INDEX

SR.NO TOPIC PAGE

NO.
1 INTRODUCTION 1
2 REVIEW OF LITERATURE 23
3 PROFILE OF THE STUDY 26
4 ANALYSIS 28
5 FINDINGS & CONCLUSIONS 44
6 SUGGESTIONS 47
7 SCOPE FOR FURTHER STUDIES 49
BIBLOGRAPHY
ANNEXATURE
 CHAPTER 1

INTRODUCTION

SR NO. TOPIC PAGE

NO.
1.1 INTRODUCTION 1
1.2 HYPOTHESIS 16
1.3 OBJECTIVES 17
1.4 RESEARCH METHOLOGY 18
1.5 SCOPE OF STUDY 20
1.6 LIMITATION 21
 INTRODUCTION

1.1 INTRODUCTION

MERCHANT BANKING

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

1
HISTORY OF MERCHANT BANKING

During the seventeenth and most of the eighteenth century international finance was
centred on Amsterdam. Consequently Amsterdam merchants became the first masters
of the various financial techniques and developments which, in the course of time,
became identified with the emergent profession of ‘Merchant Bankers’.

Commercial Banking and Investment Banking are often confused with Merchant
Banking. In many ways, there may be similarities in their functions. However, in
certain ways, Merchant Banking is distinctly different from commercial Banking and
Investment Banking.

The primary function of a commercial bank is to receive deposits from the public and
lend the same to others. Commercial Banks can undertake some of the merchant
banking activities like Issue Management whereas Merchant Banking Units can not
undertake commercial banking activities. However, the functions of Merchant
Banking may not widely vary from Investment Banking. The Merchant Banker
mainly deals with Issue Management, post issue services, corporate adviser services
etc. the Investment Banker undertaken trading in securities, Investment advisers and
Bought out deals which are not the main activities of Merchant Bankers.

In today’s Scenario the Merchant banker and management consultants undertake

advisory services to the corporate sector. The Merchant Banker advices corporation
and firms relating to opening of issues, receiving loans etc, which the management
consultants also do. The management consultant have a wide area operations like
production, Marketing, Personnel Relations, of finance etc. but they lack statutory
recognition to undertake capital market related activities which has enabled the
merchant banker to cater to the needs of the Corporate Sector.

MERCHANT BANKING IN INDIA

A merchant bank may be considered as an institution which centres its operation on

all or most of the following activities.
(1) Corporate financial advice, on such diverse matters as new share and bond

2
 issues, capital reconstructions, mergers and acquisitions;
(2) The taking of deposits and currency, money market operations including foreign
exchange dealing;
(3) Medium-term lending and syndication of loans;
(4) Acceptance credits and all forms of export finance;
(5) The holding and dealing in quoted and unquoted investment; and
(6) Fund management on behalf of clients, most typically pension funds, unit trust,
investment trusts and wealthy individuals.

DEFINITION OF MERCHANT BANKER

The first authoritative definition for the term ‘Merchant Banker’ has been given in the
Rule 2 (e) of SEBI (Merchant Bankers) Rules, 1922. Accordingly, “A Merchant
Banker means any person who is engaged in the business of Issue Management either
by making arrangements regarding selling, buying or subscribing to Securities as
Manager, Consultant, Adviser of rendering Corporate Advisory Service in relation to
such Issue Management”.

EVOLUTION & EMERGENCE OF MERCHANT BANKING

India has entered the 21st century as one of the Asia’s most dynamic economies. This
is the part of the assessment made by International Financial and Capital Market
Institutions based on India’s economic and financial reforms initiated in 1991 and
brought to fruition in various budget.

The progress of any economy mainly depends on the efficient financial system of the
country. Indian economy is no exception financial system of the country. The
importance of the financial sector reforms affirms an effective means for solving the
problems of economic, financial and social in India and elsewhere in the developing
nations of the world. The progress of the Securities Industry of any country depends
mainly on the flow of funds. In fact, capital generation is the lifeblood of the capital
market without which the health and soundness of the financial system cannot be

3
geared and for which well-developed capital market as well as money market is
essential.

India’s capital market is among the largest in the developing world. The market is
comprised of 24 stock exchanges transacting long-term debt; debentures and equity
shares both electronic and physical forms. Derivatives financial instruments are also
be added to the market shortly. The number of firms listed on the Indian Stock
Exchange is more than the USA. Market Capitalization of listed firms is 1980s was
similar to Brazil, Malaysia, Singapore and Denmark.

The capital market of the country, however, underwent dramatic changes since the
beginning of 1980s basically because of a progressive realization that the command
economy on which the emphasis was placed could not lead to higher levels of
economic development and that a slant towards a market-oriented economy is
necessary. It is in the context of fast expanding economy and a liberalized and
deregulated atmosphere that the growth of the Indian Stock Market activities has to be
viewed. No wonder that the markets have registered a quantum jump judge by any
standards.

MERCHANT BANKING IN INDIA

In India prior to the enactment of Indian Companies Act, 1956,managing agents acted
as issue houses for securities, evaluated project reports, planned capital structure and
to some extent provided venture capital for new firms. Few share broking firms also
functioned as merchant bankers.

