evolution of mb ppt
TRANSCRIPT
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EVOLUTION OF
MERCHANT BANKING
PRESENTED BY
A.MADONA DAFINY JENIFER
(10PBA155)
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CONTENT
DEFINITION OF MERCHANT BANKING
Merchant Account
Merchant Discount Rate
SERVICES OFFERED BY MERCHANT BANKS
HISTORY OF MERCHANT BANKING
INDIAN AND FOREIGN BANKS SUPPORTING THIS
REGULATIONS FOLLOWED
RANKING OF THIS IN INDIA
REFERENCES
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DEFINITION OF
MERCHANT BANKING
Amerchant bank is a financial
institution which provides capital to
companies in the form of share
ownership instead of loans. A merchant
bank also provides advisory on
corporate matters to the firms they lend
to.
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Merchant Account
A merchant account is an agreement
made between the business/seller, the
bank where the merchant account is
held and the payment processor to
settle all transactions made by debit
and credit cards
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Merchant Discount Rate
The rate charged to a merchant by a
bank for providing debit and credit card
services.
The merchant must set up this service with
a bank, and agree to the rate prior to
accepting debit and credit cards as
payment.
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SERVICES OFFERED BY
MERCHANT BANKS
Merchant banking is a service oriented industry. Merchant banks all
over the world carry out the same set of services.
Merchant banks in India carry
out the following functions and services specifically.
1. Corporate Counseling
2. Project counseling
3. Pre-investment Studies
4. Capital restructuring
5. Credit Syndication
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SERVICES OFFERED BY
MERCHANT BANKS(CONT)
6. Issue Management and underwriting
7. Portfolio Management
8. Working Capital Finance
9. Acceptance Credit and Bill discounting
10. Mergers, Amalgamations and Takeovers
11. Venture Capital
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SERVICES OFFERED BY
MERCHANT BANKS(CONT)
12. Lease Financing
13. Foreign Currency Finance
14. Fixed Deposit Broking
15. Mutual funds
16. Relief to Sick Industries
17. Project Appraisal
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HISTORY OF MERCHANT
BANKING
These were invented in the Middle Ages by Italian grain
merchants
In late 17th and early 18th century Europe, the largest
companies of the world were 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
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HISTORY (CONT)
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.
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HISTORY (CONT)
The colonies of other European countries were started in the
same manner. For example, the Dutch merchant adventurers
were active in what is 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.
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THE HISTORICAL MERCHANT
BANK
Merchant Banking, as the term has evolved in Europe from the 18th
century to today, pertained to an individual or a banking house whose
primary function was to facilitate the business process between a
product and the financial requirements for its development. Merchant
banking services span from the earliest negotiations from a transaction
to its actual consummation between buyer and seller.
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THE HISTORICAL MERCHANT
BANK (CONT)
In particular, the merchant banker acted as a
capital sources whose primary activity was directed
towards a commodity trader/cargo owner who 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 involved in the actual
negotiations between a buyer and seller in a transaction.
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THE MODERN MERCHANT BANK
During the 20th century, however,
European merchant banks expanded their
services. They became increasingly involved in the
actual running of the business for whom the
transaction was conducted. Today, merchant banks actually
own and run businesses For their own account, and that of
others.
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THE MODERN MERCHANT BANK
(cont)Since the 18th century, the term merchant banker
has, therefore, been considerably broadened to
include a composite of modern day skills. These
skills include those inherent in an entrepreneur, a management
advisor, a commercial and/or investment banker plus that of a
transaction broker. Today a merchant banker is who has the
ability to merchandise -- that is, create or expand a need -- and fulfill
capital requirements. The modern European merchant bank, in many ways,
reflects the early activities and breadth of services of the colonial trading
companies
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Foreign Players in Merchant
Banking:
GOLDMAN SACHS (INDIA) SECURITIES PVT. LTD.
MORGAN STANLEY INDIA COMPANY PVT LTD
BARCLAYS SECURITIES (INDIA) PVT. LTD
BANK OF AMERICA, N.A
DEUTSCHE BANK
DEUTSCHE EQUITIES INDIA PRIVATE LIMITED
BARCLAYS BANK PLC
CITIGROUP GLOBAL MARKETS INDIA PVT. LTD.
DSP MERRILL LYNCH LTD
FEDEX SECURITIES LTD
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HISTORY OF MERCHANT
BANKING IN INDIAThe formal beginning of the merchant banking services
In India began in 1967 when the Reserve Bank of India
provided license to the Grind lays Bank. The Grind lays
Bank was engaged in capital issuemanagement and it
provided diverse financial services to the emerging
section of entrepreneurs, especially those belonging to the
small and medium enterprise sector.
