offerings completed as a private placement.
Private placement of bonds
Capital restructuring advisory services
Advisory and arrangement services for products such as AIM Listing, Indian
Depository Receipts, ADR/GDR and other off-shore equity or bond listing
options

M&A and Advisory

The M & A product portfolio includes:

Mergers & Acquisitions

Private Equity
Foreign Currency Convertible Bonds (FCCB)
Corporate Advisory

Employees:41,871
Employee growth: 37.2%
You see, ICICI Bank is India's #2 bank (after State Bank of India), with more than
600 branches and 2,200 ATMs nationwide. ICICI's retail banking group offers
lending and deposit services to small businesses and individuals. Larger businesses
are served by the corporate banking group, which offers finance services and
treasury products. ICICI's rural and government banking unit offers micro-loans
and agricultural banking. Foreign operations, as well as services related to
international trade finance and expatriate Indians, fall under the international
banking group. Other ICICI offerings include online banking, asset management,
and insurance.
Key numbers for fiscal year ending March, 2008:
Sale: $5,796.3M
One year growth: 99.1%

Net income: $524.1M

Income growth: 167.4%
ICICI Advice on Wide Varity of Product:
Private Equity Financing
Secondary sale transactions
pre IPO deals

ICICI Securities Ltd is the largest equity house in the country providing end-to-end
solutions (including web-based services) through the largest non-banking
distribution channel so as to fulfil all the diverse needs of retail and corporate
customers. ICICI Securities (I-Sec) has a dominant position in its core segments of
its operations - Corporate Finance including Equity Capital Markets Advisory
Services, Institutional Equities, Retail and Financial Product Distribution.
ICICI Securities Inc., the step-down wholly owned US subsidiary of the company
is a member of the National Association of Securities Dealers, Inc. (NASD). As a
result of this membership, ICICI Securities Inc. can engage in permitted activities
in the U.S. securities markets. These activities include Dealing in Securities and
Corporate Advisory Services in the United States and providing research and
investment advice to US investors.
is a SEBI Registered CAT-1 Merchant banker. ICICI Securities Inc. is also
registered with the Financial Services Authority, UK (FSA) and the Monetary
Authority of Singapore (MAS).

Board of Directors:-

ICICI Securities Limited.

ICICI Securities Holding

Inc.

ICICI Securities, Inc.

Ms. Chanda Kochhar,

(Chairperson)

Ms. Anup Bagchi,

(Chairman)

Mr. Anup Bagchi,

(Chairman)

Mr. Ketan Patel

Mr. A Murugappan

Mr. A Murugappan

Mr. Narendra Murkumbi

Mr. Charanjit Attra

Mr. Charanjit Attra

Mr. Uday Chitale

Mr. Subir Saha

Mr. Subir Saha

Mr. Pravir Vohra

Mr. Gopakumar P.,

(President)

Mr. Sonjoy Chatterjee

Ms. Madhabi Puri-Buch,
(Managing Director &
CEO)
Mr. A. Murugappan,
(Executive Director)
Mr. Anup Bagchi,
(Executive Director)

Awards & Recognition

Institutional
ICICI Securities is awarded as the Best Investment Bank 2008 by Global
Finance Magazine
The Corporate Finance group also was awarded a runner-up Best Merchant
Banker by Outlook Money in 2007.
ICICI Securities (I-Sec) topped the Prime Database League Tables 2007 for
money raised through IPOs/FPOs.
The equities team was adjudged the 'Best Indian Brokerage House-2003' by
Asiamoney.

Retail
ICICIdirect wins the prestigious Outlook Money - India's Best e-Brokerage
House for 2009.
ICICIdirect, the neighborhood financial superstore won the prestigious
Franchise India `Service Retailer of the Year 2008 award.
ICICIdirect wins the prestigious Outlook Money - India's Best e-Brokerage
House for 2008.
ICICIdirect been winning the prestigious Outlook Money - India's Best eBrokerage House for 2003-2004, 2004-2005, 2006-2007 and 2007-2008.
ICICIdirect has also won the CNBC AWAAZ Consumer Award for the Most
Preferred Brand of Financial Advisory Services.
Best Broker - Web 18 Genius of the Web Awards 2007
Franchisor of the year award 2009
Retail concept of the year awards 2009

