A Study on the Performance of the Sbi Merchant Banking

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A Project Report On

A STUDY ON THE PERFORMANCE OF THE SBI MERCHANT
BANKING (Kottayam),
Kerala.

Submitted to the
S.R.M. SCHOOL OF MANAGEMENT
In partial fulfilment of the requirements in the award of the
Degree of Master of Business Administration
By
SONIA JACOB
Reg. No: 3511210455
Under the Guidance of
Mr. AP.Karthik Kumaran
Asst. PROFESSOR
SRM SCHOOL OF MANAGEMENT

DEPARTMENT OF MANAGEMENT STUDIES,
SRM UNIVERSITY
KATTANKULATHUR CAMPUS
TAMILNADU – 603 203

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CERTIFICATE

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CERTIFICATE
This is to certify that the project report entitled “A STUDY ON THE

PERFORMANCE OF THE SBI MERCHANT
BANKING(Kottayam),Kerala”
Submitted by Sonia Jacob (Reg. No: 3511210455) in partial fulfilment for the final project in
awards of Master of Business Administration of SRM University- Kattankulathur, is a
bonafide research work carried out under my supervision and guidance and no part of this
project has been submitted for any other degree / diploma.
The assistance and help received during the course of the investigation has been fully
acknowledged.

Signature Of The Guide

Signature Of Student

Place:
Date

Dr. (Mrs). Jayshree Suresh
Dean,
SRM University.

External Examiner
Date:

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DECLARATION

I Sonia Jacob, Reg. No: 3511210455, hereby declare that the project report titled “A

STUDY ON THE PERFORMANCE OF THE SBI MERCHANT
BANKING(Kottayam),Kerala” under the supervision and the guidance of Mr. AP.
Karthik Kumaran, Professor, Department of Management Studies, SRM UNIVERSITY
(Kattankulathur Campus- Chennai), is the result of the original work done by me and to the
best of my knowledge, a similar work has not been submitted earlier to any University or any
other Institution.

Place:

Sonia Jacob (3511210455)

Date:

SRM MBA-H

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ACKNOWLEDGEMENT

A journey is easier when we travel together. Interdependence is certainly more
important than independence. It will always be my pleasures to thank those who have
helped me in making this project a lifetime experience.

I would like to express my heartiest gratitude to STATE BANK OF INDIA (Kottayam),
for giving me an opportunity to work with its Kerala HEADQUATER OF STATE BANK
OF INDIA, our Institute and important persons associated with this project as without
their guidance and support I would have never ever have got a chance to have real life
experience of working with a Merchant Banking firm of such a great reputation and learn
practically about working and service provided to customer by Merchant Banking firm,

I would also like to extend my gratitude to Mr.Sohan Kumar for giving me an
opportunity to join them to know and learn about the Merchant Banking Operations in
State Bank Of India.

It is my privilege to thank Mr.Thomas Matthew (Customer Service Officer) &
Mr.Cherian Varghese (Marketing Associate) whose guidance has made me learns and
understands the finer and complicated aspects of Merchant Banking. The help and
guidance which he has extended to me has made me feel as being an integral part of the
organization.

My heartiest gratitude extends to my faculty Prof. AP.Karthik Kumaran, (Professor of
SRM UNIVERSITY CHENNAI) who have helped me in every aspect of my work.

Finally, I thank all those who directly and indirectly contributed to this project.

21st May 2014
SRM UNIVERSITY

Sonia Jacob

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Index
Sr.no

Particulars

Pg no

CHAPTER 1
1

INTRODUCTION

3

1.1

MEANING AND DEFINITION

3

1.2

INDUSTRY PROFILE

4

1.2.1 WHO ARE MERCHANT BANKERS ?
1.2.2. CLASSIFICATION OF MERCHANT BANKS

4
4

1.3

ECONOMIC GROWTH DURING LIBERALIZATION MEASURES

5

1.4

GROWTH OF MERCHANT BANKS DURING RECENT DECADE

8

1.5

FUNCTIONS OF SBI AS MERCHANT BANKERS

9

1.6

ROLE OF SEBI

14

1.6.1REGISTRATION OF MERCHANT BANKERS IN INDIA
1.6.2 MERCHANT BANKERS HAVE THE FOLLOWING
OBLIGATIONS AND RESPONSIBILITIES.
1.6.3 PROCEDURE FOR GETTING REGISTRATION
1.6.4 REGISTRATION FEE PAYABLE TO SEBI:

14
15

1.7

SCOPE FOR GROWTH OF MERCHANT BANKING IN INDIA

18

1.8

PROBLEMS AND HURDLES FACED BY MERCHANT BANKS

21

1.9

ORGANISATION PROFILE

22

1.10

REVIEW OF LITERATURE

28

1.11

NEED FOR STUDY

32

1.12

OBJECTIVES OF THE STUDY

33

1.13

LIMITATIONS OF THE STUDY

34

17
17

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CHAPTER 2
2

RESEARCH METHODOLOGY

36

2.1

RESEARCH METHODOLOGY

36

2.2

RESEARCH DESIGN

36

2.3

TYPES OF RESEARCH DESIGN

36

2.3.1 DESCRIPTIVE METHOD
2.3.2 DESCRIPTIVE RESEARCH DESIGN
2.3.3 SAMPLING SIZE
2.3.4 SAMPLING TECHNIQUE

37
37
37
38

2.4

METHODS OF DATA COLLECTION

38

2.5

DATA ANALYSIS TOOLS

38

2.5.1 PERCENTAGE ANALYSIS
2.5.2 TABLES AND CHARTS
2.5.3 BAR DIAGRAM
2.6

DATA COLLECTION PROCEDURE

38
39
39
39

Chapter 3
3.1

DATA INTERPRETATION

41

3.2

HYPOTHESIS ANALYSIS

52

Chapter 4
4.1

FINDINGS

56

4.2

SUGGESTIONS

58
Chapter 5

5.1

SUMMARY

60

5.2

BIBLIOGRAPHY

61

5.3

ANNEXURE

62

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ABSTRACT
A STUDY ON THE PERFORMANCE OF THE SBI MERCHANT BANKING
The main focus of the study would be on functioning of the Merchant Banking companies.
The study would have information and details of Merchant Banking of public sector and
private sector companies and then an analysis will be done on the collected information and
finally a comparison between these two categories will be done. After comparison it would
be find out which category has more growth potential in present scenario as well as in future.

After the study, based on the data collected, it has been analyzed and better suggestion and
conclusion are given to conclude the project study. A pilot study of 40 samples has been
collected to identify the effectiveness of the questionnaire. The statistical tools which are
used for the findings are percentage method, Chi-square test and weighted average method.
The primary sources of data are collected from a structured questionnaire circulated among
the various sectors of individuals. The data obtained give rise to following findings:
1. Out of total respondents, 45% respondents take Financial Service and rest 55%
respondents do not take Financial Service.
2. Out of total respondents, 44% respondents Know about merchant banking and rest
56% respondents do not know about merchant banking.

3. 43.75% respondents are Satisfied with the services provided by SBI‟s Merchant Bank
and the rest 56.25% respondents are unsatisfied.

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CHAPTER 1

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MERCHANT BANKING IN STATE BANK OF INDIA
1. INTRODUCTION
Merchant Bankers act as a link between corporate bodies who intend on raising funds and
investors who are interested in investing in securities. It helps corporates establish new
companies, expand, diversify, merge, commission projects etc. Apart from that, merchant
banking was the necessity of banks themselves which were in need of non-fund based income
so as to improve their profitability margins by all means in the changed economic scenario.

