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Merchant Bankers License in India

Package Inclusions
  • Merchant Banking Business Plan
  • Filing of the application before SEBI
  • Advisory on day to day basis
  • Demographics Research and Targeting
  • Target Cost as per Acquisition Optimization
  • Marketing Plan
  • Assistance in post compliance
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Who is Merchant Banker?

In accordance to Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992, a merchant banker is defined under section 2 clause (cb) as any person who is engaged in the business of issue management either by making arrangement regarding buying, selling or subscribing to securities or acting as consultant, manager or rendering corporate advisory services in relation to such issue management.

Merchant bankers advise entrepreneurs right from the stage of a conception of the project till the commencement of production and they are in charge of the issue process. Merchant Bankers act as intermediaries between the companies and the investors. They take responsibility for the preparation of the prospectus and marketing the issue.

Examples of Merchant Banking in India

In India, there are public sector, private sector, as well as foreign merchant bankers in the merchant banking industry. Some of them are listed below:

  • Public sector:

    SBI Capital Markets, Punjab National bank, IFCI Financial Services, Bank of Maharashtra, Karur Vysya Bank Ltd, State Bank of Bikaner and Jaipur

  • Private sector:

    ICICI Securities, Axis Bank, Bajaj Capital, Tata Capital Markets, Kotak Mahindra Capital Company, Reliance Securities, Yes Bank

  • Foreign merchant bankers:

    Goldman Sachs (India) Securities, Morgan Stanley India, Barclays Securities (India), Bank of America, Citigroup Global Markets India, DSP Merrill Lynch Ltd, FEDEX Securities Ltd

Categories of Merchant Banker

Category

Activities

Minimum Net Worth Requirement

Category I

Merchant bankers can act as an issue manager, advisor, consultant, underwriter and portfolio manager. They carry out the activity of the issue management, preparation of the prospectus, determining financial structure, a tie-up of financiers and final allotment.

Net worth capital of Rs. 5 Crores

Category II

Such merchant bankers can act as an advisor, consultant, underwriter, co-manager and portfolio manager

Net worth capital of Rs. 50 Lakhs

Category III

Such merchant bankers can act as an underwriter, advisor and consultant. They can neither undertake issue management of their own nor do they act as co-manager. They cannot undertake the activities of portfolio management.

Net worth capital of Rs. 20 Lakhs

 

Category IV

Merchant Bankers can merely act only as consultant or advisor to an issue.

Nil capital

What is Merchant Banking License?

Merchant bankers are required for dealing in international markets for procuring financial help and incorporating business and trading in the international market. There are many merchant banks already established and have provided best financial services to the best of abilities; but there is a requirement and scope for many more merchant bankers, with the everyday increase of international interest in the Indian market. Therefore, many more people are taking an interest in offering merchant banking services. In order to establish merchant banks, a license from SEBI is required.

Concerned Authority/Regulatory Authority for Setting up Merchant Bank

The SEBI or Securities and Exchange Board of India is the regulatory authority for Merchant Banking in India. The law which regulates the activities of the Merchant Bank in India is the SEBI (Merchant Bankers) Regulations 1992. For setting up a Merchant Bank, the concerned individual has to approach the SEBI.

The other regulatory authority is the Reserve Bank of India. Also, the Foreign Exchange Management (International Financial Services Centre) Regulations, 2015 are applicable to financial institutions which cover merchant banks under Section 2 clause (b) explanation. Banking Institutions performing merchant banking activities are also required to follow the requirements laid down in the prudential exposure norms prescribed by RBI, as well as the statutory limits contained in Section 19(2) & (3) of the Banking Regulation Act, 1949.

Process for obtaining Merchant Bankers license

Process for obtaining Merchant Bankers license

Documents required for Merchant Banker License

  • For registration, the Merchant Banker, applying as an applicant is required to pay a non-refundable application fee of Rs.50,000/- by way of demand draft drawn in favour of ‘Securities and Exchange Board of India’, payable at Mumbai.
  • Form A- Apart from the information that is provided in Form A additional information has to be published

    • Memorandum of Application and Articles of Association

    • Provide the UIN obtained under MAPIN for the applicant

    • Details of Directors/ Promoters & shareholding pattern

    • Details of Key personnel

    • Details of infrastructure facilities

    • Details regarding registration as NBFC

    • Financial Accounts of the applicant

    • Report from principal bankers

    • Details of associated registered intermediaries

    • Declaration by atleast two directors

  • The application can be made through an online process through the SEBI route.
  • Application for a merchant bank should confirm with the requirements.
  • The application, along with the requisite fees has to be submitted to the following address: Market Intermediaries Regulations and Supervision Department Division 5 Securities and Exchange Board of India, SEBI Bhavan, Plot No. C4-A, ‘G’ Block, Bandra-Kurla Complex, Bandra, Mumbai - 400051