Technology
IDG India's CIO magazine has recognized ICICI Securities as a recipient of
2009 CIO 100 award
Indian Bank's Association Business Technology Awards for Best Online
Trading Platform in 2006 and 2007

Punjab National Bank (PNB) is one of India's largest nationalized banks with some
4,500 branches or service counters. The financial institution offers services in
personal and corporate banking, including industrial, agricultural, and export
finance, as well as international banking. Its personal lending services include
loans for housing, autos, and education. PNB's diverse client list includes Indian
conglomerates, small and mid-sized businesses, non-resident Indians, and
multinational companies. The bank was established in Lahore in 1895 -- before the
country was partitioned into India and Pakistan in 1947.
Key numbers for fiscal year ending 2008:
Sale: $2,315.0M
Net income: $322.1M
PNB's Financial Numbers
Sales $2.32 bil

 Profits $.28 bil

Assets $24.12 bil
Market Value $2.79 bil
Employees 58,300

Union Bank of India has been around for more than 88 years. The bank has earned
a reputation for being techno-savvy--more than 600 branches of Bank are
networked and powered with a centralized technology platform, the bank also
manages close to 395 networked ATMs.
Union Bank is a Public Sector Unit with 55.43% Share Capital held by the
Government of India. The Bank came out with its Initial Public Offer (IPO) in
August 20, 2002 and Follow on Public Offer in February 2006. Presently 44.57 %
of Share Capital is presently held by Institutions, Individuals and Others.
Financial performance (as on 31st March 10)
The Banks Net Worth increased by 25.76% and stood at Rs. 8758 crore as
on 31st March 10 as compared to Rs.6964 crore in the previous year.
Net Profit Increased by 27.47% and stood at 594 crore as on 31st March 10
as compared to
466 crore crore in the previous year.
Gross NPA level increased to Rs.2671 crore as on 31st March10 from
Rs.1923 crore as on 31stMarch09.
Board of Directors

SHRI M.V.NAIR (Chairman & Managing Director)

Shri S.C.Kalia(Executive Director)
SHRI S.Raman(Executive Director)
Dr. Gulfam Mujibi(Part-time non-official Director)
Shri B.M.Sharma(Chartered Accountant Director)
SHRI N. SHANKAR (WORKMEN DIRECTOR)

Products and Services

Personal Banking (Accounts & Deposits, Retail Loans, Cards, Insurance &
Investment, Demat )
NRI Banking(Remittance, Savings & Deposits, Loan & Services,
Payments)
Corporate Banking(CMS, E-Tax, Insurance, Trade Finance, loans
Syndication, MSME Banking)
Internet Banking(Account Information, Transfer of
Funds/Bills/Limits/Currency. Financial & Non Financial enquiries)

Awards:
The Bank was awarded the Gold Trophy and a certificate in the Elite Class
for Excellence in Marketing & Brand Communication by Association of
Business Communicators of India (ABCI) in March 2010. The award was
given away by the Honble Governor of Maharastra, Shri K.Sankaranarayan.
The Bank was awarded the prestigious Skoch Challenger Award 2009 for
excellence in capacity building through innovative concept of Village
Knowledge Centre as part of financial inclusion initiatives. The award was
given away by Dr. C Rangarajan, Economic advisor to the Prime Minister
As part of its global expansion initiatives, the Bank opened its 5th overseas
representative office in London, U.K. in April 2010. The Bank already has 4
representative Offices in Shanghai, Beijing in PRC, Abu Dhabi in UAE and
Sydney, Australia. Besides the Bank has a full fledged overseas branch in
Hong Kong. The Bank is the process of setting up a Rep Office in Toronto,
Canada.

The Kotak Mahindra Group

Kotak Mahindra is one of India's leading financial conglomerates, offering
complete financial solutions that encompass every sphere of life. From commercial
banking, to stock broking, to mutual funds, to life insurance, to investment
banking, the group caters to the financial needs of individuals and corporates.
The group has a net worth of over Rs. 7,100 crore and has a distribution network of
branches, franchisees, representative offices and satellite offices across cities and
towns in India and offices in New York, London, San Francisco, Dubai, Mauritius
and Singapore. The Group services around 6.5 million customer accounts.
Since the inception of the erstwhile Kotak Mahindra Finance Limited in 1985, it
has been a steady and confident journey leading to growth and success.

