Merchant banking services: Management of capital issues

The capital issue are managed are category-1 merchant banker and constitutes the most important aspects of their services. The public issue of corporate securities involves marketing of capital issues of new and existing companies, additional issues of existing companies including rights issue and dilution of shares by letter of offer,. The public issues are managed by the involvement of various agencies i.e. underwriters, brokers, bankers, advertising agency, printers, auditors, legal advisers, registrar to the issue and merchant bankers providing specialized services to make the issue of the success. However merchant banker is the agency at the apex level than that plan, coordinate and control the entire issue activity and direct different agencies to contribute to the successful marketing of securities. The procedure of the managing a public issue by a merchant banker is divided into two phases, viz;

  • Pre-issue management
  • Post-issue management

Pre-Issue Management:-

Steps required to be taken to manage pre-issue activity is as follows:-

(1) Obtaining stock exchange approvals to memorandum and articles of associations.

(2) Taking action as per SEBI guide lines

(3) Finalizing the appointments of the following agencies:

  • Co-manager/Advisers to the issue
  • Underwriters to the issue
  • Brokers to the issue
  • Bankers to the issue and refund Banker
  • Advertising agency
  • Printers and Registrar to the issue

(4) Advise the company to appoint auditors, legal advisers and broad base Board of Directors

(5) Drafting of prospectus

(6) Obtaining approvals of draft prospectus from the company’s legal advisers, underwriting financial institutions/Banks

(7) Obtaining consent from parties and agencies acting for the issue to be enclosed with the prospectus.… Read the rest

Merchant banking services: Loan syndication

Credit syndication also known as credit procurement and project finance services. The main task involved in credit syndication is to raise to rupee and foreign currency loans with the banks and financial institutions both in India and abroad. It also arranges the bridge finance and the resources for cost escalations or cost Overruns.

Broadly, the credit syndications include the following acts;

(a) Estimating the total costs

(b) Drawing a financing plan for the total project cost-conforming to the requirements of the promoters and their collaborators. Financial institutions and banks, government agencies and underwriters.

(c) Preparing loan application for financial assistance from term lenders/financial institutions/banks and monitoring their progress including the pre-sanction negotiations.

(d) Selecting the institutions and banks for participation in financing.

(e) Follow-up of the term loan application with the financial institutions and banks and obtaining the satisfaction for their respective share of participation.

(f) Arranging bridge finance.

(g) Assisting in completion of formalities for drawl of term finance sanctioned by institution expediting legal documentation formalities drawing up inter-se agreements etc. prescribed by the participating financial institutions and banks.

(h) Assessing the working capital requirements.

Preparing the necessary application for a successful issue management the close liaison and coordination with the various constituents of the public issue is an essential condition that warrants full cooperation of all the parties affecting the cost and prospects of the issue. Merchant banks, acting as ‘Manager’ to the issue has to settle the fee for Advocate/solicitors’ advice, accountants certification, broker’s and banks charges, underwriters’ commission, printers’ charges and advertising and publicity expenses and coordinates with syndicated merchant bankers and principal brokers, stock exchanges, etc.… Read the rest

Merchant banking services: Project counseling

Project counseling services may be rendered independently or maybe, it relates to project finance and broadly covers the study of the project and offering advisory assistance on the project viability and procedural steps for its implementation broadly including following aspects:- general review of he project ideas/ project profile, advice on procedural aspects of project implementation, review of technical feasibility of the project on the basis of the report prepared by own experts r by the outside consultants, selecting Technical consultancy Organization (TCO) for preparing project reports and market survey, or review of the project reports or market survey report prepared by the TCO, preparing project report form financial angle, and advice and act on various procedural steps including obtaining government consents for implementation of projects. This assistance can include obtaining of the following approvals/licenses/permission/grants etc form the govt. agencies viz. letter of intent, industrial license and DGTD registration and government approval for foreign collaboration.

In addition to above, the facility providing guidance to Indian entrepreneurs for making investment projects in India and in Indian joint ventures overseas is also covered under this activity.