The need for specialized merchant banking services was felt in India with the rapid
growth in the number and size of the issues made in the primary market. The
merchant banking services were started by foreign banks, namely the National
Grindlays Bank in 1967 and the City Bank in 1970. The Banking Commission in its
report in 1972 recommended the setting up of merchant banking institutions. This
marked the beginning of specialized merchant banking in India.
To begin with, merchant banking services were offered along with other traditional
banking services. In the mid-Eighties, the Banking Regulation Act was amended

4
permitting commercial banks to offer a wide range of financial services through the
subsidy rule. The State Bank of India was the first India Bank to set up merchant
Banking division in 1972. Later ICICI set up its Merchant Banking division followed
by Bank of India, Bank of Baroda, Canada Bank, Punjab National Bank and UCO
Bank. The merchant banking gained prominence during 1983-84 due to new issue
boom.

MRCHANT BANKING: PAST AND PRESENT

Many banks entered merchant banking in the 1960s to take advantage of the
economies of scope produced when private equity investing is added to other bank
services, particularly commercial lending. As lenders to small and medium-sized
companies, banks become knowledgeable about individual firms’ products and
prospects and consequently are natural providers of direct private equity investment to
these firms. As mentioned above, commercial banks were the largest providers of
venture capital in the 1960s. In the middle to late 1980s, the decision to enter
merchant banking was thrust on other banks and bank holding companies by
unforeseen events. In those years, as a result of the LDC (less-developed-country)
debt crisis, many banks received private equity from developing nations in return for
their defaulted loans. At that time, many of these banks set up merchant banking
subsidiaries to try to get some value from this private equity.

Also at about that time, most commercial banks began refocusing their private equity
investments to middle-market and public companies (often low-tech, already
profitable companies) and, rather than providing seed capital, financed expansion or
changes in capital structure and ownership. Most particularly, they took equity
positions in LBOs, takeovers, or recapitalizations or provided subordinated debt in the
form of bridge loans to facilitate the transaction. Often they did both. Commercial
banks financed much of the LBO activity of the 1980s.Then, in the mid-1990s; major
commercial banks began once again focusing on venture capital, where they had
substantial expertise from their previous exposure to this kind of investment. Some of
these recent venture-capital investments have been spectacularly successful. For
example, the Internet search engine Lycos was a 1998 investment of Chase

5
Manhattan’s venture-capital arm. Commercial banks are permitted to report either
realized or unrealized gains on their merchant-banking portfolios, as long as they are
consistent in the reporting. This option makes it difficult for one to compare different
entities’ financial results and could lead to an overly liberal reporting of profits.
NEED AND IMPORTANCE OF MERCHANT BANKING IN INDIA

▪ Important reason for the growth of merchant banking is due to exerting

excess demand on the sources of funds forever expanding industry and trade.
▪ Corporate sector had the only alternative to avail of the capital market
services for meeting their long-term financial requirements through capital
issues of equity and debentures.
▪ With the growing demand for funds there was pressure on capital market that
enthused the commercial banks, share brokers and financial consultancy
firms to enter into the field of merchant banking and share the growing
capital market.
▪ In India have opened their merchant banking windows and are competing in
this field, and also doing advisory functions as merchant bankers as well as
managing public issues in syndication with other merchant bankers.
▪ Merchant banks can play highly significant role in mobilizing funds of savers
to investible channels assuring promising return on investments activity.
▪ With the growth of merchant banking profession corporate enterprises in
both public and private, sectors would be able to meet the growing
requirements for the funds for establishing new enterprises, undertaking
expansion/modernization/diversification of the existing enterprises.
▪ Merchant banks have been procuring impressive support from capital market
for the corporate sector for financing their projects.
▪ In view of multitude of enactments, rules and regulations, guidelines and
offshoot press release instructions brought out by the Government from time
to time imposing statutory obligations upon the corporate sector to comply
with all those requirements prescribed therein, the need of skilled agency
existed which could provide counselling.
▪ Merchant bankers advise the investors of the incentives available in the form
of tax relief’s, other statutory relaxations, good return on investment and

6
 capital appreciation in such investment to motivate them to invest their
savings in securities.

ROLE OF MERCHANT BANKER

The role of merchant banker is dynamic in the wake of diverse nature of

merchant banking services. Merchant banker’s dynamism lies in promptly
attending to the corporate problems and suggests ways and means to solve it.
The nature of merchant banking services is development oriented and
promotional to help the industry and trade to grow and survive. Merchant banker
is, therefore, dedicated to achieve this objective through his dynamism. He is
always awake to renew his skills, develop expertise in new areas so as to equip
himself with the knowledge and techniques to deal with emerging new problems
of corporate business world. He has to keep pace with the changing environment
where Government rules, regulations and policies affecting business conditions
frequently change; where science and technology create new innovations in
production processes of industries envisaging immediate renovations,
diversification, modernizations or replacements of existing plant and machinery
or other equipment’s putting new demands for finances and necessitating
overhauling of the capital structure of the firms.

Merchant banker has to think and devise new instruments of financing industrial
projects. He has to assume wider responsibilities of saving industrial units from
going sick and guiding industries to be set up industrially backward areas to
eliminate regional imbalances in industrial development of the country. He has to
guide the wider section of the community possessing surplus money to invest in
corporate securities and other productive investment channels. He has to help the
industry in different forms to ensure that it runs risk free and devoid of
uncertainty by assisting the has to watch the interest and win over the confidence
of the Government, its agencies, along with the entrepreneurs, the investors and
the whole community. He must bridge the communication gap between different

7
 sections and resolve the problem being faced in different areas concerned with
the business world.

In the days ahead, merchant bankers have very significant role to play tuning
their activities to the requirements of the growth pattern of corporate sector, the
industry and the economy as a whole, which is, in it, a challenging task and to
meet these challenges merchant bankers will have to be more vigorous and
strategic in playing their role. They will have also to adopt new ways and means
in discharging their role.