Merchant Banking is known by different names in different places. In the USA, it is known
as “Investment Banking”. In the UK it is known as “accepting and clearing houses”.

1.1.1MEANING AND DEFINITION
Original Definition: A Merchant Bank is a British term for a bank providing various
financial services such as accepting bills arising out of trade, providing advice on
acquisitions, mergers, foreign exchange, underwriting new issues, and portfolio management.

The Focus Definition:

A Merchant Bank can be generally described as a financial

services company with a private equity investment arm offering investment banking and
ancillary services as well. Because a merchant bank acts not only as an advisor and broker
but also as a principal, a merchant bank has a longer term approach than a typical investment
bank and is highly concerned with the viability of each investment opportunity and providing
the right advice for a strong partnership with each client company.
Amidst the swift changes sweeping the financial world, Merchant Banking has emerged as an
indispensable financial advisory package. Merchant banking is a service-oriented function
that transfers capital from those who own to those who can use it. They try to identify the
needs of the investors & corporate sector & advice entrepreneurs what to do to be successful.

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The merchant banking has been defined as to what a merchant banker does. A merchant
Banker has been defined by Securities Exchange Board Of India (Merchant Banker) rules,
1992, as “Any person who is engaged in the business of issue management either by
making arrangements regarding selling, buying or subscribing to securities or acting as
manager, consultant, advisor or rendering corporate advisory services in relation to such
issue management.”

1.2. INDUSTRY PROFILE
1.2.1 WHO ARE MERCHANT BANKERS ?
-Merchant banks are private financial institution.

-Their primary sources of income are PIPE (Private Investment In Public Entities)
financings and international trade.

-Their secondary income sources are consulting, Mergers & Acquisitions help and
financial market speculation.

-Because they do not invest against collateral, they take far greater risks than
traditionalbanks.

-The reason that businesses should develop a working relationship with a merchant
bank is that they have more money than venture capitalists. Their advice tends to be
more pragmatic than venture capitalists.

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1.2.2. CLASSIFICATION OF MERCHANT BANKS
(1) Public Sector Merchant Banks:
Commercial Banks (public)
National Financial Institutions
State Financial Institutions

(2) Private Sector Merchant Banks:
Foreign Banks
Indian Private Banks
Leasing Banks
Finance and investment companies

Leading Merchant Bankers in India
In Public Sector: SBI Capital Markets Ltd., Merchant Banking Divisions of IDBI &
IFCI, PNB Capital Services Ltd., Bank of Maharashtra, etc.
In Private Sector: ABN AMRO, ICICI Bank Ltd, Axis Bank Ltd., Kotak Mahindra
Capital Co., Bajaj Capital, Reliance Security Ltd., Yes bankLtd, Tata capital market
ltd., JM Financial Co. and DCM Financial Services Ltd etc.
Foreign Players: Goldman SACH (India) Security Pvt. Ltd., Morgan Stanley Indian
co. Pvt. Ltd., Barclays Security Indian Pvt. Ltd., Bank of America, Deutsche Bank,
Citi Group Global Market Indian Pvt. Ltd., Fedex Security Ltd.,

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1.3 ECONOMIC GROWTH DURING
LIBERALIZATION MEASURES
In late 17th and early 18th century Europe, the largest companies of the world was merchant
adventurers. Supported by wealthy groups of people and a network of overseas trading posts,
the collected large amounts of money to finance trade across parts of the world. For example,
The East India Trading Company secured a Royal Warrant from England, providing the firm
with official rights to lucrative trading activities in India. This company was the forerunner in
developing the crown jewel of the English Empire. The English colony was started by what
we would today call merchant bankers, because of the firm's involvement in financing,
negotiating, and implementing trade transactions. The colonies of other European countries
were started in the same manner. For example, the Dutch merchant adventurers were active in
what are now Indonesia; the French and Portuguese acted similarly in their respective
colonies. The American colonies also represent the product of merchant banking, as
evidenced by the activities of the famous Hudson Bay Company. One does not typically look
at these countries' economic development as having been fueled by merchant bank
adventurers. However, the colonies and their progress stem from the business of merchant
banks, according to today's accepted sense of the word. Merchant banks, now so called, are in
fact the original "banks". These were invented in the middle Ages by Italian grain merchants.
As the Lombardy merchants and bankers grew in stature on the back of the Lombard plains
cereal crops many of the displaced Jews who had fled persecution after 613 entered the trade.
They brought with them to the grain trade ancient practices that had grown to normalcy in the
middle and far east, along the Silk Road, for the finance of long distance goods trades.
The Jews could not hold land in Italy, so they entered the great trading piazzas and halls of
Lombardy, along side the local traders, and set up their benches to trade in crops. They had
one great advantage over the locals.
Christians were strictly forbidden the sin of usury. The Jewish newcomers, on the other hand,
could lend to farmers against crops in the field, a high-risk loan at what would have been

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considered usurious rates by the Church, but did not bind the Jews. In this way they could
secure the grain sale rights against the eventual harvest. They then began to advance against
the delivery of grain shipped to distant ports. In both cases they made their profit from the
present discount against the future price. This two-handed trade was time consuming and
soon there arose a class of merchants, who were trading grain debt instead of grain.

TRADATIONAL MERCHANT BANKING
Merchant Banking, as the term has evolved in Europe from the 18th century to today,
pertained to an individual or a banking house whose primary function was to facilitate the
business process between a product and the financial requirements for its development.
Merchant banking services span from the earliest negotiations from a transaction to its actual
consummation between buyer and seller.
In particular, the merchant banker acted as a capital sources whose primary activity was
directed towards a commodity trader/cargo owner who was involved in the buying, selling,
and shipping of goods. The role of the merchant banker, who had the expertise to understand
a particular transaction, was to arrange the necessary capital and ensure that the transaction
would ultimately produce "collectable" profits. Often, the merchant banker also became
involved in the actual negotiations between a buyer and seller in a transaction.

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1.4 GROWTH OF MERCHANT BANKS DURING
RECENT DECADE
MODERN MERCHANT BANKING
During the 20th century, however, European merchant banks expanded their services. They
became increasingly involved in the actual running of the business for which the transaction
was conducted. Today, merchant banks actually own and run businesses for their own
account, and that of others.
Since the 18th century, the term merchant banker has, therefore, been considerably broadened
to include a composite of modern day skills. These skills include those inherent in an
entrepreneur, a management advisor, a commercial and/or investment banker plus that of a
transaction broker. Today a merchant banker is who has the ability to merchandise -- that is,
create or expands a need -- and fulfill capital requirements. The modern European merchant
bank, in many ways, reflects the early activities and breadth of services of the colonial
trading companies.
Most companies that come to a U.S. merchant bank are looking to increase their financial
stability or satisfy a particular, immediate capital need.
Professional merchant bankers must have: 1) an understanding of the product, its industry and
operational management; 2) an ability to raise capital which might or might not be one's own
(originally merchant bankers supplied their own capital and thereby took an equity interest in
the transaction); 3) and most importantly, effective skills in concluding a transaction - the
actual sale of the product and the collection of profit. Some people might question whether or
not there are many individuals or organizations that have the abilities to fulfill all three areas
of expertise.

