Financial institutions that provide financial services, solutions and consultancy to businesses are known as merchant banks. A Merchant Banker in India is defined as "any person engaged in the business of issue management either by making arrangements regarding selling, buying, or subscribing to securities as manager, consultant, or adviser in relation to such an issue management," according to a notification from the Ministry of Finance in India. As a result, a merchant banker advises its clients on financial, marketing, management, and legal issues.
What is Merchant Banking, and how does it work?
Unlike commercial banks, which serve the requirements of the general public, merchant banks serve the needs of businesses.
Merchant banking is the for-profit provision of advice and services to businesses that can assist entrepreneurs in launching new ventures, raising capital, expanding and modernising existing businesses, restructuring businesses, or registering, buying, and selling assets (shares) on a stock exchange.
What are Merchant Banking Services, and what do they entail?
Merchant bankers develop project reports to analyse financing patterns in order to assess the cost of a project and appraise it with financial institutions.
Management of Debt and Equity Offers: A merchant banker's primary duty in India is to assist companies in raising financing from investors. The following are the key services provided:
• Product design • Pricing • Document registration • Assurance of support • Allocation and refund • Stock exchange listing management
Management of Issues: These bankers play a crucial role in the management of issues, which include the public marketing of company securities such as equity shares, preference shares, and bonds.
Merchant banks function as a go-between for investors and their clients, facilitating the transfer of capital. A merchant banker in India conducts meetings between firm representatives and agents to resolve arrangements connected to prospectus registration, beginning advertising campaigns, and scheduling board meetings to adopt essential resolutions, according to SEBI requirements in India. These bankers also assist corporations with issue pricing. Merchant bankers can also help with public issue underwriting (not exceeding 15 percent ).
Client Portfolio Management entails overseeing a varied range of securities such as stocks and bonds issued by various corporations in order to maximise return while minimising risk.
Placement and distribution: These bankers help with the allocation and distribution of securities via the merchant bank's institutional and retail networks.
Corporate Restructuring: These bankers serve as middlemen in discussions between two companies, assisting the client's management with a variety of reorganisation operations such as mergers and acquisitions, divestitures, management buyouts, joint ventures, and more.
Merchant bankers assist their clients in managing joint ventures, foreign currency investments, and international collaboration agreements.
Syndication of Loans: Merchant bankers help clients get term loans for projects from a single development finance institution, a syndicate, or a consortium.
Corporate Counseling and Advisory Services: Corporate counselling is a comprehensive bundle of all merchant banking services, including project counselling, restructuring, issue management, loan syndication, and so on. Merchant bankers also provide unique solutions to their corporate customers' financial problems, as well as attempts to refinance alternatives and evaluate cheaper sources of money.
However, it should be noted that in order to work as a merchant banker or firm in India, one must first obtain a certificate from the Securities and Exchange Board of India (SEBI).
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