MERCHANT BANKERS COMMISSION

As determined by the Finance Ministry, Government of India, Merchant Bankers

are

eligible to charge commission / fee from their clients as detailed below :

I. A Merchant Banker can charge 0.5% as the maximum as commission for

whole of the issue.
II. They can charge project appraisal fees.
III. A lead manager can claim a commission of 0.5% up to Rs.25 crore and
0.2% in excess of Rs.25 crore.
IV. Underwriting Commission.
V. Brokerage commission 1.5%.
VI. Other expenses like advertising, printing, Registrar’s expenses, stamp
duty etc., in connection with the issue can be reimbursed from its clients.

Type of Security On amount On amount

Devolving on subscribed by
underwriters public
1.Equity shares 2.50 2.50

8
 2.Preference
share/debentures
(a) Upto Rs. 5 lakh 2.50 1.50
(b) Excess of Rs. 5 2.00 1.00
lakh

• GROWTH OF MERCHANT BANKING IN INDIA

Formal merchant banking activity in India was originated in 1969 with

Merchant Banking Division set up by the Grindlays Bank, the largest foreign
bank in the country. The main service offered at that time to the corporate
enterprises by the merchant banks included the management of public issues
and some aspects of financial consultancy. Other foreign banks like City
Bank, Chartered Bank also assumed the merchant banking activity in India.
State Bank of India started merchant banking in 1973 followed by ICICI in
1974. Both these Indian merchant bankers emerged as leaders in merchant
banking having done significant business during the period of 1974-1987 in
comparison to foreign banks. The early and mid-seventies witnessed a boom
in the growth of merchant banking organizations in the country with various
commercial banks, financial institutions, and broker’s firms entering in to the
field of merchant banking.

The early growth of merchant banking in the country is assigned to the

Foreign Exchange Regulation Act, 1973 (FERA) where under large number of
foreign companies operating in India were required to dilute their foreign
holdings in order to continue business in the country. This had caused two-
pronged effect viz. firstly, in the form of spate in ‘Foreign Exchange
Regulation Act Issues’ eliciting interest of the investors by creating massive
awareness about capital markets amongst the new class of investing public,
secondly, merchant banking activity became attractive to banks and the firms

9
 of consultants and share brokers who entered into this fields vigorously to reap
the advantages of the expanding capital markets.

• PROBLEMS OF MERCHANT BANKERS

1. SEBI guidelines have authorized merchant bankers to undertake issue

related activities only with an exception of portfolio management. These
guidelines have made the merchant bankers either to restrict their activities or
think of separating these activities from the present one and float new
subsidiary and enlarge the scope of its activities.

2. SEBI guidelines stipulate a minimum net worth of Rs.1 crore for

authorization of merchant bankers. Small but professional and specialized
merchant bankers who do not have a net worth of Rs.1 crore may have to close
down their business. The entry is denied to young, specialized professionals
into merchant banking business.

3. Non co-operation of the issuing companies in timely allotment of

securities and refund of application money is another problem of merchant
bankers. The guidelines have put the responsibility on the merchant bankers.
They have to seek the co-operation of the issuing company to shoulder the
responsibility.

10
• CURRENT SCENARIO

Merchant banking is an area that we need to build and grow in the years to
come. As India forms part of the global village, it becomes increasingly
necessary for us to look at this business in a more holistic manner.

Obviously, international players with strong domestic partners such as DSP

Merrill Lynch, JM Morgan Stanley, Kotak Mahindra Capital, together with
experienced organizations like Enam and institutional backed investment
bankers such as ICICI Securities, etc., are the ones who have expertise,
muscle, and placement power in a greater measure than relatively new
entrants.

The red hot economy is the obvious starting point. India is likely to end the
year with GDP growth in excess of 7 percent. Companies and private equity
investors are sitting on large piles of cash. In 2006 deal activity was largely
restricted to the IT and Telecom sectors.

MERCHANT BANKING: INDIAN SCENARIO

Merchant Banking activity was formally initiated into the Indian capital
markets when Grindlays Bank received the license from Reserve Bank in
1967. Grindlays which started with management of capital issues, recognized
the needs of emerging class of entrepreneurs for diverse financial services
ranging from production planning and system design to market research.
Apart from meeting specially, the needs of small-scale units it provided
management constancy services to large and medium sized

companies. Following Grindlays Bank, Citi Bank set-up its Merchant Banking
division in 1970. The division took up the task of assisting new entrepreneur
and existing units in the evaluation of new projects and raising funds through
borrowing and issue of equity. Management consultant services were also
offered. Consequent to the recommendations of Banking Commission in1972,

11
 that Indian bank should start Merchant Banking Division in 1972. In the initial
years the SBI’s objective was to render corporate advice and assistance to
small and medium entrepreneurs.

The economic reforms initiated by the Government since July 1991 in the files
of industry, trade and financial sector have paved the way for rapid
development of the economy. Several projects have been conceived since then
and almost all the major groups in the country that have announced their
intentions to set-up mega projects in infrastructure sector envisaging
investment of thousands of crores. With several large projects been set-up and
many more on the drawing board, the demand for a complete range of
Merchant Banking services encompassing project advisory services, issue
management and financial advisory services for corporate sector has increased
considerably. This has led to a sharp growth in the Merchant Banking business
in the last 2 years.