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1.5 Functions of SBI As Merchant Bankers:
Project Appraisal
This service helps corporates analyze the soundness of a project, which may be setting
up a new unit/expansion/modernization etc. It is a process of examining the technical,
commercial, financial and economic viability of a project to ensure that it generates
sufficient returns on the resources invested in it. The study of viability involves
detached verification of project‟s ability to stand the tests of technical, financial and
commercial feasibilities and management‟s capabilities to successfully implement and
run the project. A service project report will be prepared for the company, including
finalization of capital structure. Project appraisal includes:
- Financial appraisal (liquidity analysis, capital structure analysis, profitability
analysis etc
- Technical appraisal (factors of production, technology, civil works, site location etc)
- Economic appraisal (also known as cost-benefit analysis, social cost, impact on
employment, impact of the economy)

Syndication of Loan
Merchant Bankers arrange short, medium and long term loans for their clients. They
analyze the pattern of clients cash flows, based on which the terms of borrowing can
be defined. It then prepares a detailed loan memorandum which is circulated to various
banks and financial institutions and they are invited to participate in the syndicate. The
merchant banks then negotiate the terms of lending based on which the final allotment
is done. It also arranges for raising foreign exchange loans and external commercial
borrowings for import of capital.

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Issue Management
This is the primary function of merchant bankers. It refers to the management of
securities offering of corporates to the general public and existing shareholders on
rights basis. Merchant bankers act as lead managers and assists companies in arriving
at quantum and nature of issue and obtaining consent/clearance from various statutory
authorities, preparing draft prospectus, obtaining approval from appropriate authorities
etc. it also assists companies in tying up with underwriters for the issue, appoint other
intermediaries like brokers, bankers, advertising agents, registrar to the issue and coordinates the activities of these agencies and institutions from the successful flotation
of the issue. It also helps in listing the securities in stock exchange, finalizing basis of
allotment, arranging for refund, handling investor complaints etc.

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Underwriting of issues
In order to ensure full subscription or the stipulated minimum subscription of 90% of
the issue, companies enter into an agreement with financial institutions, banks, brokers
and bankers to underwrite the issue amount. Merchant bankers can underwrite issues
and assist companies in tying up with other underwriters

Corporate Counseling
Rendering assistance to corporate clients on various aspects of business operations in
the areas of financial planning, performance budgeting, restructuring capital, and other
aspects of financial management and monitoring systems and operations.

Bankers to the issue
Collection of subscription money/application money for an issue from the investors,
acknowledgement, proper accounting of the money received, sending
reports/certificates, informing collection details are the services provided in the banker
to the issue role.

Investment Counseling
This activity involved assisting firms, companies, trusts, funds and associations in the
choice of shares and stocks for investment depending upon the needs and the riskreturn trade-off, as well as taxation and time considerations.

Portfolio

Management

Services

Portfolio refers to investment in different types of marketable securities or
investment papers like shared, debentures and debenture stocks, bonds etc. from
different companies or institutions held by individuals firm or corporate units.
Portfolio management refers to managing efficiently the investment in the
securities held by professionals to others. Merchant bankers take up management
of a portfolio of securities on behalf of their clients, providing special services with
a view to ensure maximum return by such investments with a minimum risk of loss
of return on the money invested in securities. A merchant banker while performing

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the services of portfolio management has to enquire of the investment needs of the
client, the tax bracket, ability to bare risk, liquidity requirements, etc. they should
study the economic environment affecting the capital market, study the securities
market and identify blue chip companies in which money can be invested. They
should keep record of latest amendment in government guidelines, stock exchange
regulations, RBI regulations, etc.

Registrar and Transfer Agent
Transfer agency work involves carrying out transfer work in respect of securities after
complying with stipulated formalities/procedures. Preparation and printing of dividend
warrants and dispatching them to share holders is also covered here. Other services
include attending to complaints of applicants/investors, coding and verification of
applications, allotment, processing and dispatching allotment letters, providing various
documents and certificates etc.

Mergers, amalgamations and Acquisitions
Some companies desire to restructure themselves in order to effectively meet
competition. Merchant bankers provide all requisite guidance and services for
restructuring, to prepare due diligence, necessary clearance from statutory bodies like
SEBI, ROC etc as per the statutory stipulations, for the process of mergers,
acquisitions and amalgamations.

Venture Capital
Merchant Bankers help co obtaining venture capital for financing their new and
innovative strategies. Venture capital financing is a type of financing by venture capital:
the type of private equity capital is provided as seed funding to early-stage, high-potential,
growth companies and more often after the seed funding round as growth funding round
(also referred to as series A round) in the interest of generating a return through an
eventual realization event such as an IPO or trade sale of the company.

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Leasing Finance
Is there another lucrative area of financing where merchant bankers are turning?
Leasing is a viable source of financing while acquiring capital assets. The services
include arrangement for lease finance facilities for leasing companies, legal;
documents and tax consultancy.

Non-resident investment
Merchant bankers provide investment advisory services to attract NRI investment in
primary and secondary markets, undertake buying and selling securities on their
behalf, secure clearances from RBI under FEMA for repatriation of interest and
dividends etc.

Joint ventures
Merchant Bankers help corporates with joint ventures in India and abroad.

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1.6 ROLE OF SEBI
1.6.1Registration of merchant bankers in India
Registration with SEBI is mandatory to carry out the business of merchant banking in India.
An applicant should comply with the following norms:
 The applicant should be a body corporate
 The applicant should not carry on any business other than those connected with the
securities market
 The applicant should have necessary infrastructure like office space, equipment,
manpower etc.
 The applicant must have at least two employees with prior experience in merchant
banking
Any associate company, group company, subsidiary or interconnected company of the
applicant should not have been a registered merchant banker
 The applicant should not have been involved in any securities scam or proved guilt for
any offence
SEBI HAS DIVIDED MERCHANT BANKER‟S IN
FOUR CATEGORIES, WHICH ARE AS FOLLOW:CATEGORIES

ACTIVITIES

NETWORTH

Category I

To carry on the activities of issue mgt &

RS 1 Crore

act

as

advisor,

consultant,

manager,

underwriter, portfolio management.

Category II

To act as advisor, consultant , co-manager,

Rs 50 lakh

Underwriter, portfolio management.
Category III

To

act

as

advisor,

underwriter

or

Rs 20 lakh

consultant
to an issue
Category IV

To act only as advisor& consultant to an
issue

Nil

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1.6.2 Merchant bankers have the following obligations and
responsibilities.
1. Merchant banker should maintain proper books of accounts, records and submit half
yearly/annual financial statements to the SEBI within stipulated period of time.

2. No merchant banker should associate with another merchant banker who is not
registered in SEBI
.
3. Merchant bankers should not enter into any transactions on the basis of unpublished
information available to them in the course of their professional assignment.

4. Every merchant banker must submit himself to the inspection by SEBI when required
for and submit all the records.
5. Every merchant banker must disclose information to the SEBI when it requires any
information from them.
6. All merchant bankers must abide by the code of conduct prescribed for them.

7. Every merchant banker who acts as lead manager must enter into an agreement with
the issuer setting out mutual rights, liabilities, obligations, relating to such issues with
particular reference to disclosures allotment, refund etc.

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The SEBI has announced the new guidelines for the disclosures by the
Companies leading to the investor protection. They are presented below:
a) If any Company‟s other income exceeds 10 per cent of the total income, the details
should be disclosed.
b) The Company should disclose any adverse situation which affects the operations of
the Company and occurs within one year prior to the date filing of the offer document
with the Registrar of Companies or Stock Exchange.

c) The Company should also disclose the information regarding the capacity utilization
of the plant for the last 3 years.
d) The Promoters of the Company must maintain their holding at least at 20 per cent of
the expanded capital. The minimum application money payable should not be less
than 25 per cent of the issue price.

e) The company should disclose the time normally taken for the disposal of various
types of investor‟s grievances.

f) The Company can make firm allotments in public issues as follows:
Indian mutual funds (20%),
FIIS (24%),
Regular employees of the company (10%),
Financial institution (20%).