Basic requirements of Merchant Banking Company

  • Merchant Banking Company shall comply with the provisions of the SEBI Act 1992.
  • Merchant Banking Company must not engage in any other financial activities as mentioned in section 45I(c) of the RBI Act 1934.
  • To open merchant banking company a minimum capital required is of 5 crore rupees for category 1, Rs 50 Lakhs for category 2, Rs 20 Lakhs for category 3.
  • Merchant Banking Company cannot accept or hold public deposits.
  • The Banking Company is a corporate body other than a Non-Banking Financial Company as mentioned under the RBI Act.
  • Merchant Banking must not engage in any activity other than those connected to securities market.
  • Merchant Banking Company must have a minimum of 2 employees holding a prior experience in merchant banking.
  • Merchant Banking Company must not be related to any other entity directly or indirectly registered as a merchant banker.
  • Merchant Banker must not have found guilty for any economic offence.

Services offered under Merchant Banking License

  • Project Counselling
  • Equity offerings and Management of Debt
  • Issue management
  • Underwriting of Public issue
  • Portfolio management
  • Restructuring Strategies
  • Offshore Finance
  • Non-resident Investment
  • Loan syndication
  • Corporate and advisory counselling services
  • Pre-investment studies
  • Venture Capital financing
  • Lease financing

Why Choose Enterslice

  • Enterslice helps in providing various services regarding the Merchant Banking registration process.
  • We help our clients with support to solve business problems and to ensure continuous networking of your business.
  • We provide instant response to requests in guaranteed time duration and help you maintain merchant banking license.
  • We at Enterslice also help our clients in post incorporation compliance services for merchant banking.

How Enterslice Helps you

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Frequently Asked Questions

A Merchant Banker has to pay fees of Rs. 50,000 for the application. He has to pay fees of Rs. 20,00,000 for initial/temporary registration and Rs. 9,00,000 as fees of permanent registration.

A Merchant Banker requires having a minimum net worth of not less than Rs. 5 Crore for category 1, Rs 50 Lakhs for Category 2, and Rs 20 Lakhs for Category 3.

Yes, the Merchant Banker has to pay Rs. 20 Lakh as registration fees at the time of grant of Certificate of Temporary Registration by SEBI.

a) Temporary Certificate of Registration

b) Permanent Certificate of Registration

The Certificate of Temporary Registration remains valid for 5 years. The Merchant Banker requires the grant of certificate for Permanent Registration from SEBI, before the expiry of three months of the Certificate of Temporary Registration in order to continue as a registered Merchant Banker.

The fees required to be paid by the Merchant Banker is Rs. 9 Lakhs as per SEBI Payment of Fees Amendment Regulations, 2014 for the first three years of permanent registration. For the continuation of Certificate of Permanent registration, the fee is paid after every three years before the expiry of a previous fee block.

The Certificate of Permanent Registration remains valid permanently unless suspended or cancelled by the Board. The fees must be paid regularly for the continuation of the Certificate of Permanent registration.

Yes, as per Regulation 9A, registrations granted subject to the condition under regulation 8 & regulation 8A of SEBI (Merchant Bankers) Regulations, 1992, the merchant banker proposes a change in control, and requires a prior approval of SEBI for continuing to act as such after the change.

The prior approval granted by SEBI remains valid for a period of 180 days from the date of communication as per SEBI circular CIR/MIRSD/14/2011 dated August 02, 2011

Yes, change in control requires the obtaining of a fresh registration under Section 12 of the SEBI Act, 1992. A Merchant Banker also needs to obtain a fresh certificate of registration within a period of six months.

Yes, the Compliance Officer of the Merchant Banker shall send the report in the revised format to SEBI on a half-yearly basis as per SEBI circular CIR/MIRSD/6/2012 dated May 14, 2012.

An asset management company manages the portfolio of investment and securities for an individual or a company. This form of management of securities is with the view to increase the rate of return from the portfolio of existing securities. In contrast, a merchant bank manages companies’ portfolio and helps the company in various ways such as working capital requirements, issue management, loan syndication and underwriting services.

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