QUALITIES OF GOOD MERCHANT BANKERS

Merchant bankers are individual experts who organize and manage the
merchant banks. The operations of merchant banks are, therefore, influenced
by the personality trait of these individuals. For the success of merchant
bank’s operations, the qualities which merchant bankers should have are
discussed below:-

➢
LEADERSHIP:– merchant banker should possess all relevant skills, update
knowledge to interact with the clients and effectively communicate.
Leadership is synonymous with followers who follow the one who leads.

➢
AGGRESSIVE ACTION:- aggressiveness is a personality trait of a good
leader but in merchant banking it has a wider connotation. Aggressive
merchant bankers are always looking for new business. Once a business

12
 opportunity has been located, the merchant banker has got to obtain the
mandate for the merchant banking assignment from the clients at once which
will depend upon his own communication skills, persuasiveness and the
background of the organization to which he belongs. A good merchant banker
is one who does not allow his client to think anything outside except what has
been advised.

COOPERATION AND FRIENDLINESS:- These two characteristics are

the symbols of good leadership but it hardly needs to be stressed that
cooperation and friendliness coupled with persuasiveness are the main
instruments with which a merchant banker mixes with the people, gathers
information, obtains business mandate and renders satisfactory services to the
clients. Business of an honest business merchant banker spreads with
geometrical propagation when he shares the thoughts of his clients with
sympathetic gestures and offers pragmatic suggestions without greed or
favours. Very often, rude, intemperate and indifferent disposition or blunt out
burst withdrew fortunate business opportunities forever.Friendliness and
cooperation must flow as natural traits in the merchant banker to win the trust
of the clients.

➢
CONTACTS :– success of merchant banker depends upon his sociable nature
and the richness of wider contacts. A merchant banker is supposed to be
acquainted deeply with all the constituents of merchant banking. The scope of
contact encompasses intimate contiguity and acquaintances within his own
organization, Central and State Government Offices where compliances under
various relevant enactments are to be reported, Indian and foreign banks,
financial institutions at Central and State levels, promoters/directors/owners
and chief executives of the private and public enterprises which would be
prospective beneficiaries of merchant banking services, printers, advertising
agencies, brokers and stock exchange dealers, advocates and solicitors and

13
 members of the press whose services are availed of in executing merchant
banking assignments. Merchant bankers should widen contacts and references
and continue to maintain them with goodness, honour and humour by meeting
people.

➢
ATTITUDE TOWARDS PROBLEM SOLVING:– The most important
personality trait of a merchant banker is his attitude towards problem solving.
Even client coming to him has got to return fully satisfied having consulted a
merchant banker. Positive approach to understand the view points of others,
their difficulties and their adverse circumstances is possible only when a
person is skilled in human relations particularly the inter-personal and intra-
personal behavior. Effective communication and proper feedback are the pre-
requisite for creating a positive attitude towards problem solving
Many persons are effective in this trait without any training for reasons of
cultivating a habit from environment in which they have been brought up at home, in
school, college and office. This is so important that it must be treated as a separate
objective quality of a good merchant banker.

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

14
REGISTRATION OF MERCHANT BANKER

The term ‘Merchant Banking’ originated in the 18t h and early 19t h centuries

in the United Kingdom when trade between countries was financed by bills
of exchange drawn on the principal merchant houses. With the increase in
international trade, the established merchants started the practice of lending
their names to the new comers and accepting the bills of exchange on their
behalf. They would charge a commission for the purpose and thus acceptance
business became the hallmark of Merchant Bankers. Once these banks had
gained the confidence of the government, they also entrusted with the job of
issuing bonds in the London market.

Although Merchant Banking activity ushered in two decades ago, it was only
in 1992, in India, after the formation of SEBI that is defined and a set of rules
and regulations governing it are in place. In fact, the origin of Merchant
Banking is to be traced to Italy in late medieval times and France during the
seventeenth and eighteenth centuries. Merchant Banker invested accumulated
profits in all kinds of promising activities. Since they added banking business
into the profession of Merchant activities and became a Merchant Banker. A
distinction was existed in banking systems between moneychanger and
exchanger. Moneychangers concentrate on the mutual exchange of different
currencies, operated locally and later accepted deposits for security reasons.
Passage of time money changers evolved into public or deposit banks whereas
exchangers, who operated internationally, engaged in bill-broking that raising
foreign exchange and provision of long-term capital for public borrowers. The
exchanges were remitters and Merchant Bankers. In the seventeenth century,
a Merchant Banker was a dealer in bills of exchange who operated with
correspondents abroad and speculated on the rate of exchange. Initially,
Merchant Bankers were not banks at all and a distinction was drawn between
banks, Merchant Banks and other Financial Institutions. Among all these,
Institutions it was only banks that accepted deposits from public.

15
 1.2 HYPOTHESIS

H0: People does not invest in Securities and Shares

H1: People does invest in Securities and Shares

H0: Investors are not aware of Merchant Banking

H1: Investors are aware of Merchant Banking

H0: Investors does not Uses Merchant Banking Facility provided by Financial
Institutions

H1: Investors does Uses Merchant Banking Facility provided by Financial Institutions

16
 1.3 OBJECTIVES

The Objective to study on Awareness of Merchant Banking in General Public

regarding Investment Option are as follow:

1. To know people invest in shares and securities for their savings

2. To develop the ability to study the functioning of Merchant Banking in India

& learn &apply multidisciplinary concepts, tools &techniques to solve vital
problems.

