MERCHANT BANKER OR LEAD MANAGERS
Merchant bankers are body corporate who engaged in issue of
securities. It acts as manager or advisor or consultant to issuing company. A
merchant banker requires compulsory registration under the regulation 3 of SEBI
(Merchant Bankers) Regulations, 1992. These activities mainly includes
determining the composition of capital structure, compliance with procedural
formalities , appointment of registration , listing of securities, arrangement
of underwriting , selection of brokers and bankers, publicity and advertisement
agent , private placement of securities, advisory services, etc.
The merchant bankers are responsible to make all efforts to
protect the interest of investors. The merchant bankers has to exercise due
diligence, high standards of integrity, dignity. The merchant bankers are also
responsible in providing adequate information without misleading about the
applicable regulations and guidelines. It is now mandatory for all public issue
s to be managed by merchant bankers functioning as the lead managers.
UNDERWRITER
An underwriter may be an individual, broker, merchant banker,
financial institution or banks. The underwriting is an agreement between the
issuing company and the assuring party through an agreement to take up shares
or debentures or other securities to a specified extent in case public
subscription does not amount to the expected level. Thus, in case any
short-fall, it has to be made good by underwriting arrangements by the
underwriter as per the agreement.
The underwriter shall not derive any benefit from
underwriting the issue than commission as specified in the agreement. If an
underwriter is being called upon to subscribe the shares of a company has to
subscribe such securities within 45 days of receipt of such intimation as per
the agreement. The underwriter has to appoint a compliance officer who is
responsible for fulfilling the provision Act. The compliance officer is
required to report to SEBI and responsible for complying the notification,
guidelines, instruction issued by SEBI.
Financial Services
The
development of a sophisticated and matured financial system in the country,
especially after the early nineties, led to the emergence of a new sector. This
new sector is known as financial services sector. Its objective is to
intermediate and facilitate financial transactions of individuals and
institutional investors. The financial institutions and financial markets help
the financial system through financial instruments. The financial services
include all activities connected with the transformation of savings into
investment. Important financial services include lease financing, hire
purchase, instalment payment systems, merchant banking, factoring, forfaiting
etc.
Services provided by Merchant Bankers.
Following
other services are provided by merchant bankers.
1.
Corporate counseling: Corporate counseling covers entire field of merchant
banking viz project counseling, capital restructuring, project management, loan
syndication, working capital, lease financing, portfolio management,
underwriting etc. Such counseling is provided to corporate and client units to
solve their problems.
2.
Project Counseling: Which includes preparing project reports, finance for cost
of project, appraising projects from the angle of technical, commercial and
financial viability, Getting approval of project from bank/Govt and other
agencies & Planning for public issue.
3.
Loan Syndication: Arranging loan for big projects not only from one bank or
financial institution but from more than one bank or financial institution as
amount of loan is very large.
4.
Underwriting of public issue: Underwriting is a guarantee given by the
underwriter that in the event of under subscription, the amount would be
provided by him to the extent of under subscription. All public issues are to
be underwritten fully. Merchant banks provide such service of underwriting
pubic issue subject to some limitations.
5.
Managers, Consultants or advisors to the issue: Managers to the issue assist in
drafting of prospectus, application forms and completion of formalities under
companies act, appointment of Registrar for dealing with share applications,
transfer and listing of shared with stock exchange.
6.
Portfolio Management: It refers to investments in different kinds of securities
such as shares, debentures, bonds issued by different companies and securities
issued by the Govt. Merchant bankers advise about mix of investments a company
should follow to ensure maximum return with minimum risk and for this purpose
merchant makers have to make a careful study of Govt. policies, capital market
as well as financial position of companies.
7.
Corporate restructuring: Merchant bankers are also advising companies ;about
corporate restructuring including merger, acquisition, takeovers etc.
8.
Off-share financing: Merchant bankers are also arranging foreign currency,
foreign loans, foreign collaborations, financing exports imports etc.
9.
Technical assistance: Merchant bankers are also providing services on technical
aspects such as technological up gradation, modernization of industries etc.
10.
Revival package for sick units: Merchant bankers are also liaisoning with Board
of Industrial and Financial Reconstruction (BIFR) and industrial Reconstruction
Bank of India (IRBI) and such helping their clients in this regard also.