The Company should disclose the safety net scheme or buy back arrangements of the
shares proposed in public issue. This scheme is applicable to a limited number of 500
shares per allottee and the offer should be valid for a period of at least 6 months from
the date of dispatch of securities.

i) According to the guidelines, in case of the public issues, at least 30 mandatory
collection centres should be established.

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j) According to the SEBI guidelines regarding rights issue, the Company should give
advertisements in not less than two newspapers about the dispatch of letters of offer. No
preferential allotment may be made along with any rights issue.

k) The Company should also disclose about the fee agreed between the lead managers and the
Company in the memorandum of understanding.

1.6.3 PROCEDURE FOR GETTING REGISTRATION

An application should be submitted to SEBI in Form A of the SEBI (Merchant Bankers)
Regulations, 1992. SEBI shall consider the application and on being satisfied, issues a
Certificate of registration in Form B of the SEBI (Merchant Bankers) Regulations, 1992.

1.6.4 REGISTRATION FEE PAYABLE TO SEBI:

Rs. 5 lakhs which should be paid within 15 days of date of receipt of intimation regarding
Grant of certificate. Validity period of certificate of registration is three years from the
Date of issue. Three months before the expiry period, an application along with renewal
Fee of 2.5 lakhs should be submitted to SEBI in Form A of the SEBI (Merchant Bankers)
Regulations, 1992. SEBI shall consider the application and on being satisfied renew
Certificate of registration for a further period of 3 years.

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1.7 SCOPE FOR GROWTH OF
BANKING IN INDIA

MERCHANT

As planning and industrial policy of the country envisaged the setting of up of new industries
and technology, greater financial sophistication and financial services are required. There is a
well proven link between economic growth and financial technology.
Economic development requires specialist financial skills: savings banks to marshal
individual savings; finance companies for consumer lending and mortgage finance; insurance
companies for life and property cover; agricultural banks for rural development; and a range
of specialized government or government sponsored institutions. As new units have been set
up and business is expanding, they require additional financial services. A public equity or
debt issue is the logical source of fund in this situation and merchant banks can tap this
opportunity of growth.

THE AREAS OF GREAT SCOPE COULD BE
 Entry of Foreign Investors

Now India capital market directly taps foreign capital through euro issues.FDI is increased in
capital market. So Merchant bankers are required to advice them for their investment in India.
The increasing number of joint ventures also requires expert services of Merchant Bankers. If
more and more NRIs participate in capital market, there will be great demand for merchant
banker services.

 Changing policy of Financial Institutions

Now the lending policies of financial institutions are based on project orientation, so the

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merchant banker services will be needed by corporate enterprise to provide expert guidance.

 Development of debt markets

If the debt market is enhanced, there will be tremendous scope for Merchant bankers. Now
NSE and OTCEI are planned to raise their fund through debt instruments.

 Corporate restructuring:

Due to liberalization and globalization Companies are facing lot of competition. In
order to compete, they have to go for restructuring, merger, acquisitions or
disinvestments. They may offer good opportunities to merchant bankers
 Size and dynamics of the market

Indian market is growing. In fact India is one of the largest emerging markets.
Obviously, public issues, FDI, debt raising are on rise. Lots of new and green fried
projects are happening. Merchant bankers have lots space to contribute.
 Restrictions-liberalization :

More liberal the market is, more the things left to be decided by the corporate.
Merchant bankers assist in decision making and hence their scope increases. With
significant market freedom, merchant bankers work has increased many folds.
 Banking policies

RBI prefers that commercial banks do not indulge in merchant banking business
directly. They should setup a subsidiary for the purpose. This limits scope of
commercial banks and gives space to merchant bankers. This policy also results in fair
business practices. Some countries allow commercial bankers to get involved in

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IPO‟s, placement of debentures, etc. Indian scenario is favorable to merchant bankers.
 Corporate culture

Corporate can do project appraisal, strategicrestructuring in house as well. If the
corporate prefer third-party independent assessment, then only they will engage
merchant bankers. Otherwise merchant banker‟s role is only statutory as in issue
management. India inc. apparently prefers and is happy with merchant bankers work.
 Corporate dynamics

More happening in business gives more opportunities to merchant bankers. Mergers,
takeover acquisition, new Greenfield projects, fund raising for government
institutions, active money market are all providing better business prospectus to
merchant bankers.

THE SCOPE COULD BE EXTENDED TO

1. Advising the company on designing of its Capital Structure.
2. Advising the company on the instrument to be offered to the public.
3. Pricing of the instrument.
4. Advising the company on Legal/ regulatory matters and interaction with SEBI/ ROC/
Stock
5. Exchanges and other regulatory authorities.
6. Assisting the company in marketing the issue.
7. In channelizing the financial surplus of the general public into productive investment
avenues.
8. To coordinate the activities of various intermediaries to the share issue such as the

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registrar, Bankers, advertising agency, printers, underwriters, brokers etc.
9. To ensure the compliance with rules and regulations governing the securities market.

1.8 PROBLEMS AND HURDLES FACED BY
MERCHANT BANKS
Not many but some problems are faced by Indian merchant bankers.

I.

Industry compartmentalization

Company which is in merchant banking business would have expertise in
underwriting, hire purchase, leasing, and portfolio management, money-lending.
But RBI does not permit merchant banking firms to get into these activities. So
the same promoters have to setup different companies for different purposes.
Management cost increases and expertise pooling i.e. multiple use of same talent
is not possible.

II.

Malafide practices

India corporate culture is bettering. but still many corporate have excessively
friendly approach. Favored allotment of shares, tampering with project appraisal
report to bankers is common. Corporate like to use merchant bankers for malafide
intentions. This gives growth to more boutique fly-by-day firms. Giant
professional or multinational merchant bankers are cautions in their approach to
Indian market.

III.

Regulations

Though regulations are much better now, there is still scope for further
improvement. Merchant bankers can be made more accountable and responsible.
Professional qualification focused on merchant banking is not available. Industry

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is not well organized and all the players do not play the same tune. This is
specifically evident in comparison with insurance industry and mutual funds
industry.

1.9 ORGANISATION PROFILE

SBI Merchant Banking Group is strongly positioned to offer perfect financial solutions to
your business. We specialize in the arrangement of various forms of Foreign Currency
Credits for Corporate.
State Bank of India is the nation's largest bank. Tracing its roots back some 200 years to the
British East India Company (and initially established as the Bank of Calcutta in 1806), the
bank operates more than 13,500 branches and over 5,000 ATMs within India, where it also
owns majority stakes in seven associate banks. State Bank of India has more than 50 offices
in nearly 35 other countries, including multiple locations in the US (California), Canada, and
Nigeria. The bank has other units devoted to capital markets, fund management, factoring and
commercial services, and brokerage services. The Reserve Bank of India owns about 60% of
State Bank of India.
SBI being an Indian entity has no India exposure ceiling. Our Primary focus is On Indian
Clients. SBI‟s seasoned Team of professionals provides you with Insightful credit
Information and helps you Maximize the Value from the transaction.
OUR PRODUCTS AND SERVICES
 Arranging External Commercial Borrowings (ECB)
 Arranging and participating in international loan syndication
 Loans backed by Export Credit Agencies

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 Foreign currency loans under the FCNR (B) scheme
 Import Finance for Indian corporate

SBI CAPITAL MARKETS LIMITED (SBICAPS) is India's leading investment bank and
project advisor, assisting domestic company‟s fund-mobilization efforts for last many years.

