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Unit - 2 Capital Structure, Role of Merchant Banker in Project Appraisal

The document discusses the role of merchant bankers in appraising projects and capital structure for companies raising funds. It outlines the functions of issue management including signing agreements, conducting due diligence, and filing documents. It also describes the steps in project appraisal including technical, economic, and financial analysis. Finally, it defines capital structure and discusses factors that affect determining the optimal capital structure, including internal costs and risks as well as external economic conditions.

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7K views

Unit - 2 Capital Structure, Role of Merchant Banker in Project Appraisal

The document discusses the role of merchant bankers in appraising projects and capital structure for companies raising funds. It outlines the functions of issue management including signing agreements, conducting due diligence, and filing documents. It also describes the steps in project appraisal including technical, economic, and financial analysis. Finally, it defines capital structure and discusses factors that affect determining the optimal capital structure, including internal costs and risks as well as external economic conditions.

Uploaded by

yamumini07
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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UNIT 2 ISSUE MANAGEMENT

Role of Merchant banker in appraisal of projects, Capital Structure

ISSUE MANAGEMENT

Management of issues for raising funds through various types of instruments by companies

Role of Issue Manager


Easy floatation Financial consultant Underwriting Market makers Due diligence Coordination Liaison with SEBI

Functions of Issue Management


Signing of MoU Obtaining appraisal note Optimum capital structure Convening meeting Appointment of financial intermediary Preparing financial documents Due diligence certificate Submission of offer document Finalization of collection centres Filing with RoC Launching the issue Promoters contribution

Role of Merchant Bankers in appraisal of project


PROJECT APPRAISAL Step in confirmation of a desired project Analysis of financial soundness of an investment project Appraisal will be made on the basis of projected cash flows Appraisal will be carried out by the promoter, it will helpful to the MB

Project evaluation will be made in comparison with respect of various alternatives to technology raw material production capacity location local production

Steps in Project Appraisal


Technical Appraisal Economic Appraisal Financial Appraisal

Selection of best available technology, design and other infrastructure facilities

Employment (Direct & Indirect) Foreign Exchange (Export & Import)

Simple Rate of return method Payback period Discounted cash flow method

Capital Structure
Permanent financing of the firm, represented primarily by long-term debt, preferred stock and common equity, but excluding all short-term credit. Common equity includes common stock, capital surplus and accumulated retained earnings

Geresternberg

Capital Structure Process


Capital Budgeting Decision Need to Raise Funds Capital structure Design Existing Capital Structure Desired DebtEquity Mix
Replacement Modernization Expansion Diversification Internal Funds Debt External equity

Payout Policy

Effect on Return Effect on Cost of capital

Effect on Risk

Optimum Capital Structure Value of the firm

Characteristics of Capital Structure


Simplicity Profitability Solvency Flexibility Intensive use of funds Conservation Provision for meeting future contingencies Control Economy

Factors Affecting Capital Structure


Internal Factors Cost factor Risk factor Control factor Objects of the capital structure planning External Factors General economic conditions Behaviour of interest rates Policy of lending institutions Taxation policy Statutory restrictions

General Factors Constitution of the company Characteristics of the company Stability of the company Attitude of the management

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