Merchant Bankers
Content
Meaning of merchant banking
It is an institution or an organization which provides a number of services
including management of securities, portfolio management, underwriting of
capital and issue, insurance, financial advice and project counseling etc.
Large brokers, Mutual Funds, Venture capital companies
and Investment Banks offer merchant banking services.
Functions of merchant banking
1. Raising Finance for Clients: Merchant Banking helps its clients to raise
finance through issue of shares, debentures, bank loans, etc. It helps its
clients to raise finance from the domestic and international market. The
finance raised is used for starting a new business or project or for
modernization, Diversification or expansion of the business.
2. Broker in Stock Exchange: Merchant bankers also take form of brokers in
the stock exchange. They buy and sell shares on behalf of their clients. Lot
of research is done by these merchant bankers on equity shares. They
also advise their clients about which shares to buy, when to buy, how much
to buy and when to sell.
3. Project Management: Merchant bankers offer help to their clients in
every way possible. For e.g. They advise about location of a project,
preparing a project report, conducting feasibility studies, making a plan for
financing the project, finding out sources of finance, advising about
concessions and incentives from the government which the companies are
not aware of.
4. Advice on Expansion and Modernization: Merchant bankers also give
advice for expansion and modernization of the business units. They give
expert advice on mergers and amalgamations, acquisition and takeovers,
diversification of business, foreign collaborations and joint-ventures, also in
technology up gradation, etc.
5. Managing Public Issue of Companies: Merchant bankers offer to advice as
well as manage the public issue of their clients.
They provide following services:
i.
Merchant bankers advise on the timing of the public issue.
ii. Merchant bankers advise on the size and price of the issue.
iii. Merchant bankers Act as manager to the issue, and help in accepting
applications and allotment of securities.
iv. Merchant bankers Help in appointing underwriters and brokers to the
issue.
v. Merchant bankers help in the listing of shares of its clients on the
stock exchange, etc.
6. Handling Government Consent for Industrial Projects: the government
has to grant permission for a person to start his business or expand his
business. Similarly, a company requires permission for expansion or
modernization activities. For this, many formalities have to be completed.
Merchant bankers advice on these matters and do all this work for their
clients.
7. Revival of Sick Industrial Units: Merchant banks help to bring back(cure)
sick industrial units. It goes to the extent of negotiating with different
agencies like banks, term lending institutions, and BIFR (Board for
Industrial and Financial Reconstruction). It also creates a detail plan and
executes the same to revive the industry from its downfall.
8. Portfolio Management: A merchant bank helps its clients to manage their
portfolio (investments) of its clients. This makes investments safe, liquid
and profitable for the client. It offers expert guidance to its clients for taking
investment decisions.
9. Money Market Operation: Merchant bankers deal with and underwrite
short-term money market instruments, such as:
i.
Government Bonds.
ii.
Certificate of deposit issued by banks and financial institutions.
iii.
Commercial paper issued by large corporate firms.
iv.
Treasury bills issued by the Government (Here in India by RBI).
10. Leasing Services: Merchant bankers also help in leasing services. Lease
is a contract between the lessor and lessee, whereby the lessor allows the
use of his specific asset such as equipment by the lessee for a certain
period. The lessor charges a fee called lease rentals.
Following are the services provided by merchant bankers in India
Corporate counseling: This service is rendered to the corporate unit
with a view for better performance and growth among the investors. It
includes with range of merchant banking activities such as project
management, loan syndication, project counseling .public issue
management, fixed deposit, lease financing etc.
Project advisory services: merchant bankers help their clients in
various stages of the project undertaken by the clients. They assist
them in conceptualizing the project idea in the initial stage. Once the
idea is formed, they conduct feasibility studies to examine the viability
of the proposed project. They also assist the client in preparing
different documents like the detailed project report.