We began operations in August 1986 as a wholly owned subsidiary of the State Bank of
India, which is the largest commercial bank in India. In January 1997, fresh equity shares
were issued to Asian Development Bank (ADB) and ADB now holds 13.84% stake in the
equity of SBICAPS. The distinguished parentage (with a 86.16% stake) together with the
long standing association of an internationally renowned financial institution like the Asian
Development Bank further enhances our image as a truly 'World Class Investment Bank'.

Our Mission - To provide Credible, Professional and Customer Focused world-class
investment banking services.
Our Vision - To be the best India based Investment Bank.
SBI Group








The largest commercial bank group in India
Position in the domestic banking sector as on 31 March 2008:
15.44% of the aggregate deposits.
15.28 % of total advances.
The only Indian Bank to find a place in the Fortune Global 500 List.
First Indian Bank to take up merchant banking in 1986.

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SBI Capital Markets Limited

 No. 1 in Asia – Pacific for Project Advisory. Rating by Thomson Project Finance
International.
 No. 1 in IPO‟s, managed 700+ issues (since 1989 – source Prime Database).
 The only Indian Merchant Banker in the Global 10, Thomson Project Finance
International 2007.
 Pioneer in Privatization.

Subsidiary






SBICAPS Ventures Ltd.
SBICAP Securities Ltd.
SBICAPS (UK) Ltd.
SBICAP Trustee Company Ltd.

Associates Bank
State Bank of
Bikaner &
Jaipur

State Bank of
Saurashtra

SBI Factors &
Comm. Services
Ltd.

SBI (California)

State Bank of
Hyderabad

State Bank of
Travancore

SBI Funds
Management
(P) Ltd.

SBI
International
(Mauritius)
Ltd.

State Bank of
Indore

SBI Capital
Markets Ltd.

SBI DFHI Ltd.

Indo-Nigerian
Merchant Bank

State Bank of
Mysore

SBICI Bank
Ltd.

SBI Life
Insurance Co.
Ltd

Nepal SBI
Bank Limited

Commercial
Bank of India
LLC

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Promoters’ Share: -

Performance:-

Awards: Asia Pacific Bank of the Year Award 2009 for Leadership in Project Finance by
Thomson Reuters (pfi)
 India Loan House 2009 for Leadership in Loan Syndication by Thomson Reuters (ifr
Asia)
 Asia Pacific Oil and Gas Deal of the Year 2009 for Cairn India by Thomson Reuters
(pfi)
 African Power Deal of the Year 2009 for Morupule B by Thomson Reuters (pfi)
 Indian Power Deal of the Year 2009 for Sasan by Euromoney
 Indian Upstream Oil & Gas Deal of the Year 2009 for Cairn India by Euromoney
 Indian Road Deal of the year 2009 for Yamuna expressway by Euromoney
 Indian Telecom Deal of the Year 2009 for Aircel by Euromoney
 SAFA Best Presented Accounts Award 2008
 Award for Excellence in Financial Reporting

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SERVICE’S

 Project Advisory & Structured Finance
SBICAP has built a formidable presence in the area of Project Finance Advisory and Funds
Syndication with several prestigious mandates in almost every sector of the industry to its
credit.
Our product portfolio includes:






Project Appraisal
Structured Finance and Syndication
Infrastructure Project Advisory
Securitisation
Debt & Equity Syndication

 Capital Markets
Capital Markets Group handles transactions in the capital markets space across multiple
instrument structures.
Our product and solutions bouquet includes:
Managing Initial Public Offerings and Follow-on Public offerings and Offers-for-Sale
Managing Rights Offering, be it the traditional or the structured formats
Qualified Institutional Placements
Open offers, Buyback and Delisting of securities
Offerings of convertible securities
Public offering of Corporate structured bonds
Arranging Private Equity to include growth capital, pre-IPO convertibles, private
investments in public equity (PIPES), mezzanine debt and equity, and equity offerings
completed as a private placement.
Private placement of bonds
Capital restructuring advisory services
Advisory and arrangement services for products such as AIM Listing, Indian
Depository Receipts, ADR/GDR and other off-shore equity or bond listing options

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 M&A and Advisory
The M & A product portfolio includes:
 Mergers & Acquisitions
 Private Equity
 Foreign Currency Convertible Bonds (FCCB)
 Corporate Advisory
 , and Franklin Templeton

As a strategic partner, the State Bank Of India provide a broad and complimentary range of
services to address the business needs. The expertise, insight and competitive rates in Foreign
Currency loans give an edge to your business.
The State Bank Of India invites you to use their comprehensive array of strategic and
financial advisory services including mergers and acquisitions, Bilateral Foreign Currency
Loans, Syndicated Loans and Reverse FDIs.

SBI’s Merchant Banking Group is strongly positioned to offer perfect financial solutions to
your business. They specialize in the arrangement of various forms of Foreign Currency
Credits for Corporate. They provide the resources, convenience and services to meet your
needs by arranging Foreign Currency credits through:

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1.10 REVIEW OF LITERATURE
A number of studies have been conducted from time to time to understand the different
aspects relating to primary market and merchant banking activities in India. However, most
of them have focused upon the primary market in India only. Research in the area of
merchant banking in India and its role in the primary market is very limited and that too is
descriptive in nature and deals with procedural aspects, organization and management and
marketing aspects of merchant bankers. A review of important studies is presented below:

Literature Survey
Verma (1990)
I conducted research on merchant banks in India with the purpose to analyse their
organization structure and management pattern and to assess their suitability for medium and
small size corporate and non corporate enterprises. The suitability of merchant banking
services in reducing investors‟ risk and corporate capital structure has also been examined.
The information was collected from a sample of 32 merchant bankers through questionnaire
and the study covered the period 1978 to 1984.
The researcher found a number of weaknesses in the existing „divisional form‟ organization
and management pattern of merchant banks in India. This included deep concentration of
decision making power, lack of co-ordination, lack of appropriate skill, inadequate training
programme, strict dependence on the bureaucratic framework, blocked communication
channels and misdirected accountability. The study revealed that 90 percent of the resources
of all merchant banks were devoted only to the management of public issues.
A negligible performance of merchant banks was found in other areas of services including
loan syndication, merger and amalgamation, inter corporate investments and corporate
counselling. Further, merchant banking activities were found to have remained concentrated
with only a few top merchant bankers, while stock brokers managed very small sized issues
covering just 15% of the total amount of public issues.

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A good public response was found to the issues managed by category I merchant bankers
including merchant bankers of public sector banks, whereas the category II merchant bankers
which included private firms had the public response of second order.
The researcher highlighted the merchant banks‟ contribution in causing risk reduction both
to investors (through portfolio management) as well as the industry (through project
counseling and corporate counseling). Empirical results also highlighted that corporate
enterprises which sought merchant bankers‟ assistance were financially sounder and less
prone to sickness as compared to those not assisted by the merchant banks.
Murthy (1993)
In his paper examined the cost of raising capital from the public issues floated during 199293. During 1992-93, an amount of Rs. 4677.74 crore was raised through 514 public issues.
The estimated expenses on these issues were Rs. 473 crore. Analysis of 506 public issues
showed that issue expenditure as percentage of net public offer was 10.10% and the
proportion of issue expenses declined with the increase in offer size. The study found that
smaller projects tend to spend a higher proportion as issue expenditure compared to the larger
ones. The researcher also compared the cost of raising capital of issues through the OTC
(over the counter) route and regular stock exchange option and found that the cost of raising
capital through OTC route was lower than the issues that opted for regular stock exchange
route.
The study pointed out that no uniform format existed for reporting the issue expenditure in
the prospectus. The researcher has suggested that the total issue expenditure as percentage to
the total issue amount be reported prominently in the prospectus and abridged prospectus
cum application form.