Kotak Group Products & Services:

Senior Management:

Mr. Uday S. Kotak (Executive Vice Chairman & Managing Director)

Mr. Anand Mahindra (Vice-Chairman and Managing Director)
Mr. C Jayaram (Executive Director)
Mr. Dipak Gupta (Executive Director)
Dr. Shankar Acharya (Non-Executive Part-time Chairman)

 Mr. Shivaji Dam (managing director of Kotak Mahindra Old Mutual Life
Insurance Limited)
Mr. C. Jayaram ( Executive Director)
Mr. Dipak Gupta ( Executive Director)
Mr. Cyril Shroff (managing partner of the law firm)

Kotak Securities

Kotak Securities Ltd. 100 % subsidiary of Kotak Mahindra Bank is one of the
oldest and largest broking firms in the Industry. A subsidiary of Kotak Mahindra
bank. Reconstruction from a private company to a public limited company
effective from June 13, 2003. Act as a lead manager to several (IPOs) & help in
Client in accessing the public & private equity market.
It is also a depository participant with National Securities Depository Limited
(NSDL) and Central Depository Services Limited (CDSL).
Kotak Securities Limited has Rs. 2300 crore of Assets Under Management (AUM)
as of 31st March, 2010.

Large Presence: At present Kotak in 331 cities with 843 offices all over the
country.
Services :

Stock broking through the branch and Internet,

Investments in IPO,
Mutual funds
Portfolio management service,
Currency Derivatives,
Insurance.

Accolades:

UTI MF CNBC TV18 Financial Advisor Awards - Best Performing Equity

Broker (National) for the year 09
Finance Asia Award (2009)-Best Brokerage Firm In India
Best Brokerage Firm in India by Asia money in 2008, 2007 & 2006
Best Performing Equity Broker in India CNBC Financial Advisor Awards 2008
Avaya Customer Responsiveness Awards (2007 & 2006) in Financial Services
Sector
The Leading Equity House in India in Thomson Extel Surveys Awards for the year
2007
Euromoney Award (2007 & 2006) - Best Provider of Portfolio Management:
Equities
Euromoney Award (2005)-Best Equities House In India
Finance Asia Award (2005)-Best Broker In India
Finance Asia Award (2004)- India's best Equity House
Prime Ranking Award (2003-04)- Largest Distributor of IPO's

IDBI Capital Market Services Ltd., (IDBI Capital) is a wholly owned subsidiary of
IDBI Bank Ltd and is a leading Investment Banking & Securities Company.
IDBI Capital offers a full suite of products and services to Corporates, Institutional
and Individual clients. The range of services include :-

Investment Banking
Capital Market Products
Private Equity
Corporate Advisory Services
Mergers & Acquisitions
Project Appraisals & Debt Syndication
Stock Broking - Institutional & Retail
Distribution of Financial Products
Debt Placement and Underwriting
Fund Management (Managing Clients' Assets-Pension/PF Fund Managers)
Research Group

IDBI Capital is highly regarded for safety and trust and enjoys a credit rating of
AAA by CARE for its medium-term borrowings and P1+ by ICRA for its shortterm borrowing

Milestones
1995 March

Commenced Equity Broking on NSE CM segment

1995 July

Built agent Distribution Network across the country

1996 October Commenced Debt Broking on NSE WDM segment

1996
December

Started operations as a Depository Participant

1996

Started to act as Arranger to Privately Placed Bond issues

1998 April

Commenced operations as a Portfolio Manager

1999
February

Acquired membership of BSE, Mumbai

1999
November

Started operations as a Primary Dealer

2002 March

Achieved an outright secondary market turnover exceeding

Rs.100000 crore in G-Secs

2000 June

Acquired Derivatives memberships of BSE and NSE

2002 October Commenced trading in Interest Rate Swaps

2004 June

Commenced Merchant Banking & Corporate Advisory Services

2006 January Launched the online investing portal www.idbipaisabuilder.in

2006
September

IDBI Capital bags CNBC TV18 'Best National Financial

Advisor-Institutional' award.