3. To familiarize with the various services provided by merchant bankers

4. To inform the investors about merchant banking as a consultant option

5. To understand whether investors trust merchant banker while investing

17
 1.4 RESEARCH METHODOLOGY

Research is a purposeful investigation. The term ‘research’ refers to the systematic

method of clarifying the problem, formulating a hypothesis, collecting the data,
analysing the data and reaching certain conclusions. Research process starts with
defining the research problem, formulating a hypothesis, design research, collecting
data and finally interpretation and analysing the data to form a report.

Therefore, research methodology is a way to systematically solve the research

problem. Investigators need to adopt an appropriate methodology in a systematic way
to achieve the objectives.

RESEARCH DESIGN

SAMPLE DESIGN AND SIZE

Sample is defined as the segment of population that is representive of whole
population. The respondents were selected by convenient sampling depending upon
the availability of the respondents. Convenient Sampling (sometimes known as grab
or opportunity sampling) is a type of non-probability sampling which involves the
sample being drawn from a part of the population which is close to hand. It is based
on picking of the individual’s elements as per one’s needs. Sample size is the number
of observations used for calculating estimates of a given population. In this research
project descriptive research design in used. Judgement and convenience sampling
method is used to get information about customer satisfaction. For conducting this
research a structured questionnaire is prepared and sample of customers is taken.

DATA COLLECTION

Direct personal interview method with structured questionnaire was adopted for
the collection of primary data.
Secondary data was been collected through internet sites.

SOURCES OF DATA

SECONDARY DATA:

18
 • Through internet

• Refer the various books

PRIMARY DATA:
Questionnaires are used to collect primary data from respondents. The questionnaire
was structured type and contains questions relating to customer satisfaction.

19
 1.5. SCOPE OF STUDY

• It would help us to develop the ability to study the functioning of Merchant

banking in India & apply multi-disciplinary concept tools and techniques to
solve vital problem

• It familiarize with the various services provided by merchant

• They would help us to draw comparison between public and 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 or her fund to maximise
the return at minimum risk

20
 1.6 LIMITATION OF STUDY

1) Due to paucity of time only limited information can be collected.

2) There can be a possibility of “individual biasness” on the part of respondent

3) Study would be confirmed to only 10 public & private sector merchant

banking companies

4) Sample size to be taken may not be the true representative of the population

5) The customers may be hesitant to provide the necessary information.

6) Only 30 respondents were Selected for Sampling.

7) Data is collected only from limited area.

8) the sample size of only 50 was taken from the limited population for the
purpose of the study, so there can be differences between results of sample
from total population.

9) People can be reluctant to go into details because of their busy schedules.

10) The customers may not feel the need to answer certain questions as per their
convenience.

21
 CHAPTER 2:

REVIEW OF LITERATURE

SR.NO TOPIC PAGE

NO.
2.1 INTRODUCTION 23
2.2 REVIEW 23

22
 2. REVIEW OF LITERATURE

2.1 Introduction :

A literature review or narrative review is a type of review article. A literature review

is a scholarly paper, which includes the current knowledge including substantive
findings, as well as theoretical and methodological contributions to a particular topic.
Literature reviews are secondary sources, and do not report new or original
experimental work.

Most often associated with academic-oriented literature, such reviews are found
in academic journals, and are not to be confused with book reviews that may also
appear in the same publication. Literature reviews are a basis for research in nearly
every academic field.[1] A narrow-scope literature review may be included as part of
a peer-reviewed journal article presenting new research.

A literature review surveys books, scholarly articles, and any other sources relevant to
a particular issue, area of research, or theory, and by so doing, provides a description,
summary, and critical evaluation of these works in relation to the research problem
being investigated.

2.2 REVIEW
There are no. of study have been done on Merchant Banking. A few of literature are
form of banking where the bank arranges credit financing, but does not hold the loans
in its investment portfolio to maturity. A merchant bank invests its own capital in
leverage buyouts, corporate acquisitions, and other structured finance transactions.
Following are the Review of literature:

1) Dr. R.L. HYDERABAD & DR.SO.HALASAGI (2004) in their study that

the merchant banker’s primary function is to assist the corporate
clients in mobilizing financial resources. This is the activity and they are
expected to generate core competency in this particular activity. However, the
merchant bankers deviated from this and concentrated on fund-based
activities.

23
2) Bruce W. Barren (The EMCO/ Hanover Group)(2006) in their study
merchant banker acted as a capital sources whose primary activity was
involved in the buying, selling and shipping of goods. The role of the
merchant banker, who had the expertise to understand a particular transaction,
was to arrange the necessary capital and ensure that the transaction would
ultimately produce “collectable profits”. Often, the merchant banker also
became in the actual negotiations between a buyer and seller in a transaction.

3) K.C. Gupta and Joginder (2008) Merchant Banking is an important service

provided by a number of financial institutions that helps in the growth of the
corporate sector which ultimately reflects into the overall economic
development of the country. Merchant banks were expected to perform several
functions like issue management, underwriting, portfolio management, loan
syndication, consultant, advisor and host of other activities. SEBI was also
made all powerful to regulate the activities of merchant banking was the
necessity of banks themselves which were in need of non-fund based income
so as to improve their profitability margins by all means in the changed
economic scenario.

4) Sankar De & Sushil Khanna (1994) This study examines the economic and
financial implications of some of the regulations introduced by the new
Securities Board of India (SEBI) through the guidelines it has periodically
issued. The regulations apply to investment or merchant banking services
required for corporate issues of long-term securities in India. The authors find
that some implications of the guidelines may be in conflict with the professed
objective of the current economic policy.

