Merchant Banking

18039 Words Oct 27th, 2010 73 Pages
1.Q: Explain the functions of Merchant Banking.
Merchant banking is a service oriented industry. Merchant banks all over the world carry out the same set of services. Merchant banks in India carry out the following functions and services specifically.
1. Corporate Counseling
2. Project counseling
3. Pre-investment Studies
4. Capital restructuring
5. Credit Syndication
6. Issue Management and underwriting
7. Portfolio Management
8. Working Capital Finance
9. Acceptance Credit and Bill discounting
10. Mergers, Amalgamations and Takeovers
11. Venture Capital
12. Lease Financing
13. Foreign Currency Finance
14. Fixed Deposit Broking
15. Mutual funds
16. Relief to Sick Industries
17. Project Appraisal
Each of these functions is
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10. Arranging and negotiating foreign collaborations, amalgamations, mergers, and takeovers.

Pre-Investment Studies
Pre-investment studies relate to the activities that are concerned with making a detailed feasibility exploration to evaluate alternative avenues of capital investment in terms of growth and profit prospects. Some of these activities are as follows:
1. Carrying out an in-depth investigation of environment and regulator factors, location of raw material supplies, demand projections and financial requirements in order to assess the financial and economic viability of a given project.
2. Helping the client in identifying and short-listing those projects which are built upon the client’s inherent strength with a view to accentuate corporate profitability and growth in the long run.
Capital Restructuring Services
Merchant bankers assist the corporate enterprise in structuring their capital in such a way that it would minize the cost of capital and maximize its return on capital invested.
Following are the services covered:
1. Examining the capital structure of the client company to determine the extent of capitalization required.
2. Preparing a comprehensive memorandum for the controller of Capital issues, and securing consent where the capitalization takes place through issue of bonus shares.
3. Suggesting an alternative capital structure conforming to legal requirements, viz., extent of capitalization on reserve and quantum of disinvestments by
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