2006
September

IDBI Capital ties up with Punjab National Bank and Bank of

Rajasthan Bank.

2007 March

IDBI Capital ties up with Oriental Bank of Commerce

2007 May

IDBI Capital ties up with Karur Vysya Bank (KVB)

2008 January IDBI Capital bags CNBC TV18's prestigious National Financial
Advisor Award

2008 March

IDBI Capital ties up with Union Bank of India

Fund Management

IDBI Capital Market Services Ltd. (ICMS) is a leading Fund Manager in the
country for Provident, Pension and Retirement Benefit Funds. The Company is a
SEBI registered Portfolio Manager and manage its Clients assets under both
discretionary and non-discretionary mandates. These services are provided to
various public and private sector undertakings and their provident, pension,
retirement benefit and surplus funds. The Companys client base includes leading
pension and provident funds in the country.

IDBI capital has been advising institutions, banks and corporates for their
investment in Debt, Mutual Funds and Equities over several years. Its services
include managing Client Assets--Pension & Provident Funds, Surplus fund
Management, Equity Portfolio Management and Mutual Fund Advisory.

The funds have continuously yielded superior returns, which are significantly
higher than the benchmark.

ISO Certification 9001:2000

Keeping in view the importance of standardized processes and service levels, the
Company has gone in for ISO Certification for Fund Management, and is the only
company to have done so in this sector. Being a public sector, the Company is also
audited by Comptroller and Auditor General (CAG) office and follows transparent
practices.

Regulatory Approval

IDBI Capital is a registered Portfolio Manager with Securities and Exchange Board
of India (SEBI) since 1998 and is authorised to undertake Funds Management
activities (Debt & Equity) for clients. These activities would be governed by
Securities and Exchange Board of India (Portfolio Managers) Rules and
Regulations, 1993. SEBI Regisration No. of IDBI Capital is INP000000209, valid
till the year 2010.
Services:

Retail Broking & Distribution

Online Investing
IPO Distribution
Capital Markets
IPO / FPO / Right Issues
Takeover
Buyback of Securities
Qualified Institutional Placement
Private Equity
Investment Banking
Financial Advisory
Project Advisory
Corporate Advisory
Mergers & Acquisitions
Strategic Advisory
Institutional Broking & Distribution
Equity Sales & Dealing
Equity Research
Mutual Fund Sales & Dealing
Mutual Fund Research

ANALYSIS AND INTERPRETATION

Q 1 Do you take any financial services from bank?
Sr.
No.

Take Financial
Service

Nos.

Percentage

Yes

12

40

No

18

60

Total

30

100

GRAPH

Take Financial Services

Yes

No

40%
60%

Interpretation
Out of total respondents, 40% respondents have taken Financial Service and rest
60% respondents have not taken the Financial Services.

Q 2 Do you know about Merchant Banking?

Sr.
No.

Know about
Merchant

Nos.

Percentage

Yes

10

33.33

No

20

66.67

Total

30

100

Know about Merchant Banking

Yes

No

33%

67%

Interpretation:
Out of total respondents, 33% respondents Know about merchant banking and rest
67% respondents dont know about merchant banking.

Q 3 Are you satisfied with the services provided by your bank?

Sr.
No.

Satisfied

Nos.

Percentage

Yes

13

43.75

No

17

56.25

Total

30

100

Interpretation:
Out of total respondents, 43.75% respondents are satisfied and rest 60%
respondents are not satisfied.

Q4 Are you satisfied with services offered by banks?

Sr. No

Bank

Percentage

ICICI

20

SBI

35

PNB

20

BOI

15

Other

10

Interpretation:
Large number prefers services from SBI.

Q 5 What is the position of Merchant Banking in Private Sector?

Sr. No.

Position

Percentage

Good

50

Normal

35

Bad

15

Total

100

Interpretation:
Out of total respondents, 50% respondents Say Good, 35% Say Normal and rest
15% respondents say Bad.
Q 6 What is the position of Merchant Banking in Public Sector?

Sr. No.