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HISTORY OF MERCHANT
BANKING IN INDIA (cont)
Citibank started themerchant banking
services in 1970 and the State Bank of
India followed the same in 1972. After few years,
the nationalmerchant banks started
collaborating with their counterparts in different countries
to start theirmerchant banking divisions abroad.
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Merchant Bankers in India:
There are 135 Merchant bankers who
are registered with SEBI now in India.
There are public sector, Private sector
and foreign players registered with
SEBI. The below are the examples of
few of the Merchant bankers in each of
the Public, private and foreign players.
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Public sector Merchant Bankers:
SBI CAPITAL MARKETS LTD
PUNJAB NATIONAL BANK
BANK OF MAHARASHTRA
IFCI FINANCIAL SERVICES LTD
KARUR VYSYA BANK LTD,
STATE BANK OF BIKANER AND JAIPUR
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Private Sector Merchant
Bankers:
ICICI SECURITIES LTD
AXIS BANK LTD.(FORMERLY UTI BANK LTD.
BAJAJ CAPITAL LTD
TATA CAPITAL MARKETS LTD
ICICI BANK LTD
KOTAK MAHINDRA CAPITAL COMPANY LTD
YES BANK LTD.
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REGULATIONS FOLLOWED BY
MERCHANT BANKERSRegistration of Merchant bankers with SEBI
It is mandatory for a merchant banker to register with the
SEBI. Without holding a certificate of registration granted by the
Securities and Exchange Board of India, no person can act as a
merchant banker in India.
1) Only a body corporate other than a non-banking financial company shall be eligible
to get registration as merchant banker.
2) The applicant should not carry on any business other than those connected with the
Securities market.
3) All applicants for Merchant Bankers should have qualification in Finance, law or
Business Management.
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REGULATIONS (CONT)
4) The applicant should have infrastructure like office space,
equipment, manpower etc.
5) The applicant must have at least two employees with prior
experience in merchant banking.
6) Any associate company, group company, subsidiary or interconnected
company of the applicant should not have been a registered merchant banker
7) The applicant should not have been involved in any securities scam or
proved guilt for any offence
8) The applicant should have a minimum net worth of Rs.5 Crores.
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The various categories for which
registration can be obtained are:
1) Category I to carry on the activity of issue management
and to act as adviser, consultant, manager, underwriter,portfolio
manager.
2) Category II - to act as adviser, consultant, co-manager,
underwriter, portfolio manager.
3) Category III - to act as underwriter, adviser or consultant to an
issue
4) Category IV to act only as adviser or consultant to an issue
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The capital requirement for carrying
on activity as merchant banker:
The capital requirement depends upon the
category. The minimum net worth requirement
for acting as merchant banker is given below:
Category I Rs. 5 crores
Category II Rs, 50 lakhs
Category III Rs. 20 lakhs
Category IV Nil
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Procedure for getting registration:
An application should be submitted to
SEBI in Form A of the SEBI (Merchant
Bankers) Regulations, 1992. SEBI shall
consider the application and on being
satisfied, issues a certificate of registration in Form B
of the SEBI (Merchant Bankers) Regulations, 1992.
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Registration fee payable to SEBI:
Rs. 5 lakhs which should be paid within 15
days of date of receipt of intimation regarding grant
of certificate. Validity period of certificate of
registration is three years from the date of issue. Three months
before the expiry period, an application along with renewal fee
of 2.5 lakhs should be submitted to SEBI in Form A of the SEBI
(Merchant Bankers) Regulations, 1992. SEBI shall consider the
application and on being satisfied renew certificate of registration for a
further period of 3 years.
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CURRENT POSITION OF
MERCHANT BANKS IN INDIA
Note:
OE: Overall Excellence;
FSS: Financial Soundness ;
QPS: Quality Product/Service;
QM: Quality Management;
INN: Innovativeness.
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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
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REFERENCES
http://www.articlesbase.com/home-
business-articles/merchant-banking-
services-in-india-an-understanding-
3102091.html#ixzz1QMxqVBif
http://in.answers.yahoo.com/question/index
?qid=20100816061713AADsitl
http://www.investopedia.com/terms/m/merchant-
discount-rate.asp#ixzz1QIeBEAoZ
http://www.investopedia.com/terms/m/merchant-
Account.asp#ixzz1QIdmfkOt
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THANK YOU