The merchant bankers provide assistance to corporate houses on the following lines.
1. Project counseling.
2. Loan Syndication.
3. Issue Management.
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4. Management of fixed deposits of Joint Stock Companies.
5. Portfolio Management.
6. Corporate Counseling.
7. Assistance in floating new companies.
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8. Bought out Deals
9. Venture Capital.
1. Project Counseling
a. Assist corporate houses for incorporation and obtain certificate of commencement of business.
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b. Assist to obtain letter of intent/industrial licence.
c. Obtain permission if required, of joint controller of imports and exports for import of capital goods.
d. Merchant Banking Division assists in introducing/selecting and appointing outside technical consultancy organization(s), if considered necessary, for preparation of a detailed project report, market survey report, feasibility study, etc.
e. Where the company has already prepared a project report, the Division would review the same and advice on the viability of the project and scrutinizes the same from financial angle.
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f. For effective implementation of the project, the Division would advise/guide the company the steps to be taken with regard to procedural matters, viz., obtaining consents of the Government agencies such as Ministry of Industry, SEBI, Reserve Bank of India, etc.
2. Loan Syndication
The division would help in drawing a financial plan setting out the means of financing the project to conform to the requirements of financial institutions/banks, government agencies as also stock exchange authorities after studying/finalizing the project assistance in preparing detailed applications for term loans from financial institutions/banks.
The detailed project report and term loan applications would thereafter be submitted to financial institutions/banks to secure their participation in term loans and necessary follow-up action would be initiated. It includes the following assistance:
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(a) Assist promoters to raise finance from Financial Institutions/banks for modernization/expansion.
(b) Arrange consortium meetings.
(c) Prepare necessary documents.
(d) Execution of necessary documents, registration of charges, etc.
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(e) Arrange Syndication of Euro-currency Loans/guarantees whenever required. (Euro currency loans are foreign currency loans raised outside the country of the currency)
3. Issue Management
The merchant Banking Division would render the following:
a. Public Issue
b. Rights Issue
c. Debenture Issue
d. Advisors to Non-Resident Issues
e. Private placement deals
a. Public Issue
(i) Advising the company on planning and timing of the issue.
(ii) Obtaining the consent of the SEBI including their approval for reservation of shares for non-residents (on repatriation basis) employees and business associates.
(iii) Making necessary arrangements for underwriting the issue by financial institutions, banks and/or brokers.
(iv) Selection and appointment of a principal broker, brokers and bankers to the issue.
(v) Selection and appointment of an issue house and fixing their remuneration.
(vi) Selection and appointment of advertising consultants/agencies for organising the necessary publicity campaign including press and brokers/investors’ conferences at important centres.
(vii) Preparing the draft prospectus, where necessary, ‘having it approved by solicitors.
(viii) Obtaining the clearance of financial institutions, bankers, other underwriters and stock exchanges for the draft prospectus.
(ix) Arranging for designing and printing of draft prospectus as well as dispatch of the final prospectus.
(x) Filing a copy of the prospectus along with the other necessary documents under Section 60 of the Companies Act, with the Registrar of Companies.
(xi) Making an application to stock exchanges(s) to have the shares listed and comply with all the listing requirements.
(xii) Obtaining written consents from auditors, solicitors and advocates bankers to the company, bankers and brokers to the issue, etc. to act in their respective capacities.
(xiii) Obtaining permission from Reserve Bank of India for offering shares to non-residents and opening Foreign Currency Collection Accounts at our overseas branches.
(xiv) Monitoring the progress and furnishing information to the company on the response to the issue.
(b) Rights Issue
(i) Advising the company on planning and timing of the issue.
(ii) Obtaining consent of the SEBI.
(iii) Assisting in underwriting/making standby arrangement with financial institutions, banks brokers.
(iv) Drafting and finalizing the letter of offer and getting the same approved by the stock exchanges wherever the shares are listed.
(y) Selection and appointment of principal broker, broker and banker to the issue.
(vi) Selection and appointment of an issue house and advertising consultant/agency.
(vii) Designing, printing and mailing of letters of offers, application forms, etc.
(viii) Where the shares are held by non-residents of Indian Nationality/origin, assisting the company in obtaining necessary permission from Reserve Bank of India where required.
(c) Debenture Issue
1. Computation of amount of debentures that can be raised as per the prevailing Government guidelines.
2. All other services mentioned above for public and right issues as applicable.
3. Advisors to Non-Resident Issues
4. Obtaining approval of the Securities and Exchange Board of India (SEBI) for reservation of a part of the issue for non-residents of Indian Nationality/origin.
5. Obtaining permission from the Reserve Bank of India for offering shares/debentures to non-residents and for opening Foreign Currency Collection Accounts at overseas branches, if applicable.
6. Advising the strategy of marketing the issue amongst non-residents.
7. Arranging investors’ conferences and publicity campaigns abroad.
8. Arranging Collection of application moneys at overseas branches and monitoring the day-to-day progress of the issue.
4. Management of Fixed Deposits of Joint Stock Companies
(i) Computation of amount that a company can raise by way of deposits from public and deposits/loans from shareholders.
(ii) Advising the company on terms and conditions for acceptance of fixed deposits and the rate of interest to be paid thereon keeping in view the prevailing conditions in capital and money markets.
(iii) Drafting of an advertisement to be issued inviting deposits from public.
(iv) Filing a copy of the advertisement with the Registrar of companies for registration.
(v) Arranging for issue of advertisement in newspapers as required under the Companies Act.
(vi) Drafting of application form and arranging printing thereof.
(vii) Arranging for collection of deposits at various branches of the Bank.
(viii) Submitting periodical statements to the company.
(ix) Arranging the company for payment of interest warrants.
(x) Assisting the company in observing all the rules and regulations in this connection.
(xi) Maintaining of records/registers for the purpose.
5. Portfolio Management
Portfolio Management includes the following:
(i) Advise on right mix of securities for maximum returns with minimum risk.
(ii) Undertake to sell / buy securities on authorization.
6. Corporate Counseling
It includes identifying the cause of problems like tight liquidity, over/under capacity utilization, product mix, etc.
7. Bought out Deals
Under the scheme, a portion of equity to be offered to the investing public is taken up in the first instance by the merchant banker. At an appropriate later time these shares are placed with the public at a price which will fetch reasonable and adequate return to them.
8. Venture Capital
Providing long-term start up funds for high risk ventures promoted by unknown technocrats/entrepreneurs, which suffer from capital deficiencies but have a high profit potential.
Funding an emerging high risk, hi-tech project based purely on Research and Development efforts is termed as venture capital financing. It is a long-term financial arrangement and oriented towards capital gains. It is a source of financing for hi-tech industries which use new technology to produce new products.