Position

Percentage

Good

40

Normal

55

Bad

Total

100

Interpretation:
Out of total respondents, 40% respondents Say Good, 55% Say Normal and rest
5% respondents say bad.

Q7 What type of security have you deposited/you will deposit with the banks?

Sr. No.

Type of Security

Nos.

Percentage

1.

Bank Security (F.D.)

22.5

2.

Gold

3.

Land Papers

19

62.5

4.

Third person security

15

Total:

30

100

50
45
40
35
30
25

bank sec.

gold

land paper

third person

20
15
10
5
0
bank sec.

gold

land paper

third person

Interpretation:
Out of total respondents, a large number have deposited/will deposit land papers.

Q 8 Are you satisfied by Security margin of bank?

Sr. No.

Satisfaction by Security Nos.

Percentage

Margin
1.

Yes

24

80

2.

No

20

Total:

30

100

70
60
50
40

Yes

No

30
20
10
0

Yes

No
Interpret

ation
Out of total respondents, 80% respondents are satisfied and rest 20% respondents
are not satisfied.

Q 9 Are you satisfied with timely services provide by banks?

Sr.
No.

Depends on M.B

Nos.

Percentage

Yes

21

75

No

25

Total

30

100

Depends on M.B

75
1 Yes
2 No
1 Yes
25

2 No

Nos.

Interpretation
Out of total respondents, 75% respondents Say that they are timely heard and rest
25% say that they are not timely served by merchant banking.

Q10 Will it differ from investment banks?

Sr.
No.

Difference

Nos.

Percentage

Yes

23

75

No

25

Total

30

100

100 Y
e

50 s
0 N
Yes
No
o

Interpretation
Out of total respondents, 75% respondents think that it differs and rest 25%
respondents dont think so.

COMPARISION BETWEEN

PUBLIC & PRIVATE

SECTORS
Public Sector is the pioneer in providing Merchant Banking services in India.
But due to liberalization of economy the scenario has changed many private
Merchant Banking companies have entered in the industry since then.

Public sector merchant banking companies facing stiff competition from the
private sector companies.
Market Share
Public Sector= 66%
Private Sector= 34%

70%
60%
50%
40%
30%
20%
10%
0%

Series1

Public sector Private sector

CONCLUSION

The merchant banker plays a vital role in channelizing the financial surplus of the
society into productive investment avenues. Hence before selecting a merchant
banker, one must decide, 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 predicted 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 an essential to remove the trading malpractice and structural
inadequacies prevailing in the market, and provide the investors an organized, well
regulated market.

BIBLIOGRAPHY
Reference Material
Financial Institutions & Market By Shashi K. Gupta, Nisha Aggarwal
Merchant Banking H.R. Machiraju
The Rise of Merchant Banking Stanley Chapman

 The Merchant Bankers Joseph Wechsberg

INTERNET
www.google.com/news
www.answer.com
www.emissarycapital.com
www.wikipedia.com
www.sebi.gov.in
http://unionbankofindia.co.in
http://www.asialaw.com/Article/1988860/Merchant-Banking.html
http://www.icicisecurities.com
http://www.sbicaps.com
http://www.bobcapitalmarkets.com
http://www.pnbindia.in/subsidiaries
http://www.kotaksecurities.com
http://www.canmoney.in

Questionnaire
Respondents Profile
Name

: _______________

Age

: _______________

Gender

: _______________

Occupation : _______________
1. Do you take any financial services from bank?
(a) Yes

(b) No

2. Do you know about Merchant Banking?

(a) Yes

(b) No

( )

3. Are you satisfied with the services provided by your bank?

(a) Yes

(b) No

4. Which bank provides you maximum services?

(a) ICICI

(c) PNB

(b) SBI

(d) BOI

( )

(e) OTHER

(specify)

5. What is the position of Merchant Banking in Private Sector?

(a) Good

(c) Bad

(b) Normal

( )

6. What is the position of Merchant Banking in Public Sector?

(a) Good

(c) Bad

(b) Normal

( )

7. What type of security have you deposited/you will deposit with the banks
(a)Bank security

( )

(b) Gold

(c) Land paper

(d) Third party security ( )

( )

8. Are you satisfied by Security margin of bank?

(a) Yes

(b) No

( )