Loan syndication: Merchant bankers arrange to tie up loans for their
clients. This takes place in a series of steps. Firstly they analyse the
pattern of clients cash flows, based on which the terms of borrowings
can be defined. Then the merchant banker prepares a detailed loan
memorandum, which is circulated to various banks and financial
institutions and they are invited to participate in the syndicate. The
banks then negotiate the terms of lending on the basis of which the
final allocation is done
Management of capital issues: Management of issue involves
marketing of corporate securities i.e. equity and preference shares,
debentures or bonds. The issue functions are broadly divide into preissue management and post issue management.
The pre-issue management is divided into:
(1) Issue through prospectus, offer for sale and private placement.
(2) Pricing of issues.
(3) Marketing and underwriting.
Post issue management it includes collection of application form
and statement of account received from bankers, screening
applications, mailing of allotment letters, shares certificates and
refund orders.
Providing venture capital: Merchant bankers help companies in
obtaining venture capital financing for financing their new and
innovative strategies.
Mutual funds: Mutual fund is a kind of trust that manages the pool of
money collected from various investors and it is managed by a team
of professional fund managers for a small fee. The investments by
the mutual funds are made in equities, bonds debentures, call money
etc. Depending on the terms of each scheme floated by the fund.
Management of debt and equity offerings: This forms the main function
of the merchant banker. He assists the companies in raising funds
from the market. The undergoing tasks include instrument designing,
pricing the issue, registration of the offer document, underwriting
support, marketing of the issue, allotment and refund and listing on
stock exchanges.
Importance of Merchant Banking in India
The need of merchant banking services in India arises from the fact that
high level industrialization is taking place in the country. So, there is need
for skilled professionals who can take care of various finance-related needs
of the advanced industrial sectors. These specialist services are also of
great importance for the small and medium sized enterprises to help them
operate smoothly.
Most of the rural areas still lack industrial advancement and the main
reasons for this include lack of funds and information. The merchant
banking services help the entrepreneurs to come up with industrial setups
in these areas. Besides, the merchant banks help the entrepreneurs to
explore the joint venture opportunities in the foreign markets.
The above discussion highlights the ways merchant banks are promoting
industrial development in India. The government in the country plays a
significant role by issuing rules and regulations for merchant banks so that
entrepreneurs can make most out of these services.
Banker while examining the firm's performance record.
TATA CAPITAL
Tata Capital is a finance company that fulfills the financial needs of retail
and institutional customers in India. It was established in 2007 as a wholly
owned subsidiary of Tata Sons and is registered with the Reserve Bank of
India as a systemically important non-deposit taking non-banking financial
company (NBFC).
The company is focused on providing multiple financial services through an
extensive network of over 1,000 customer touch-points covering tier I, tier II and
tier III cities.
Areas of business
Tata Capital has financial products and services in the following seven
sectors:
(1) Distribution and broking: Third-party investment products, equity
and commodity trading for retail and institutional customers.
(2) Retail finance: Passenger and commercial vehicle loans, used car
loans, personal loans, home loans, credit cards and consumer
durable loans for retail customers.
(3) Commercial finance: Financial products for small and medium
enterprises and project finance for capital equipment and
infrastructure.
(4) Investment banking: Advisory and debt and equity market products
for corporate and small and medium enterprises.
(5) Private equity: Investments in India and other countries.
(6) Wealth management: Suite of advisory and investment offerings for
high net worth individuals.
(7) Rural finance: Relevant financial products for rural customers,
including financing of farm equipment, agricultural inputs and
agricultural enterprises.
The company has entered into an understanding with Japan-based Mizuho
Securities Co to promote an alliance in private equity, investment banking
including cross border merger and acquisition, securities business including
broking and distribution, structured finance and other business areas such
as wealth management. It has also entered into an understanding with
Equifax Inc and CRISIL to develop plans to create a credit information
company in India.
Joint ventures, subsidiaries, associates
Tata Securities (TSL): A wholly owned subsidiary of Tata Capital
Limited engaged in retail and institutional distribution and broking.