24
 CHAPTER 3

PROFILE OF THE STUDY

SR.NO TOPIC PAGE

NO.
3.1 AREA OF THE STUDY 26
3.2 AGE 26
3.3 GENDER 26
3.4 OCCUPATION 26

25
 3. PROFILE OF STUDY

3.1 Area of the Study :

The present study was conducted in Andheri (E). Population for the present study
comprised of customers of State Bank of India, Bank of Baroda, ICICI Bank and
various other banks of the area.

3.2 Age :

In today’s scenario everyone wants to invest their money in some or any aspects for
better return or safety in future. I have tried to focus on which age group people focus
on saving or invest where I observe that above 30 years age group choose option of
saving or investment.

3.3 Gender:

In India, we have seen a lot of working women as compared to men. So in my

questionnaire survey out of 30 samples, 18 are women and only 12 are men.
Through this I assumed that mostly women visit the banks.

3.4 Occupation :
Out of 30 samples collected, everyone is from a different profession. Some were
House-wife, Students, some were working in Corporates, a few were Teachers,
Proprietors, Service etc.

26
 CHAPTER 4

ANALYSIS

SR.NO TOPIC PAGE NO.

4.1 INTRODUCTION 28
4.2 DATA ANALYSIS 29

27
 4. DATA ANALYSIS

4.1 INTRODUCTION

This project deals with the description of the sample of 30 interviewer focused on
demographic factors (gender, age, occupation) data analysis and its interpretation. The
thesis is mainly focused on the people or DeMat Account holder that investors choose
which saving options. The project is to focus upon whether investors take an expert
advise to invest in such Investment to minimise the risk and increase the profit margin
in a short period of time. The Questions are Asked in an descriptive manner to a
multiple option type questions for eased responses. The collected data is analysed
using Pie Diagram And Bar Graph.

28
4.2 DATA ANALYSIS

1) AGE

CHOICES PERCENTAGE COUNT

18-30 YEAR 43.33% 13
31-50 YEAR 50.00% 15
50 & ABOVE YEAR 6.67% 2
TOTAL 100% 30

AGE
18-30 YEAR 31-50 YEAR 50 & ABOVE

50 &…

18-30 YEAR
43%
31-50 YEAR
50%

INTERPRETATION- People under age of the 31-50 years believe in savings more
than compare to 18-30years and 50&above years.

29
 2) OCCUPATION

CHOICES PERCENTAGE COUNT

BUSINESS 50% 15
SERVICE 33% 10
OTHER 17% 5
TOTAL 100% 30

OCCUPATION
BUSINESS SERVICE OTHER

17%

50%

33%

INTERPRETATION- As we can see that businessmen saves more than

servicemen and other occupation people.

30
 3) GENDER

CHOICES PERCENTAGE COUNT

MALE 60.00% 18
FEMALE 40.00% 12

GENDER
MALE FEMALE

40%

60%

INTERPRETATION- The above diagram shows female are more engaged in

savings for future expense with the option of fixed deposit and has lack
knowledge about merchant banking.

31
 4) WHAT IS YOUR ANNUAL INCOME?

CHOICES PERCENTAGE COUNT

1.5 LAKHS – 3LAKHS 40% 12
3 LAKHS – 5 LAKHS 43.33% 13
5 LAKHS & ABOVE 16.67% 5
TOTAL 100% 30

ANNUAL INCOME
1.5 LAKHS - 3 LAKHS 3 LAKHS - 5 LAKHS 5 LAKHS & ABOVE

17%

40%

43%

INTERPRETATION – As above diagram says that a people earns 3 to 5 lakhs

annually and are eligible to save good amount through various ways

32
 5) DO YOU LIKE TO SAVE YOUR MONEY FOR PASSIVE INCOME ?

CHOICES PERCENTAGE COUNT

YES 86.67% 26

NO 6.67% 2

MAYBE 6.67% 2

TOTAL 100% 30

CHOICES
YES NO MAY BE

7%
6%

87%

INTERPRETATION - As above diagram says that 87% of bread earner likes to save
their money as a passive income for future benefits or for higher returns.

33
 6) WHAT PERCENTAGE OF YOUR ANNUAL INCOME DO YOU
SAVED TO INVEST ?

CHOICES PERCENTAGE COUNT

46.67% 14
5% -10%
40% 12
10%- 20%
13.33% 4
20% & ABOVE
100% 30
TOTAL

PERCENTAGE
5% - 10% 10% - 20% 20% & ABOVE0

13%

47%

40%

INTERPRETATION – As in above diagram people usually saves 10% - 20%

of their annual income for the savings of passive income.

34
 7) WHAT ARE THE FACTORS TO WHICH YOU GIVE PRIORITY
WHEN YOU INVEST ?

CHOICES PERCENTAGE COUNT

33.33% 10
SAFETY
43.33% 13
HIGH RETURN
6.66% 2
LIQUIDITY
16.67% 5
LESS RISK
100% 30
TOTAL

Chart Title
14 13

12

10
10

6 5

2
2

0
COUNT

SAFETY HIGH RETURN LIQUIDITY LESS RISK

INTERPRETATION – As diagram clearly explain that people invest for the

purpose of safety.

35
 8) IF YES; THEN WHERE WOULD YOU LIKE TO INVEST FOR
BETTER RETURN ?