9. Non-financial institution depends on merchant banking. Are you satisfied?

(a) Yes

( )

(b) No

10. Will it differ from investment banks?

(a) Yes

( )

(b) No

APPENDIX
List of All Merchant Bankers Registered with SEBI

A.K. CAPITAL SERVICES LTD

ALLAHABAD BANK
ALLBANK FINANCE LTD.
ALMONDZ GLOBAL SECURITIES LTD (FORMERLY ALLIANZ SECURITIES LTD)
AMBIT CORPORATE FINANCE PRIVATE LTD
ANAND RATHI FINANCIAL SERVICES LIMITED (FORMERLY ANAND RATHI
SECURITIES PVT LTD)

ANDHRA BANK
ANTIQUE CAPITAL MARKETS PVT. LTD.
ARIHANT CAPITAL MARKETS LTD
ARYAMAN FINANCIAL SERVICES LIMITED
ASHIKA CAPITAL LTD
ASIT C. MEHTA INVESTMENT INTERRMEDIATES LTD
ATHERSTONE CAPITAL MARKETS LTD
AVENDUS CAPITAL PVT. LTD.
BNP PARIBAS
BOB CAPITAL MARKETS LTD
BRICS SECURITIES LTD
CALYON BANK (FORMERLY CREDIT AGRICOLE INDOSUEZ)
CENTRUM CAPITAL LIMITED (FORMERLY CENTRUM FINANCE LTD)
COMFORT SECURITIES PVT LTD
CORPORATE PROFESSIONALS CAPITAL PVT. LTD.
CORPORATE STRATEGIC ALLIANZ PVT LTD
D & A FINANCIAL SERVICES PVT. LTD.
DAIWA SECURITIES SMBC INDIA PVT LTD
CREDIT SUISSE SECURITIES (INDIA) PVT LTD
DALMIA SECURITIES PVT. LTD.
DARASHAW & COMPANY PRIVATE LTD (FORMERLY BADAR FINANC
DBS BANK LTD
EDELWEISS CAPITAL LTD
ELARA CAPITAL (INDIA) PRIVATE LIMITED
EMKAY SHARE AND STOCK BROKERS LTD
EQUIRUS CAPITAL (P) LTD
ESCORTS SECURITIES LTD
FIRSTCALL INDIA EQUITY ADVISORS PVT. LTD.
FORTRESS CAPITAL MANAGEMENT SERVICES PVT LTD
FORTUNE FINANCIAL SERVICES (INDIA) LTD
GSFS CAPITAL & SECURITIES LTD
HDFC BANK LTD
IDBI BANK LTD.(FORMERLY INDUSTRIAL DEVELOPMENT BANK OF INDIA)
IDBI CAPITAL MARKET SERVICES LTD
IDFC-SSKI LTD.
IMPERIAL CORPORATE FINANCE & SERVICES PVT LTD
IND GLOBAL CORPORATE FINANCE PVT LTD
INDIA CAPITAL MARKETS PRIVATE LIMITED
INDIA INFOLINE LTD.(FORMERLY INDIA INFOLINE SECURITIES PVT LTD)
INDIABULLS SECURITIES LIMITED (FORMERLY ORBIS SEC LTD)
INDUSIND BANK LTD
INFRASTRUCTURE DEVELOPMENT FINANCE COMPA
ING VYSYA BANK LTD. (ERSTWHILE THE VYSYA BANK LTD.)
INTEGRATED ENTERPRISES (INDIA) LTD (INTEGRATED ADVISORY SERV
INTENSIVE FISCAL SERVICES PVT LTD

INTER CORPORATE FINANCIERS & CONSULTANTS LTD.

