INSTITUTE-UNIVERSITY SCHOOL OF

BUSINESS
DEPARTMENT-MBA
Banking and Financial Services Management
22BAT-735
Chapter 1.2

FACULTY NAME: Manpriya Singh

(Assistant Professor)

Topic- Merchant Banking

Services DISCOVER . LEARN . EMPOWER
 Merchant Banking
Services

Course Outcome
Blooms
Course
Outcome
Description Taxonomy www.indiamart.com
Level
1 To demonstrate a comprehensive knowledge of the disciplines Understand/
of banking and financial services Remember

2 Employing the knowledge of financial services to choose Apply Will be covered in this
between lease, buy or hire-purchase lecture
3 To analyse the performance of the various financial Analyze
instruments

4 Evaluating the different investment vehicles on the basis of Evaluate

credit ratings

5 Design/Create
To structure and appraise the debt securitisation deals for the
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business
Merchant Banking Services

• Management of customers securities

• Portfolio management
• Project counseling and appraisal
• Underwriting of shares and debentures
• Loan syndication
• Acting as banker for the refund orders
• Handling interest and dividend warrants

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A. Service based Functions
i) Project counselling
Guidance in relation to project viability i.e. project identification and counselling. It
may be for setting up new units, expansion or improvement of existing facilities.
• Selection of consultants for preparation of project reports/market surveys etc.
Sometimes merchant bankers also engage in preparation of project reports or
market surveys.
• Advice on various procedural steps including obtaining of governmental
approvals clearance etc. e.g. for foreign collaboration.
• Proposing a suitable capital structure laying broad as well as specific features.

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ii) Credit syndication

• Preparing applications for financial assistance to be submitted to financial

institutions and banks.
• • Monitoring the sanction of funds while acting as a specialised liaison agency.
• • Negotiating the term of assistance on behalf of client.
• • Post sanction formalities with these institutions and banks.
• • Assistance in drawl of term loans and or bridging loans.
• • Assessing working capital requirements and arranging it.

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iii) Issue management

•Advise the company about the quantum and terms of raising funds.
• Advise as to what type of security may be acceptable in the market as well as to
the concerned lending institutions at the time of issue.
• Advise as to whether a fresh issue to be made or right issue to be made or if
both, then in what proportion, obtaining the desired consents, if any, from
government or other authorities.
• Advice on the appointment of bankers, brokers to the issue.
• Advice on the selection of issue house or Registrar to the issue, printer
advertising agency etc.

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iv) Corporate counselling

Rejuvenating old line and ailing/sick unit or appraising their technology and
process, assessing their requirements and. restructuring their capital base.
• Evolving rehabilitation programmes/packages which can be acceptable to the
financial institutions and banks.
• Assisting in obtaining approvals from Board for Industrial and Financial
Reconstruction (BlFR) and other authorities under the Sick Industrial Companies
(special provisions) Act1985 (SICA).
• Monitoring implementation of schemes of rehabilitation.
• Advice on financial restructuring involving redeployment of corporate assets to
refocus companies line of business.
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B. Fund based Functions
(i) Bill discounting
• Bill discounting is a service against which merchant banker has to arrange funds
against the bills which have been discounted.
• This service is undertaken by merchant bankers generally if bill market is big as
well as mature. Otherwise bill discounting is undertaken by banks only.
• Depending on their credibility they may also undertake the assignment of bill
acceptance.

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(ii) Venture capital

• Venture capital is the organized financing of relatively new enterprises to achieve

substantial capital gains.
• Such new companies are chosen because of their potential for considerable
growth due to advance technology, new products or services or other valuable
innovations.
• A high risk is implied in the term and is implicit in this type of investment.
• Since certain ingredients necessary for success of such projects are missing in the
begging but are added later on.

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(iii) Bought out deals

• When a promoter envisages that if public issue made to raise capital will not
clinch.
• Many a time a syndicate of merchant bankers jointly sponsor a bought out deal
to spread the risk involved.
• In contract to venture capital, there is no role to be played by non traditional
technology.
• Such bought shares by sponsor can be disposed off at an opportune time on ‘over
the counter’ or other stock exchanges.

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(iv) Lease financing and hire purchase

• Depending on the funds available, merchant bankers can also enter the field of
lease or hire purchase financing.
• Lease is an agreement where by the lessor (merchant banker in our case)
conveys to the lessee (the user), in return for rent,
• the right to use an asset for an agreed period of time.
• The merchant bankers can advise the client to go in for leasing or hire purchase
system of financing an asset.

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Web Link
• https://accountlearning.com/merchant-bankers-definition-services-
offered-categories/
• https://www.youtube.com/watch?v=WgFoxRzhCEg

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MOOCs Link
• https://www.onlinenifm.com/module_detail/48/merchant-banking-
nism-series-ix-certificate-course

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Assessment Pattern

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