TSL distributes third-party investment products and offers stock
broking services of buying, selling or dealing in securities, including
futures and options, in its capacity as a member of the Bombay Stock
Exchange and the National Stock Exchange. TSL is also a depository
participant.
Tata Capital Markets (TCML): A wholly owned subsidiary of Tata
Capital engaged in debt and equity capital markets and M&A
advisory. TCML has a category I merchant banking license from the
Securities and Exchange Board of India.
E-Next: A KPO unit specializing in the area of financial services;
owned by Tata Capital, Tata Sons and others.
Tata Capital also owns around 4 per cent of equity capital of Development
Credit Bank, a growing private sector bank.
Tata Capital appraised at People Capability Maturity Model (P
CMM) Level 3
Tata Capital becomes the first NBFC in India to be appraised at P CMM
Level 3
Tata Capital announced today that it has been appraised at level 3 of the
CMMI Institute‟s People Capability Maturity Model (P CMM). This makes it
the first non-banking financial company (NBFC) in India and one of the first
few in the world to do so. CMMI is a process improvement approach that
provides organizations with the essential elements of effective processes
that ultimately improve their performance. The appraisal process for Tata
Capital was performed by KPMG.
An appraisal at maturity level 3 indicates the organization is performing at a
'defined' level. At this level, processes are well characterized and
understood, and are described in standards, procedures, tools and
methods. The organization‟s set of standard processes, which is the basis
for maturity level 3, is established and improved over time. An appraisal at
maturity level 3 indicates the organization is performing at a "defined" level.
Speaking on the announcement, Amar Sinhji, head – human resources,
Tata Capital, said, “We are very proud that Tata Capital has been
appraised at the highly coveted P CMM Level 3, making us the first NBFC
in India and the first non-IT company in the Tata group to do so. This is a
significant milestone in our quest for world-class people processes and a
commendable achievement for a new company like Tata Capital.”
CMMI is the result of more than 20 years of ongoing work at Carnegie
Mellon University by members of industry, government, and the software
engineering institute. Powered by Carnegie Mellon, the CMMI Institute is
working to build upon CMMI‟s success, advance the state of the practice,
accelerate the development and adoption of best practices, and provide
solutions to the emerging needs of businesses around the world.CMMI
models provide guidance for developing or improving processes that meet
the business goals of an organization as also used as a framework for
appraising the process maturity of the organization
‘It’s important to be flexible and innovative to provide the
type of products and services that your client wants’
Tata Capital in Europe is a corporate finance advisory business that
facilitates investment opportunities between Europe and India. The
company also provides corporate finance advice to Tata companies. Amit
Mehta, head of Tata Capital in Europe since its inception, works on
identifying opportunities, building relationships and providing solutions to
existing clients. In this interview with tata.com he talks about the company‟s
operations and future plans
Financial services are not new, however the attitude and sentiments of the
clients change. For example, investors are more cautious now than before
2008. So in order to remain credible it‟s important to be flexible and
innovative to provide the type of products and services that your client
wants. This credibility is vital in such a competitive sector.
Tata Capital home loans launches new ad campaign
Tata Capital home loans have launched its new advertising campaign
themed „Because memories cannot be shifted‟ or „Kyunki yaadein ghar
nahin badla karti‟.
Crafted from the insight that when we shift across rented houses there
always are some immovable things on which our fondest memories are
created, that cannot be shifted. The campaign highlights the significance of
an owned home. The communication features classic situations which most
people can relate to, such as the window which one grows up looking out
of, the wall on which siblings usually have their heights measured, a loving
mother-like neighbour and childhood best friends.
Conceptualized by Leo Burnett, the campaign conveys the message that
Tata Capital understands that the some memories cannot be shifted and
hence offers customized home loan solutions which help customers
acquire their own home.