CHOICES PERCENTAGE COUNT

53.33% 16
FIXED DEPOSIT
16.67% 5
SHARES AND
SECURITIES
13.33% 4
MUTUAL FUND
6.67% 2
INSURANCE
10% 2
OTHER
100% 30
TOTAL

18
16
16

14

12

10

6 5
4
4
2 2
2

0
CHOICES

FIXED DEPOSIT SHARES AND SECURITY

MUTUAL FUND INSURANCE
OTHER

INTERPRETATION – As we can see that people select fixed deposit for the
purpose of safety rather than higher return.

36
 9) DO YOU TAKE ANY ADVICE OR CONSULTANCY WHILE
INVESTING IN SECURITIES OR MUTUAL FUND ? (ANSWER
ONLY IF YOU CHOOSE SECURITIES AND MUTUAL FUND)

CHOICES PERCENTAGE COUNT

56.67% 17
YES
26.67% 8
NO
16.67 5
MAY BE
100% 30
TOTAL

MAY BE NO YES

CHOICES 8

17

0 5 10 15 20

INTERPRETATION – As we can see that 56.67% take advise from consultant

while investing in securities or mutual fund.

37
 10) DO YOU TRUST UPON KNOWLEDGE OF CONSULTANT IN
FINANCE MARKET ?

CHOICES PERCENTAGE COUNT

60% 18
YES
10% 3
NO
30% 9
MAYBE
100% 30
TOTAL

MAY BE NO YES

CHOICE 3

18

0 5 10 15 20

INTERPRETATION – As above graph says that 60% of the sample size trust
upon knowledge of consultant and only 10% of sample size don’t trust on
knowledge of consultant.

38
 11) ARE YOU AWARE ABOUT MERCHANT BANKING, A TYPE OF
FINANCIAL SERVICE WHO ADVISORY SERVICE FOR
INVESTMENT ?

CHOICES PERCENTAGE COUNT

76.67% 23
YES
23.33% 7
NO
100% 30%
TOTAL

AWARE OR NOT
YES NO

12%

88%

INTERPRETATION – As above diagram focus on study of awareness of

merchant banking, it gives a clear knowledge about the awareness of investors
towards merchant banking where 76.67% knows about it.

39
 12) ARE YOU SATISFIED WITH THE SERVICES PROVIDED BY
YOUR BANK ?

CHOICES PERCENTAGE COUNT

80% 24
YES
20% 6
NO
100% 30
TOTAL

SATISFACTION
30
24
25

20

15

10
6
5

0
SATISFACTION
YES NO

INTERPRETATION – As the study says that 80% of the investors are satisfies by the
services provided by the merchant banker.

40
13) NON-FINANCIAL INSTITUTION DEPENDS ON MERCHANT
BANKING ?

CHOICES PERCENTAGE COUNT

YES 46.67% 14

NO 20% 6

DON’T KNOW 33.33% 10

TOTAL 100% 30

16
14
14
12
10
10
8
6
6
4
2
0
CHOICES
YES NO DON’T KN OW

INTERPRETATION – As the studies says that Non-Financial Institution depends

upon the Merchant banking.

41
 14) SUGGESTION TO AWARE PEOPLE ABOUT THE MERCHANT
BANKING ?

ANS- 90% of the respondent answer this questions by saying that financial institution
should show more and more advertisement about the services of merchant banking to
make general public aware about the Merchant banking.

42
 CHAPTER 5

FINDINGS & CONCLUSIONS

SR NO. TOPIC PAGE NO.

5.1 FINDINGS 44
5.2 CONCLUSIONS 45

43
 CHAPTER 5

FINDINGS & CONCLUSION

5.1 FINDINGS

Findings means purpose of research done for. Merchant banking helps me to find the
corporate profile of the investor. The findings of the research are as follow:

➢ In most of the cases, the issuer 225 companies appointed their own subsidiary
company/sister concern to advice on their equity issue

➢ Companies making large size issues of equity shares relied more on foreign
merchant banker than on Indian merchant banker because of their vast
international network.

➢ Respondents are interesting in saving their annual income for the passive
income which they will use it in the future in their retirement for the
independence on the others.

➢ Respondents founds that fixed deposits type of savings is better than mutual
fund because mutual fund is more risky as compare to fixed deposit

➢ Respondents wants to invest in the fixed deposits because it is more safer than
mutual fund

➢ Respondents observe that fixed consume time than mutual fund for the better
return

44
5.2 CONCLUSION

Conclusion is the chance to have the last word on the subject. The conclusion
allows you to have the final say on the issues you have raised in your paper, to
synthesize your thoughts, to demonstrate the importance of your ideas, and to
propel your reader to new view of the subject. It is also your opportunity to
make a good final impression and to end on a positive note.

The research is further concluded as:

After testing the hypothesis I found that people like to invest in fixed
deposits than in mutual fund or shares and securities as it more safer than it.
The investors who are investing in the mutual fund or shares and securities
takes the advice from the Merchant Banker.
They trust the merchant banker’s knowledge in the financial market.
The person who are investing in the fixed deposits or any other saving options
for safe return and less risk does not have any idea about the facility provided
by the merchant banker.
The investors who use the merchant banking facility are satisfied by
the services provided by the merchant banker. And only limited people are not
satisfied by the services provided by the merchant banker.
As looking forward for the growing demand of merchant banking it a
roadmap the unemployed population for put their step in it. As merchant
banker can becomes a career option for the students.

