When corporate insiders like officers, directors and employees, auditors, appointed counsels, t...
Fundamentally, merchant banker are financial institutions. The main activities of merchant banker are like business loans as well as underwriting. They largely offer their services to large enterprises and individuals of high net worth.
The major functions that a merchant bank carries out are like
Underwriting is the process by which they raise and arrange to collect the fund from investors on behalf of corporations and governments issuing either equity or debt securities.
While acting as a banker to an issue, a merchant banker has to disclose full details to the Securities Exchange Board of India (SEBI) as it is the regulator for this entity. Basically, merchant bankers are financial institutions. They do not undertake the activities of depositories or retail lender institutions. They are, instead, intermediaries.
They undertake the activities of business loans as well as underwriting. They are an unique combination of consultancy and banking services. They provide consultancy on matters pertaining to the finances, marketing, management, and law. Such consultancy services assist starting of businesses, raise finance, modernise, expand or restructure an existing business, revival of sick units as well as provide assistance to companies in registering, buying and selling shares. They do not undertake the activities of depositories or retail lender institutions. They are, instead, intermediaries.
National Grindlays Bank introduced the concept of merchant banks in India somewhere in 1967. Similarly, the State Bank of India became the first Indian Commercial Bank to set up a separate Merchant Banking Division in the year 1972.
Citibank setup its merchant banking division in 1970.
Merchant Bankers(MB) assist their clients in fund raising by way of issue of a debenture, shares, bank loans, etc.
In India, Activities of Merchant Banker play a very vital role of promoter of industrial enterprises. They assist entrepreneurs in the matter of conceiving ideas, identifying projects, preparation of feasibility reports, getting Government approvals as well as incentives, etc.
Merchant bankers also buy and sell shares in the stock exchange on behalf of their clients. They also additionally conduct researches on equity shares.
Merchant bankers offer their service to clients in several ways in the process of project management also.
Further, Merchant bankers also advise on amalgamations, mergers, acquisitions, takeovers, foreign collaborations, diversification of business, technology up-gradation, joint-ventures, etc. to their clients.
Managing the ensuing public issue of the client is also very important service offered by the Merchant Bankers. In fact, it is prime function of Merchant Bankers.
They offer their following services for the above-mentioned purpose:
A merchant banker offers some specialized assistance in the phases of preparation of a project, the loan applications required for the raising of short-term and long- term credit from various banks and financial institutions, etc.
A merchant banker fulfills all formalities for his client, to obtain government permission to expand and modernize business and starting new businesses.
Merchant banker councils and explains the businessmen and small companies on availability and avenues of business opportunities, concessions, incentives and government policies and helps them to take advantage of this.
Merchant banker also offers several services to public sector undertakings and units and their public utilities.
A merchant bank assists in reviving sick industrial units also. They negotiate with several agencies such as banks, long-term lending institutions, and the Board for Industrial and Financial Reconstruction (BIFR).
Merchant bankers help in offering revival services to companies issuing the securities.
Thus, the Merchant Bankers offer a wide variety of services to the capital market in India.