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Shah (1995)
Conducted an empirical study on the data set of 2056 Indian IPOs listed on the BSE from
January 1991 to May 1995 with the objective to examine the under pricing of IPOs and to
establish the empirical regularities about India‟s IPO market. He examined six factors
underlying under pricing, namely asymmetric information between firms and investors,
fixing the offer price too early, the interest rate float, loss of liquidity on the amount paid at
issue date (liquidity premium), building loyal shareholders and merchant bankers rewarding
favoured clients as an incentive to under price. Empirical study found that the average price
on first listing day was 105.6% above the offer size, average delay between issue dates and
listing day was 11 weeks and weekly excess return on market index (BSE Sensex) was 3.8%.
The study further found that correlation between the volume of IPOs under pricing and the
return on BSE Sensex was positive, under pricing among the smaller issues was high, average
long run trading frequency of IPO was lower than „A‟ group companies and return on IPOs
during the first 200 trading days was more than market return.

A Few of literature are Form of banking where the bank arranges credit financing, but does
not hold the loans in its investment portfolio to maturity. A merchant bank invests its own
capital in leveraged buyouts, corporate acquisitions, and other structured finance transactions.
Merchant banking is a fee based business, where the bank assumes market risk but no longterm credit risk. A common form of banking in Europe, merchant banking is gaining
acceptance in the United States, as more banks originate commercial loans and then sell them
to investors rather than hold the loans as portfolio investments. A banque d'affaire is a French
merchant bank, which has more powers than its British counterpart. The Gramm-LeachBliley Act allows financial holding companies, a type of Bank Holding Company created by
the act, to engage in merchant banking activities.
First of all, you should make a list of several providers that offer the features you want, and
then compare the variable fees that may differ depending on the company you deal with.
These fees include things like set-up, cancellation, and monthly minimum, and may be
negotiable based on your unique circumstances.
Once you have determined what your business will be charged for its merchant account, it‟s

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often a good idea to do a few sample calculations to work out your total credit card
processing costs during a good, bad, and average month.
Finally, you should read and double-check the contract, including small print and detailed
terms. Don‟t sign anything until you are confident that you understand all the fees,
minimums, termination clauses, and other details. It‟s important to keep in mind that
merchant account providers won‟t go over every single point with every single customer, and
that it is ultimately your responsibility to read and understand the terms.
Financial services firm India Infoline on Wednesday said its wholly owned subsidiary, India
securities Pvt. Ltd, has received a category 1 merchant banking licence from the Securities
and Exchange Board of India.
“This will enable the company to carry out the entire range of merchant banking activities
ranging from public issue management to advisory services and underwriting of issues” a
company release said here.
Mr. Ajit Menon, Senior Vice –President and Head-Investment Banking, India Infoline, said
the company would provide focused corporate finance advisory for SME`s in the areas of
mergers & acquisitions, pvt. equity placements, IPO‟s & high yield debt. “We see specific
opportunities in cross border M&A that would bring in strategic benefits and growth
opportunities for companies in the SME sector and we are already seeing good traction in this
area”
India Infoline expects a significant number of small and medium-sized companies to be
turning to the capital markets and becoming involved in mergers and acquisitions.
The leading investment banks are targeting the large companies and the small and mediumsized companies bracket is a good untapped growth opportunity.
The company recently acquired Marchmont Capital Advisors Ltd and entered into an alliance
with Marchmont International for exclusive services and non-compete in India.

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1.11 NEED FOR STUDY

It would help us to develop the ability to study the functioning of Merchant Banking
in India & learn & apply multidisciplinary concepts, tools & techniques to solve vital
problems.

It familiarizes with the various services provided by Merchant Bankers.

It would help us to draw comparison between SBICAP & other private sector
companies engaged in Merchant Banking activities.

Based upon the comparison, it would help us to determine which sector has more
growth potential & where should one invest his/her funds to maximize the return at
minimum risk.

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1.12 OBJECTIVES OF THE STUDY
To study the significance of Merchant Banking towards the development of the economy.

To familiarize with the various services provided by Merchant Bankers.

To evaluate the performance of Merchant Bankers, both activity performance and operational
and financial performance.

To understand the customers satisfaction level provided by the SBI merchant banking
services

To analyze the functions of Merchant Banking in relation to rules and regulations of SEBI

To find out the growth potential of the Merchant Banking

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1.13 LIMITATIONS OF THE STUDY
Due to paucity of time only limited information can be collected.

There can be a possibility of “individual biasness” on the part of respondents.

Study would be confined to only 2-4 public & private sector merchant banking
companies.

Sample size to be taken may not be the true representative of the population.

Sometimes, they may face the problem of sufficient capital to deal in securities which
stops them from getting proper returns.

Lack of proper skilled labour.

Problem in managing right kind of Merger & Acquisition.

Choosing the right kind of Capital Mix.

Giving proper knowledge to its clients about future strategies.

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CHAPTER - 2

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2.1 RESEARCH METHODOLOGY
Research Methodology is a way to systematically solve the research problem. It guides the
researcher to do the research scientifically. It contains of different steps that are generally
adopted by a researcher to study his research problem along with the logic behind them. Data
become information only when a proper methodology is adopted. The research methodology
includes the logic behind the methods we use in the content of our research study.
There are various types of research methods.
(i) Applied Research

(ii) Exploratory Research

(iv) Descriptive Research

(v) Casual Research

(iii) Conclusive Research

2.2 RESEARCH DESIGN
“A research design is the arrangement of conditions for collection and analysis data in a
manner that aims to combine relevance to the research purpose with economy in procedure.”
The research design undertaken by researcher is descriptive research design.
The methodology involved in the design is mostly quantitative in nature. Descriptive
researcher Need with the research studies with a focus on the portrayal of the characteristics
of a group of individual or a situation.

2.3 TYPES OF RESEARCH DESIGN
Descriptive method is used to describe the expectations, opinion and views of the employees
in the Merchant bank

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2.3.1 DESCRIPTIVE METHOD:
Descriptive research is undertaken to describe the situation, community, phenomena,
outcome or programme. The main goal of this type of research is to describe the data and
characteristics about what is being studied. It is contemporary, topical and time bound. They
are relatively more structured and require a formal, specific and systematic approach to
sampling, collecting information, collating and testing the data to verify the research
assumptions. It is largely of a diagnostic nature without establishing the causality of the
relationship.

2.3.2 DESCRIPTIVE RESEARCH DESIGN:
Under descriptive research design we know there are two types of methods are normally used
they are:
1. Survey method
2. Observation method
For my analysis I have used the survey method. This method works by obtaining information
based on questioning of respondents. Respondents are asked a variety of questions regarding
their behavior, intentions, attitudes, awareness. Questions are basically asked either
verbally or in writing or both in same time. In this case I have decided to use the structured
questioner format and asked the questions both verbally and allowed them to write the
answers.

2.3.3 SAMPLING SIZE
The sample size selected for the study was 40 SME‟s. Ltd.

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2.3.4 SAMPLING TECHNIQUE
The study was conducted based on convenient sampling. It looks sample of 50 employees in
Diamond Engineering Pvt. Ltd.

2.4 METHODS OF DATA COLLECTION
2.4.1 PRIMARY DATA
For the main prospect of my report I have decided to use primary data analysis. For this I
have structured a small survey using the “descriptive research design” in the perspective of
recruitment and selection of the company using a Questionnaire model.