45
 CHAPTER 6

SUGGESTIONS

INDEX

SR NO. TOPIC PAGE

NO.
6.1 SUGGESTIONS & 47
RECCOMENDATION

46
 CHAPTER 6
SUGGESTION

1. Merchant banker should provide services like merger and acquisitions advise.

2. Merchant banker should a provide service like project counselling

3. Merchant banker should advertise as much as possible for the awareness

among the general public and inform them about the investment option
.
4. Merchant banker should educate the investors about the risk management and
proper planning for the investment

5. They should also provide technical, financial & managerial services & help
the company to set up a track record

6. The assistance should be provided for the equity support through loan support
to supplement this may be extended

47
 CHAPTER 7

SCOPE FOR FURTHER STUDIES

INDEX

SR.NO TOPIC PAGE

NO.
7.1 INTRODUCTION 49
7.2 SCOPE 49

48
 CHAPTER 7
SCOPE OF FURTHER STUDY

7.1 INTRODUCTION

Project report consists of technical process, location, management profile,

means of financing, reports on market surveys and market explorations.
Merchant bankers advise the clients on project preparation. Merchant bankers,
on behalf of their clients, engage technical consultants specialized in the
specific area, and marketing experts to prepare technical feasibility report and
market survey reports.

7.2 SCOPE

Merchant bankers maintain the list of such experts approves by financial

institutions and assign the work to these experts. It should be understood that
interest rates are not the only definition of capital costs. Restrictions on
availability, prepayment terms, and operating effectiveness can often outweigh
what might appear to be inexpensive capital with low interest rates. Too often,
capital includes costs, which force an entrepreneur or a business to undertake
undesirable actions. In the short-run, some actions might be necessary, but
often in the long run are detrimental. The traditional merchant banker
understands these capital limitations and can structure a transaction, which is
beneficial to all sides of the table -- not just the capital source. The various
studies which had been undertaken in India for evaluating the performance of
Merchant Banking firms and the implications of these on securities industry.
No single study has been emerged so far pertaining to the evaluation of
Merchant Banking firms and in-depth study on their activities as well as
operational and financial performance in the light of changing regulatory
environment. In recent past, the small investor has turned his back on the
primary capital market. Issue after issue as failed to capture his imagination,
rekindle his enthusiasm, and reinforce his faith. He has lost all hopes of
appreciation of his investment. And this when all these years millions have

49
though capital market, ate capital market and dreamt capital market. It needed
an extraordinary effort and skill the drive the small investor away! High
premiums, false premiums and gray market operations. The professed
protector of his interests first laid down the dictum of proportionate allotment,
then of minimum subscription, all working against his interests. This would
make an observant student of the stock market infer that there is some game
plan afoot to dethrone the small investor from his prominent; he was believed
to be the king. With the coming to SEBI, an organisation that was ostensibly
brought into existence to guard the interest of the small investor, hopes ran
high that the small investor would now have a safe playing field. But these
hopes were soon belied. Far from guarding the interests of the investing
public, SEBI embarked on a course of action, which has positively hurt them.
The latest fiat of EBI bans corporate advertising after the receipt of
acknowledgement card by a company wanting to go public. SEBI’s this action
has caused the closure of an information window. Now 50 million potential
investors are deprived of official and authentic information given by the
Issuer. It is hard to understand reasons for this drastic and totally uncalled for
action. While there has been no official explanation for this fiat, there is
reason to believe that it may be based on a wrong perception of the role for
corporate advertising.
All this has been done perhaps because the corporate and intermediaries is to
follow the practices of Western capital markets here, oblivious of the fact that
our capital markets are altogether different in structure, in systems and in the
number of participants Freedom of commercial expression could be exploited
by some to serve their own ends, just a s freedom of speech and expression
could be abused but this has not led our Government to put arbitrary
restrictions on our freedom.

50
 BIBLIOBRAGAPHY

BOOKS

1. Merchant Banking and Financial Services – Madhu Vij & Swati Dhawan
2. Merchant Banker – H.R. SUNEJA
3. Merchant Banking Principles & Practices- H.R.MACHIRAJU

WEBSITES

www.google.co.in

www.jmmorgansranley.com

www.economictimes.com

https://s3.amazonaws.com/ppt-download/merchantbankproject-150109041034-
conversion-gate02.pdf?response-content-
disposition=attachment&Signature=UqldsmmHzlPgg8fV28pOc0LTvkI%3D&Expire
s=1553596694&AWSAccessKeyId=AKIAIA5TS2BVP74IAVEQ

51
 ANNEXURE

1) Age

• 18-30year
• 31 – 50 year
• 50& above year

2) Occupation

• Business
• Service
• Others

3) Gender

• Male
• Female

4) What is your Annual Income ?

• 1.5 lakhs -3 lakhs

• 3 lakhs – 5 lakhs
• 5 lakhs & above

5) Do you like to save your money for passive income ?

• Yes
• No
• Maybe

6) What Percentage of your annual income do you save to invest ?

• 5%- 10%
• 10% - 20%
• 20% & above

52
7) What are the factors to which you give priority when you invest ?

• Safety
• High return
• Liquidity
• Less risk

8) If yes; then where would you like to invest for better return ?

• Fixed deposit
• Share and securities
• Mutual fund
• Insurance
• Others

9) Do you take any advice or consultancy while investing in securities or mutual fund

• Yes
• No
• Maybe

10) Do you trust upon knowledge of consultant in Financial Market ?

• yes
• no
• maybe

11) Are you Aware about Merchant Banking, a type of Financial services who
advisory services for investment ?

• yes
• no

12) Are you satisfied with the services provided by your bank ?

• yes
• no

53
13) Non-financial institution depends on Merchant banking ?

• yes
• no
• Don’t Know

14) Suggestion to Aware people about the Merchant Banking

54