Definition of Debentures A company may not with to possess itself of the use of more share capital or ownership securities, and yet desire more available money. It may invite persons to kind their money as a loan, instead of contributing it as a part of the capital. Money so lent must also be recorded and acknowledged. The document which the lender receives is called a debenture. The holder of this debenture is a creditor of the company, while the shareholder is one of the proprietors of the capital of the company and so responsible for its liabilities. The debenture holder is one of the liabilities for which the shareholder is responsible. Thus a company in order to secure long-term finance for initial needs and more often for extensions and developments to supplement its capital may issue debentures or “creditorship securities”. In fact in every country, debenture issue is oneContinue reading
Financial Concepts
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 toContinue reading
Merchant Banking Services: Credit 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; Estimating the total costs. 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. Preparing loan application for financial assistance from term lenders/financial institutions/banks and monitoring their progress including the pre-sanction negotiations. Selecting the institutions and banks for participation in financing. Follow-up of the term loan application with the financial institutions and banks and obtaining the satisfaction for their respective share of participation. Arranging bridge finance. Assisting in completion of formalities for drawlContinue reading
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 corporateContinue reading
Areas and Scope of Financial Management
Financial management, at present is not confined to raising and allocating funds. The study of financial institutions like stock exchange, capital, market, etc. is also emphasized because they influenced under writing of securities & corporate promotion. Company finance was considered to be the major domain of financial management. The scope of this subject has widened to cover capital structure, dividend policies, profit planning and control, depreciation policies. Some of the functional areas covered in financial management are discussed as such- Determining financial needs:- A finance manager is supposed to meet financial needs of the enterprise. For this purpose, he should determine financial needs of the concern. Funds are needed to meet promotional expenses, fixed and working capital needs. The requirement of fixed assets is related to types of industry. A manufacturing concern will require more investments in fixed assets than a trading concern. The working capital needs depend upon scaleContinue reading
Commercial Paper – Definition, Features and Advantages
What is a Commercial Paper? A commercial paper is an unsecured promissory note issued with a fixed maturity by a company approved by RBI, negotiable by endorsement and delivery, issued in bearer form and issued at such discount on the face value as may be determent by the issuing company. Features of Commercial Paper Commercial paper is a short-term money market instrument comprising usince promissory note with a fixed maturity. It is a certificate evidencing an unsecured corporate debt of short term maturity. Commercial paper is issued at a discount to face value basis but it can be issued in interest bearing form. The issuer promises to pay the buyer some fixed amount on some future period but pledge no assets, only his liquidity and established earning power, to guarantee that promise. Commercial paper can be issued directly by a company to investors or through banks/merchant banks. Advantages of CommercialContinue reading