JEFFERIES INDIA PRIVATE LIMITED
KARN MERCHANT BANKERS LTD.
KARVY INVESTOR SERVICES LTD
KEYNOTE CORPORATE SERVICES LTD
KHANDWALA INTEGRATED FINANCIAL SERVICES PVT LTD
KHANDWALA SECURITIES LTD
LAZARD INDIA PRIVATE LTD ( LAZARD CREDIT CAPITAL LTD.)
LKP SECURITIES LTD (FORMERLY LKP SHARES AND SECURITIES LTD)
LODHA CAPITAL MARKETS LTD
LSI FINANCIAL SERVICES PVT. LTD.
MACQUARIE INDIA ADVISORY SERVICES PVT LTD
MAPE ADVISORY GROUP PVT LTD
MASTER CAPITAL SERVICES LTD
MEGHRAJ SP CORPORATE FINANCE (PVT) LTD
MONEY MATTERS INVESTMENT ADVISORS PRIVATE LIMITED
MOTILAL OSWAL INVESTMENT ADVISORS PVT. LTD.
MPA FINANCIAL SERVICES LIMITED
MUNOTH FINANCIAL SERVICES LTD
N M ROTHSCHILD AND SONS (INDIA) PVT LTD
NETWORTH STOCK BROKING LTD.
NIRBHAY CAPITAL SERVICES PVT LTD
NOMURA FINANCIAL ADVISORY AND SECURITIES (INDIA) PVT. LTD.
NORTHBRIDGE CAPITAL LIMITED
ORIENTAL BANK OF COMMERCE
PADMAKSHI FINANCIAL SERVICES LIMITED
PIONEER INVESTCO
PL CAPITAL MARKETS PVT LTD
PNB GILTS LIMITED
PNR SECURITIES LTD
PRIME SECURITIES LTD
PUNEET ADVISORY SERVICES PVT LTD
R R FINANCIAL CONSULTANTS LTD
RABO INDIA SECURITIES PRIVATE LIMITED
REAL GROWTH SECURITIES PVT. LTD.
RELIGARE CAPITAL MARKETS LIMITED
SAFFRON CAPITAL ADVISORS PVT LTD
SAL SECURITIES PVT. LTD.
SICOM LTD
SMC CAPITALS LIMITED
SOBHAGYA CAPITAL OPTIONS LTD.
SOCIETE GENERALE
SPA MERCHANT BANKERS LIMITED
SPARK CAPITAL ADVISORS (INDIA) PVT LTD
SREI CAPITAL MARKETS LTD

STANDARD CHARTERED-STCI CAPITAL MARKETS LIMITED

STCI PRIMARY DEALER LIMITED
SUMEDHA FISCAL SERVICES LTD
TAIB CAPITAL CORPORATION LIMITED
TAMILNAD MERCANTILE BANK LTD
THE CATHOLIC SYRIAN BANK LTD
TRUST INVESTMENT ADVISORS PVT LTD
ULJK SECURITIES PVT. LTD.
UNION BANK OF INDIA
UNITED BANK OF INDIA
VALUE LINE ADVISORS PVT LTD.(FORMERLY S B & T FINANCE PRIVATE LTD)
VC CORPORATE ADVISORS PVT. LTD. (FORMERLY ECCENTRIC CAPITAL PVT LTD.)
VCK CAPITAL MARKET SERVICES LTD.
AXIS BANK LTD.(FORMERLY UTI BANK LTD.)
BAJAJ CAPITAL LTD
TATA CAPITAL MARKETS LTD
ICICI BANK LTD (private)
ICICI SECURITIES LTD
RELIANCE SECURITIES LIMITED
KOTAK MAHINDRA CAPITAL COMPANY LTD
YES BANK LTD.
BANK OF AMERICA, N.A
MORGAN STANLEY INDIA COMPANY PVT LTD
DEUTSCHE BANK & DEUTSCHE EQUITIES INDIA PRIVATE LIMITED
BARCLAYS BANK PLC
BARCLAYS SECURITIES (INDIA) PVT. LTD.
CITIGROUP GLOBAL MARKETS INDIA PVT. LTD.
DSP MERRILL LYNCH LTD
FEDEX SECURITIES LTD
GOLDMAN SACHS(INDIA) SECURITIES PVT. LTD.
J P MORGAN INDIA PVT. LIMITED
SBI CAPITAL MARKETS LTD
BANK OF MAHARASHTRA
IFCI FINANCIAL SERVICES LTD
KARUR VYSYA BANK LTD,
PUNJAB NATIONAL BANK
STATE BANK OF BIKANER AND JAIPUR

MERCHANT BANKING PLAYERS IN INDIA