{"id":27306,"date":"2021-03-12T14:23:11","date_gmt":"2021-03-12T08:53:11","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=27306"},"modified":"2021-03-13T12:02:03","modified_gmt":"2021-03-13T06:32:03","slug":"significance-of-merchant-banker-in-the-corporate-world","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/significance-of-merchant-banker-in-the-corporate-world\/","title":{"rendered":"Significance of Merchant Banker in the Corporate World"},"content":{"rendered":"\n<p class=\"has-drop-cap\"> merchant\u00a0banker refers to a financial institution. Merchant bankers mainly provide business loans and underwriting services to the clients. Their services are largely confined to large enterprises and individuals of high net worth. They often regarded as unique combo of banking services &amp; consultancy.<\/p>\n\n\n\n<p>They\nrender consultancy on affairs related to marketing, finances, law, and\nmanagement. Such consultancy services help to commence a business, procure\nfunds, expand or rejuvenate the existing business. They provide a helping hand\nto companies during the registration process or share trading.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/significance-of-merchant-banker-in-the-corporate-world\/#What_are_the_Activities_of_the_Merchant_Banker_in_India\" >What are\nthe Activities of the Merchant Banker in India?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/significance-of-merchant-banker-in-the-corporate-world\/#What_are_the_Attributes_of_Merchant_Banker\" >What are\nthe Attributes of Merchant Banker?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/significance-of-merchant-banker-in-the-corporate-world\/#A_Brief_Note_on_Merchant_Banks_vs_Investment_Banks\" >A Brief\nNote on Merchant Banks vs. Investment Banks<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/significance-of-merchant-banker-in-the-corporate-world\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_Activities_of_the_Merchant_Banker_in_India\"><\/span>What are\nthe Activities of the Merchant Banker in India? <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em><strong>The primary functions that a merchant banker carries out are like<\/strong><\/em><\/p>\n\n\n\n<ul><li>Stock\nUnderwriting: This is one of the primary activities of the merchant bank.&nbsp;<\/li><li>Issue\nManagement: In this, a merchant bank renders support to the capital market to\nincrease the securities\u2019 supply in the market.&nbsp;<\/li><li>Portfolio\nServices: &#8211; merchant bank also renders Portfolio Services to clients confronting\nfiscal crunch.<\/li><\/ul>\n\n\n\n<p>Underwriting&nbsp;is\nthe process through which they increase and arrange to gather the fund from\ninvestors on behalf of governments and corporations issuing either debt\nsecurities or equity.&nbsp;<\/p>\n\n\n\n<p>While\nserving as a banker, a merchant banker has to share details with Securities\nExchange Board of India (SEBI). Fundamentally, they are not involved with the\nactivities of lending institutions or depositories. Instead, they act as\nintermediaries.<\/p>\n\n\n\n<p>National Grindlays Bank brought the notion of merchant banks in our country in 1967. Likewise, the State Bank of India (aka SBI) becomes the first Indian commercial bank to establish the independent Merchant Banking Division in 1972. Citibank establishes its merchant bank division in the year 1970.&nbsp;<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/exemptions-from-registration-as-nbfc-by-reserve-bank-of-india\/\">Synopsis on Exemptions from Registration as NBFC by Reserve Bank of India<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_Attributes_of_Merchant_Banker\"><\/span>What are\nthe Attributes of Merchant Banker? <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><strong><em>The following section depicts the very nature of the merchant bankers operating pan India, which are given below:-<\/em><\/strong><\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/03\/What-are-the-Attributes-of-Merchant-Banker.png\" alt=\"Attributes of Merchant Banker\" class=\"wp-image-27339\" width=\"486\" height=\"487\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/03\/What-are-the-Attributes-of-Merchant-Banker.png 900w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/03\/What-are-the-Attributes-of-Merchant-Banker-150x150.png 150w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/03\/What-are-the-Attributes-of-Merchant-Banker-300x300.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/03\/What-are-the-Attributes-of-Merchant-Banker-768x771.png 768w\" sizes=\"(max-width: 486px) 100vw, 486px\" \/><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">Support Fundraising&nbsp;<\/h3>\n\n\n\n<p>Merchant\nBankers (MB) supports their clients in procuring funds via the issuance of\ndebenture, bank loans, shares, etc.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Brokers in Stock Exchanges<\/h3>\n\n\n\n<p>Merchant\nbankers also perform share trading on behalf of their clients. They often conduct\nresearches on equity.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Promotional Activities<\/h3>\n\n\n\n<p>In\nIndia, Merchant Banker\u2019s activities play a pivotal role as a promoter of\nindustrial enterprises. They provide assistance to entrepreneurs in conceiving\nideas, pinpointing projects, preparation of feasibility reports availing\ngovernment permission, and incentive, etc.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Project Management<\/h3>\n\n\n\n<p>Merchant\nbankers use several ways to render their service to the client in financial\nrelated project management.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Advice on Modernization &amp; Expansion<\/h3>\n\n\n\n<p>Further,\nMerchant bankers also provide clients with services on acquisitions, mergers,\njoint-ventures, amalgamations, diversification of foreign business\ncollaborations, technology up-gradation, etc. Merchant bankers render the\nfollowing on account of above-mentioned purpose:-<\/p>\n\n\n\n<ul><li>Determining the public issue\u2019s size<\/li><li>The share pricing that yet to be issued.&nbsp;<\/li><li>Acting in the manager\u2019s capacity to the issue.