2.4.2 SECONDARY DATA
In this report I have basically focused on secondary data analysis. This means the information
of this report has been collected from Human Resource Manual, Magazines, Websites and
textbooks from various libraries.

2.5 DATA ANALYSIS TOOLS
2.5.1 PERCENTAGE ANALYSIS
Percentage method refers to a specified kind which is used in making comparison between
two or more series of data. Percentages are based on descriptive relationship. It compares
the relative items. Since the percentage reduces everything to a common base and
thereby allow meaning comparison.

Percentage = Number of respondents x 100
___________________

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Total no of respondents

2.5.2 TABLES AND CHARTS
Various kinds of tables and charts are used to represent the survey findings and
result. Charts like pie diagram, bar diagram are used.

2.5.3 BAR DIAGRAM
This diagram consists of a series of rectangular bars standing on a common base. The length
of the bars is proportional to their magnitude. The comparison among the bars is based on
lengths. There are three types of bar diagram.


Simple bar diagram



Multiple bar diagram



Component bar diagram

2.6 DATA COLLECTION PROCEDURE
The sources of recruitment are broadly divided into Internal Sources and Externals
Sources. Internal Sources are the sources within organizational pursuits. The primary data is
collected with direct interaction with candidates through questionnaire and personal
interview. The questionnaire consists of closed ended and open-ended questions. Externals
Sources are sources outside organizational pursuits.

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CHAPTER 3

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DATA ANALYSIS & INTERPRETATION
Q1. Do you take any financial services from bank?
Sr. No.

Take Financial Service

Number of clients

Percentage

1

Yes

18

45%

2

No

22

55%

Total

40

100%

GRAPH

Percentage Of Clients Taking Financial
Services

45%
55%

Yes
No

Interpretation
Out of total respondents, 45% respondents have taken Financial Service and rest 55%
respondents have not taken the Financial Service.

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Q2. Do you Know about Merchant Banking?
Sr. No.

Know about Merchant

Nos.

Percentage

1

Yes

16

40%

2

No

24

60%

Total

40

100%

GRAPH

Percentage of clients who are aware of
Merchant Banking

60%
50%

Percentage

40%
30%
20%
10%
0%
Percentage

Yes
44%

No
56%

INTERPRETATION
Out of total respondents, 44% respondents Know about merchant banking and rest 56%
respondents don‟t know about merchant banking.

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Q3. Are you satisfied with the services provided by your bank?
Sr. No.

Satisfied

Nos.

Percentage

1

Yes

17

42.5%

2

No

23

57.5%

Total

40

100%

GRAPH

Percentage Of Satisfied Clients
60.00%

Percentage

50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
Yes
No

Percentage

Yes
42.50%

No
57.50%

INTERPRETATION
Out of total respondents, 42.50% respondents areSatisfied and the rest 57.50% respondents
are unsatisfied.

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Q4 Which bank would you prefer to take Merchant Banking Services?

Sr. No

Bank

Percentage

1

ICICI

20

2

SBI

35

3

PNB

20

4

BOI

15

5

Other

10

GRAPH

Favourable Merchant Banking Institution
10%
20%

15%

ICICI
SBI
PNB
BOI
Other

20%
35%

INTERPRETATION


A large percentage of clients takes financial services from SBI.

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Q 5 What is the position of Private Sector Merchant Banking in India?

Sr.no

Position

Percentage

1

Good

50%

2

Normal

35%

3

Bad

15%

Total

100%

GRAPH

Image of Private Sector Merchant Banks

15%
Good
Normal
50%
Bad
35%

INTERPRETATION
Out of total respondents, 50% respondents Say Good, 35% Say Normal and rest 15%
respondents say bad.

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Q 6 What is the position of Public Sector Merchant Banking in India?

Sr.no

Position

Percentage

1

Good

40%

2

Normal

55%

3

Bad

5%

Total

100%

GRAPH

Image Of Public Sector Merchant Banks

5%

40%

Good
Normal
Bad

55%

INTERPRETATION
Out of total respondents, 40% respondents Say Good, 55% Say Normal and rest 5%
respondents say bad.

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Q 8 Are you satisfied by Security margin of the bank?
Sr.No.

Satisfaction by Security Margin

Nos.

Percentage

1.

Yes

32

80%

2.

No

8

20%

Total:

40

100%

GRAPH

Percentage Of Satisfaction by Security Margin
20%

80%

Yes

No

INTERPRETATION
Out of total respondents, 80% respondents Satisfied and rest 20% respondents are unsatisfied.

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Q 9 Are you satisfied with timely services provide by banks?

Sr. No.

Depends on M.B

Nos.

Percentage

1

Yes

28

70%

2

No

12

30%

Total

40

100%

GRAPH

Depends On The Merchant Bank
Yes

No

30%

70%

INTERPRETATION
Out of total respondents, 75% respondents Say that They are timely heared and rest 25% say
that They are not timely served by merchant banking.

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Q10. Will it differ from investment banks?

Sr. No.

Difference

Nos.

Percentage

1

Yes

30

75%

2

No

10

25%

Total

40

100%

GRAPH

Is Merchant Banking Different from
Investent Banking
80
70
60
50
Percentage

40
30
20
10
0
Yes

No

INTERPRETATION
Out of total respondents,75% respondents Think that It is differ and rest 25% respondents
don‟t Think so.

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11. Which is the best service provided in a Public sector Merchant Bank?
IN PUBLIC SECTOR MERCHANT BANKING

Numbers

Percentage

Capital Restructuring
Venture capital financing
Credit syndication
Others
Total

14

35%

8

20%

18

45%

0

0%

40

100%

GRAPH

Service Mostly Used in Public MB

45%
40%
35%
Percentage

30%
25%
20%
15%
10%
5%
0%
Series1

Capital
Restructuring
35%

Venture capital
financing
20%

Credit
syndication
45%

Others
0%

INTERPRETATION
In a Public Sector Merchant Bank the Service mostly used is Credit Syndicatiom at a rate of
45% followed by Capital Restructuring and Venture Capital Finance at a rate of 35% and
20% respectively.

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12. Which is the best service provided in a Private sector Merchant Bank?
TABLE
IN PRIVATE SECTOR MERCHANT BANKING

Numbers

Percentage

Capital Restructuring

10

25%

Venture capital financing

16

40%

Credit syndication

10

25%

4

10%

40

100%

Others
Total

GRAPH

Service Mostly Used in Private MB
40%
35%

Percentage

30%
25%
20%
15%
10%
5%
0%
Series1

Capital
Restructuring
25%

Venture capital
financing
40%

Credit
syndication
25%

Others
10%

INTERPRETATION
In a Private Sector Merchant Bank the Service mostly used is Venture Capital Finance at a
rate of 40% followed by Capital Restructuring and Credit Syndication at a rate of 25% and
25% each and other services with 10%.