Besides the above services, project counseling may include identification of potential investments avenues, precise capital structuring shaping the pattern of financing, arranging and negotiating foreign collaborations, amalgamations, mergers and takeover, financial study of the project and preparation of viability reports, to advice on the framework of institutional guidelines and laws governing corporate finance, assistance in the preparation of project profiles and feasibility studies based on preliminary project ideas in order to indicate the potential.… Read the rest

Merchant banking services: Corporate counseling

Corporate counseling denotes the advice provided by the Merchant Banking to the corporate unit to ensure better corporate performance in terms of image building among investors, steady growth through good working and appreciation in market value of its equity shares. The scope of corporate counseling, capital restructuring and, portfolio management and the full range of financial engineering includes venture capital, public issue management, and loan syndication, working capital, fixed deposit, lease financing, acceptance credit, etc. However counseling is limited to only opinions and suggestions and any detailed analysis would form part of a specific service.

The scope of corporate counseling is restricted to the explanations of concepts, procedures and laws to be observed by the client company. Requirement of any action to be taken or compliance of statutory formalities to be made for implementation of those suggestions would mean the demand for a specific type of service other than corporate counseling being offered by the merchant bankers. An academic analysis of corporate counseling present a different picture than that transpires from the literature of the merchant bankers Firstly corporate counseling is the beginning of the merchant banking service which every clients whether new or existing has got to avail a different matter whether a merchant bank charges its client separately for rendering the corporate counseling service or includes the element of fee in the other heads of services but fro the angle of priority. Corporate counseling is first in line of the services which a merchant banker offers and than other services.… Read the rest

Organizational set up of merchant bankers in India

In India a common organizational set up of merchant bankers to operate is in the form of divisions of Indian and Foreign banks and Financial institutions, subsidiary companies established by bankers like SBI, Canada Bank, Punjab National Bank, Bank of India, etc. some firms are also organized by financial and technical consultants and professionals. Securities and exchanges Board of India (SEBI) has divided the merchant bankers into four categories based on their capital adequacy. Each category is authorized to perform certain functions. From the point of Organizational set up India’s merchant banking organizations can be categorized into 4 group on the basis of their linkage with parent activity. They are:

a) Institutional Base:-

Where merchant banks function as an independent wing or as subsidiary of various Private/ Central Governments/State Governments Financial institutions. Most of the financial institutions in India are in public sector and therefore such set up plays a role on the lines of governmental priorities and policies.

b) Banker Base:-

These merchant bankers function as division/ subsidiary of banking organization. The parent banks are either nationalized commercial banks or the foreign banks operating in India. These organizations have brought professionalism in merchant banking sector and they help their parent organization to make a presence in capital market.

c) Broker Base :-

In the recent past there has been an inflow of Qualified and professionally skilled brokers in various Stock Exchanges of India. These brokers undertake merchant baking related operating also like providing investment and portfolio management services.… Read the rest

Levels of international strategy

There are mainly three levels of international strategy. They are

  • Corporate Strategy
  • Business Strategy
  • Functional Strategies

Short description of these three are given bellow,

1. Corporate Strategy:

Corporate strategy attempts to define the domain of businesses the firm intends to operate. Consider three Japanese electronics firms: Sony competes in the global market for con­sumer electronics and entertainment but has not broadened its scope into home and kitchen appliances. Corporation focuses only on electronic audio and video products. Each firm has answered quite differently the question of what constitutes its business domain. Their divergent answers reflect their differing corporate strengths and weaknesses, as well as their differing assessments of the opportunities and threats produced by the global economic and political environments.

  • The single- Business Strategy: The single-business strategy calls for a firm to rely on a single business, product, or service for all its revenue. The most significant advan­tage of this strategy is that the fine can concentrate all its resources and expertise on that one product or service. However, this strategy also increases the firm’s vulnerability to its competition and to changes in the external environment. For example, for a firm producing only VCRs, a new innovation such as the DVD player makes the firm’s single product obso­lete, and it may be unable to develop new products quickly enough to survive.
  • Related Diversification: Related diversification, the most common corporate strategy,, calls for the firm to operate in several different but fundamentally related busi­nesses, industries, or markets at the same time. This strategy allows the firm to leverage a distinctive competence in one market in order to strengthen its competitiveness in others.
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