How does merchant banking work?
In contrast to commercial banks, which serve the needs of the average person, merchant banks serve the needs of business organizations.
Providing advice and services to businesses for a fee is known as ""merchant banking,"" and it can aid business owners in starting new ventures, raising capital, expanding and modernizing existing operations, reorganizing operations, and registering, purchasing, and selling assets (shares) at stock exchanges.
What do Merchant Banking Services entail?
Project management: Merchant bankers draft project reports to analyze financing trends, estimate project costs, and appraise projects for financial institutions.
Offerings for Management of Debt and Equity: One of the main jobs of a merchant banker in India is to help businesses raise money from investors. The principal services provided are,
Product design, pricing, document registration, assurance of support, allocation and reimbursement, and stock exchange listing management
Management of Issues: These bankers are crucial to the marketing of business securities to the general public, such as equity shares, preference shares, and bond issues.
In order to facilitate the flow of funds from investors to their client, merchant banks serve as a middleman. In accordance with Indian SEBI regulations, a merchant banker arranges meetings between company representatives and agents to resolve issues relating to prospectus registration, the commencement of advertising campaigns, and the scheduling of board meetings to adopt essential resolutions. These bankers provide corporations with pricing advice for challenges. Additionally, the merchant bankers offer underwriting for public issues up to a maximum of 15%.
Client portfolio management involves overseeing a wide range of instruments, including shares and bonds issued by various corporations, to provide the greatest possible return with the least amount of risk.
Placement and distribution: Through the institutional and retail networks of merchant banks, these bankers help with the distribution and allocation of securities.
Corporate Restructuring: These bankers support the management of their clients with different corporate reorganization operations, such as mergers and acquisitions, divestitures, management buyouts, joint ventures, and more by acting as the middlemen in discussions between the two companies.
Offshore Funding: Merchant bankers assist their clients in managing joint ventures, foreign exchange investments, and international collaboration agreements.
Term loans for projects can be obtained from a single development finance institution, a syndicate, or a consortium with the help of merchant bankers.
Corporate counseling and advisory services: Project counseling, restructuring, issue management, loan syndication, and other merchant banking services are all included in the corporate counseling package. In addition to customizing solutions for their corporate clients' financial problems, merchant bankers also look into refinancing options and assess more affordable funding sources.
To be a merchant banker in India or for a firm, one must possess the necessary certificate from SEBI, the Indian Securities and Exchange Board."""