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3.2 HYPOTHESIS ANALYSIS
Service provided vs banking sectors in merchant banking
SERVICE PROVIDED

PUBLIC

PRIVATE

TOTAL

CAPITAL RESTRUCTURING

8

5

13

VENTURE CAPITAL FINANCING

4

8

12

CREDIT SYNDICATION

10

5

15

TOTAL

22

18

40

NULL HYPOTHESIS : Willingness to take up Public or Private merchant banks as
an a Merchant Banking option is independent of the services provided by the merchant banks

ALTERNATIVE HYPOTHESIS : Willingness to take up Public or Private
merchant banks as a Merchant Banking option is dependent of the services provided by the
merchant banks

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Observed Frequency (Oi)

(Oi-Ei)

(Oi-Ei)^2

(Oi-Ei)^2/Ei

8

Expected
Frequency (Ei)
7.15

0.85

0.7225

0.1010

5

5.8

-0.8

0.64

0.1103

4

6.6

-2.6

6.76

1.0242

8

5.4

2.6

6.76

1.0242

10

8.25

1.75

3.062

0.3711

5

6.75

-1.75

3.062

0.3711

Total

CALCULATION:
E1=22*13/40=7.15
E2=18*13/40=5.8
E3=22*12/40=6.6
E4=18*12/40=5.4
E5=22*15/40=8.25
E6=18*18/40=6.75

CALCULATED VALUE X^2 = 3.0019
TABLE VALUE X^2 = 5.991
DEGREE OF FREEDOM = (r-1)(c-1)
= (3-1)(2-1)
= 2*1 =2
DEGREE OF FREEDOM = 2 (@ 5% Significant level)

3.0019

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INFERENCE:
Since table value is greater than the calculated value Null Hypothesis is
accepted. Willingness to take up Public or Private merchant banks as a merchant banking
option is independent of the services provided by the merchant banks.

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CHAPTER 4

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4.1FINDING
80% of the respondents treat SBI caps as a Merchant Banking Service option

While dealing with the clients, it is found that medium level entreprenuers are more
Interest in Merchant banking Services
Business sector feels that Merchant banking is an important criterion in their field
ofwork.
The clients would like to invest their money where they would get more Security
The willingness to take up SBICaps Merchant banking as an investment option is
independent of the services provided by them.

Mutual Fund objectives and respondents categories are found to be independent.
Due to liberalization of economy the scenario has changed as many private Merchant
Banking companies have entered in the industry since then.
SBI merchant banking companies services are facing stiff competition from the
private sector companies.
Market Share
Private Sector= 44%
Publice Sector=56%

Comparision Between
Private and Public
Sector Merchant Bank
Private

56%

Public

44%

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Year wise participation of merchant bankers in the management of public issues of
equity showed that the majority of small merchant bankers were involved in one or
two issues only during the year.
SBI Capital Markets Ltd. was the preferred choice of maximum issuers (43 in
numbers). This was followed by Enam Securities Ltd with 35 equity issues.224 Karvy
Investor Services Ltd. managed 34 equity issues. ICICI Securities Ltd, UTI Securities
Ltd and Kotak Mahindra Capital Co. Ltd managed 32, 33and 30 public issues
respectively.
SBI Capital Markets Ltd was the preferred choice of public and private banksfor the
management of their public issues of equity. Out of 40 public issues of equity floated
by public sector banks in India during the period under review,SBI Capital Markets
Ltd was the lead manager/BRLM/co-lead manager in as many as 31 equity issues.
In most of the cases, the issuer 225 companies appointed their own subsidiary
company/sister concern to advise on their equity issue.

With the exception of SBI Capital Markets Ltd and Canara Bank, no other public
sector bank performed a significant role in the public issue management
activities.Other public sector banks„ subsidiaries/merchant banking divisions who
showed their presence in public issue management were BOB Capital Markets Ltd, All
bank Finance Ltd.

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4.2 SUGGESTIONS AND RECOMMENDATIONS
The performance of the a Merchant Bank depends on the services provided by the Merchant
Bankers. But the future is uncertain. So, the SBI Caps (State Bank Of India Capital Services)
should take the following steps: -

Try to reduce fund charges, administration charges and other charges which would to
help gain more clients.
Different campaigns should be launched to educate people regarding Merchant
Banking.
From the findings, it is found that, the security is the main criteria for the
investors. It is suggested that this aspect would be reinforced while
accessing the clients.
The people do not want to take risk. The Merchant banks should come up with more
risk free services so that the risk becomes minimum. This will lure more and more
people to take Merchant Banking Services.
The expectation of the people from the Merchant Bank is high. So, a blue print of the
business services to pe provided should be prepared taking into consideration the
expectations of the people.

.

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CHAPTER 5

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5.1SUMMARY AND CONCLUSIONS

The company wants to know the perception of investors, who perceive Merchant Banking as
an investment option. The company would like to create the awareness of SBI Merchant
Banking. This study would assist. In the form of an infrastructure, for the forthcoming
branches in developing their services towards the Investors.

 Longstanding client relationships

 Strong positions in high-growth client and product niches.

 Multiple revenue growth initiatives are in place with detailed and concrete action
plans, and with rigorous follow-up mechanisms.

 Growth is controlled by a sound Risk Management System and disciplined cost
management.

 Small & Medium scale enterprises SMEs need immediate attention from merchant
bankers to get access to finance.

 SMEs are facing stiff competition from large scale companies.

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5.2 BIBLIOGRAPHY
BOOKS
S.P.Gupta, „Statistical Methods‟, Sultan Chand & Sons Vol 1 pp.E-3.1,
(E-4.1 – E-4.15), E-13.5.
S.P. Gupta, „Statistical Methods‟, Sultan Chand & Sons Vol 2 pp.A-4.1.
Beri G.C., „Marketing Research‟. New Delhi, Tata Mc Graw Hill Pub,
Edition II, pp.245-260.
Donald S.Tull, „Marketing Research Measurements and Methods‟, Tata
Mc Graw Hill, pp.310-312.

Financial Institutions & Market By Shashi K. Gupta, Nisha Aggarwal

WEBSITES

www.google.com/news
www.answer.com
www.emissarycapital.com
www.wikipedia.com
www.sebi.gov.in
http://unionbankofindia.co.in
http://www.asialaw.com/Article/1988860/Merchant-Banking.html
http://www.icicisecurities.com
http://www.sbicaps.com
http://www.canmoney.in

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ANNEXURE
Annexure1
Respondent’s Profile
Name

:_______________

Age

:_______________

Gender

:_______________

Occupation :_______________

1. Do you take any financial services from bank?
(a) Yes

(

)

(b) NO

( )

2. Do you know about Merchant Banking?
(a) Yes

(

)

(b) No

(

)

3. Are you satisfied with the services provided by your bank?
(a)

Yes

(

)

(b) No

( )

4. Which bank would you prefer to take Merchant Banking Services?
(a) ICICI

( )

(b) SBI

(

(c) PNB

( )

(d) BOI

( )

(e) OTHER(specify)

)

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5. What is the position of Merchant Banking in Private Sector?
(a) Good

(

)

(c) Bad

(

)

(b) Normal

( )

6. What is the position of Merchant Banking in Public Sector?
(a) Good

(

)

(c) Bad

(

)

(b) Normal

( )

7. What type of security have you deposited/you will deposit with the banks
(a)Bank security

( )

(b) Gold

(c) Land paper

(

(d) Third party security ( )

)

(

)

8. Are you satisfied by Security margin of bank?
(a) Yes

(

)

(b) No

(

)

9. Non-financial institution depends on merchant banking. Are you satisfied?
(a) Yes

( )

(b) No

10. Will it differ from investment banks?

( )

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(a) Yes

( )

(b) No

( )

11. Which is the best service provided in a Public sector Merchant Bank?
(a) Capital restructuring ( )
(b) Venture capital financing ( )
(c) Credit syndication ( )
(d) Others ( )

12. Which is the best service provided in a Private sector Merchant Bank?
(a) Capital restructuring ( )
(b) Venture capital financing ( )
(c) Credit syndication ( )
(d) Others ( )

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ANNEXURE-2
MERCHANT BANKING PLAYERS IN INDIA

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