&nbsp;<\/li><li>Assist in receiving an allotment of securities as well as application.&nbsp;<\/li><li>Appointment of underwriters and brokers for the issue.&nbsp;<\/li><li>Listing shares on the stock exchange for the purpose of trading.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Credit\/loan Syndication<\/h3>\n\n\n\n<p>A\nmerchant banker assist clients during the project preparation, the loan\napplication needed for procuring credit (either short term or long term) from\nvarious banks &amp; financial institutions, etc.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Managing Government Permission for Industrial Projects<\/h3>\n\n\n\n<p>Merchant\nbanker acts on behalf of the client to acquire government approval to expand\nthe business and commencing a new business.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Special Assistance to Small Companies &amp; Entrepreneurs<\/h3>\n\n\n\n<p>Merchant\nbanker connects with small entities and business people and explains the\naccessibility of available avenues of business opportunities, incentives,\nincentives, and government-related policies and helps them leverage this.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Assisting PSUs\u2019<\/h3>\n\n\n\n<p>Merchant\nbankers also furnish services to companies falling under the public sector\ncategory and their public undertakings.&nbsp;&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Revival of Financially Challenged Units<\/h3>\n\n\n\n<p>A merchant bank helps compromised industrial units to come back on track. They set terms with several agencies, including long-term lending institutions, banks, and <em><strong>Board for Industrial and Financial Reconstruction<\/strong><\/em><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Board_for_Industrial_and_Financial_Reconstruction\"><em><strong>[1]<\/strong><\/em><\/a><\/sup> (BIFR).<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Portfolio Management of Financially Challenged Units<\/h3>\n\n\n\n<p>Merchant\nbankers offer revival services to organizations issuing securities. Therefore,\nthese bankers provide a wide portfolio of services to the capital market in\nIndia.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"A_Brief_Note_on_Merchant_Banks_vs_Investment_Banks\"><\/span>A Brief\nNote on Merchant Banks vs. Investment Banks<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The\nline that separates the merchant and investment banks is very thin. The investment\nbanks sell securities via IPO and underwrite as their primary function. The\nclient of such banks is bigger organizations seeking to register securities for\nsale to the general public. <\/p>\n\n\n\n<p>Investment\nbanks also act as advisors for companies and guide them to tide over the\ndifficulties that arise during significant business events such as mergers and\nacquisitions (M&amp;A) and joint ventures. They also provide investment\nresearch to clients.<\/p>\n\n\n\n<p>While\nmerchant bankers are fee-based, investment banks possess a two-fold income\nstructure. They may charge fees depending on the advisory services they render\nto the clients, but may also be fund-based- meaning they can reap income from\nleases and interest.&nbsp;<\/p>\n\n\n\n<p>Irrespective\nof how a firm sells out its securities, there are minimum disclosure requisites\nto share with investors. Both private placements &amp; IPOs require a firm\naudit by an external agency, which renders reports on the financial statements.\nAudited financial statements should enclose past year data along with disclosures.\nPotential investors can leverage this data to identify risks and advantages of\npurchasing the securities.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Merchant\nBanker plays a pivotal role in serving the corporate world. They act as a\nsavior for institutions or companies who have issues in tiding over apparent\nbusiness challenges. They have a wide portfolio of services designed to cater\ncorporate needs regardless of their size or scale of operation.&nbsp; It\u2019s worth noting that merchant bankers do\nnot resemble commercial banks and largely remain inaccessible to the general\npublic. <\/p>\n\n\n\n<p>Merchant\nbanks typically engaged in financing and underwriting services. They might\nprovide services regarding the issuance of letters of credit and fund transfer.\nThey may also consult on trading technology. They widely work with firms that\noperate in a limited market to raise funds from the public via IPO. <\/p>\n\n\n\n<p>Merchant banks enable companies to issue securities via private placement, which require limited regulatory disclosure and are sold to investors. Merchant banks may assist their client with international transactions as well.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/a-complete-checklist-of-indian-depository-receipts\/\">Indian Depository Receipts: A Complete Checklist<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>merchant\u00a0banker refers to a financial institution. Merchant bankers mainly provide business loans and underwriting services to the clients. Their services are largely confined to large enterprises and individuals of high net worth. They often regarded as unique combo of banking services &amp; consultancy. They render consultancy on affairs related to marketing, finances, law, and management. [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":27338,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[128],"tags":[1595],"acf":{"service_id":"230"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":13980,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/27306"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=27306"}],"version-history":[{"count":15,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/27306\/revisions"}],"predecessor-version":[{"id":27388,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/27306\/revisions\/27388"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/27338"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=27306"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=27306"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=27306"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}