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(EVOLUTION)
In banking a merchant bank is a traditional term for an
investment bank. The so called merchant banks, were in fact
the original ‘banks’.
These were invented in the middle ages by Italian grain
merchants.
Merchant bankers were individuals or banking houses whose
major objective was to provide capital for commodity traders,
cargo owners, and buying, selling and shipping of goods. They
carried out their lending operations from a bench, which in
Italian term was known as ‘banco’. Thus the merchant banking
came into existence. Later on, the centre of merchant banking
operations was shifted from Italy to Amsterdam and thereafter
to London.
INTRODUCTION
Section 2(e) of SEBI Act, 1992 defines
merchant banker as ‘any person who is
engaged in the business of issue management
either by making arrangements regarding
selling, buying, or subscribing to securities as
manager, consultant, adviser or rendering
corporate advisory service in relation to such
issue management’.
Merchant Banks - Concept
There is no statutory or any authoritative definition for the
term Merchant Banking. For many, it just means
management of capital issues of companies. Some confuse
this with investment banking and an issue house. Yet
another group of persons mean it to what a merchant banker
does. In this situation, let us try to settle for a workable
definition of this term.
Financial
Services
Underwriting functions
Investment advises
Dealing in securities
Citibank-1970
SBI-1972
SEBI Merchant Banking Regulations
Categorization
Category I to act as lead manager and carry on any activity
of the issue management, including preparation of
prospectus and other information relating to the issue,
determining financial structure, tie up of financiers and final
allotment and refund and refund of the subscription and to
act as a adviser ,consultant, manager, underwriter, portfolio
manager
Category II : to act as adviser ,consultant, co-manager,
underwriter, portfolio manager
Category III : to act as underwriter , adviser and consultant
to an issue
Category IV : to act only as advisor or consultant to an issue
Ranking of Merchant Banking in India:
Merchant Banker OE FSS QPS QM INN
ICICI Securities 4.0 4.0 4.2 3.8 4.3
IDBI 4.2 3.2 4.5 4.0 4.8
SBI Caps 4.4. 3.9 4.6. 6.7 5.2
DPS 6.1 5.7 6.0 6.0 5.3
IFCI 6.1 5.7 6.0 6.0 6.3
Bank of Baroda 6.7 6.5 6.7 6.6 6.8
Jardine Fleming 5.8 6.2 5.9 5.0 5.5
JM Finance 6.0 6.5 5.5 5.9 5.4
ENAM 6.3 6.8 6.4 6.3 6.2
PNB Caps 6.8 6.8 6.7 6.8 6.8
Note: OE: Overall Excellence; FSS: Financial Soundness ; QPS: Quality Product/Service;
QM: Quality Management; INN: Innovativeness.
Capital Adequacy Requirement
SEBI has prescribed the following net worth
requirements for merchant bankers. The total paid
up capital and free reserves is considered as net
worth
Category Minimum Amount of Net Worth
I Rs 5,00,00,000
II Rs 5,00,000
III Rs 20,00,000
IV Rs Nil
REGULATORY FRAMEWORK
The merchant banking activity in India is governed by SEBI (Merchant Bankers)
The merchant banking activity in India is governed by SEBI (Merchant Bankers)
Regulations, 1992. Registration with SEBI is mandatory to carry out the business of
merchant banking in India. An applicant should comply with the following norms:
i) The applicant should be a corporate body.
ii) The applicant should not carry on any business other than those connected with
the securities market.
iii) The applicant should have necessary infrastructure like office space, equipment,
manpower, etc.
iv) The applicant must have at least two employees with prior experience in
merchant banking.
v) Any associate company, group company, subsidiary or interconnected company
of the applicant should not have been a registered merchant banker.
vi) The applicant should not have been involved in any securities scam or proved
guilt for any offence.
vii) The applicant should have a minimum net worth Rs50 million.
FAQ
Q. Is it mandatory for a merchant banker to register with
the SEBI?
Q. Who is eligible to obtain registration as a merchant
banker? A
Q. What are the various categories for which registration
can be obtained? Q. What is the capital requirement for
carrying on activity as merchant banker?
Q. What is the procedure for getting registration?
Q. What is the registration fee payable to SEBI?
Q. What is the validity period of certificate of registration?
Q. How to renew the certificate?
Q. What is the renewal fee payable to SEBI?
Q. What is the consequence of non-registration or failure
to renew registration?
Services of merchant bankers
Merchant Banking
As leading Merchant Bankers in India, we have associated with issues
ranging from Rs.1 crore to Rs.1500 crores, involving various types of
industries, banks, statutory Bodies etc. and have an edge in handling
Private Placement issues – both retail & HNIs.
SPECTRUM OF SERVICES :
Private Placements
Project Appraisals
Monitoring Agency Assignments
IPO Funding
Security Trustee Services