Speaking at the launch of the campaign, R Vaithianathan, managing
director, Tata Capital Housing Finance, said, “Home loans are a key
segment for Tata Capital. Our constant endeavour is to provide customized
and innovative home loan solutions to help the customer own his dream
home. With the current campaign, we are confident of enhancing the
awareness of Tata Capital‟s home loan offering and reaching out to many
more potential customers.”
Also commenting on this unique campaign, Veetika Deoras, head, brand
marketing and corporate communication, Tata Capital, said, “This
campaign is Tata Capital home loans‟ second mass media campaign, and
it builds on our earlier campaign by highlighting another reason to own a
home. The campaign is based on a pertinent and warm insight – that as we
move across rented houses, we leave behind many beautiful memories. An
owned home allows us as individuals to grow with these memories, and not
without them.”
The campaign will run from December 6, 2012 across print, radio, outdoor
and online, specifically targeting the markets of Mumbai, Delhi, Bengaluru,
Pune, Ahmedabad, Indore and Raipur, among others. The duration of the
campaign will be around 30 days.
It is an institution or an organization which provides a number of services
including management of securities, portfolio management, underwriting of
capital and issue, insurance, financial advice and project counseling etc.
Large brokers, Mutual Funds, Venture capital companies
and Investment Banks offer merchant banking services.
Functions of merchant banking
1. Raising Finance for Clients: Merchant Banking helps its clients to raise
finance through issue of shares, debentures, bank loans, etc. It helps its
clients to raise finance from the domestic and international market. The
finance raised is used for starting a new business or project or for
modernization, Diversification or expansion of the business.
2. Broker in Stock Exchange: Merchant bankers also take form of brokers in
the stock exchange. They buy and sell shares on behalf of their clients. Lot
of research is done by these merchant bankers on equity shares. They
also advise their clients about which shares to buy, when to buy, how much
to buy and when to sell.
3. Project Management: Merchant bankers offer help to their clients in
every way possible. For e.g. They advise about location of a project,
preparing a project report, conducting feasibility studies, making a plan for
financing the project, finding out sources of finance, advising about
concessions and incentives from the government which the companies are
not aware of.
4. Advice on Expansion and Modernization: Merchant bankers also give
advice for expansion and modernization of the business units. They give
expert advice on mergers and amalgamations, acquisition and takeovers,
diversification of business, foreign collaborations and joint-ventures, also in
technology up gradation, etc.
5. Managing Public Issue of Companies: Merchant bankers offer to advice as
well as manage the public issue of their clients.
They provide following services:
i.
Merchant bankers advise on the timing of the public issue.
ii. Merchant bankers advise on the size and price of the issue.
iii. Merchant bankers Act as manager to the issue, and help in accepting
applications and allotment of securities.
iv. Merchant bankers Help in appointing underwriters and brokers to the
issue.
v. Merchant bankers help in the listing of shares of its clients on the
stock exchange, etc.
6. Handling Government Consent for Industrial Projects: the government
has to grant permission for a person to start his business or expand his
business. Similarly, a company requires permission for expansion or
modernization activities. For this, many formalities have to be completed.
Merchant bankers advice on these matters and do all this work for their
clients.
7. Revival of Sick Industrial Units: Merchant banks help to bring back(cure)
sick industrial units. It goes to the extent of negotiating with different
agencies like banks, term lending institutions, and BIFR (Board for
Industrial and Financial Reconstruction). It also creates a detail plan and
executes the same to revive the industry from its downfall.
8. Portfolio Management: A merchant bank helps its clients to manage their
portfolio (investments) of its clients. This makes investments safe, liquid
and profitable for the client. It offers expert guidance to its clients for taking
investment decisions.
9. Money Market Operation: Merchant bankers deal with and underwrite
short-term money market instruments, such as:
i.
Government Bonds.
ii.
Certificate of deposit issued by banks and financial institutions.
iii.
Commercial paper issued by large corporate firms.
iv.
Treasury bills issued by the Government (Here in India by RBI).
10. Leasing Services: Merchant bankers also help in leasing services. Lease
is a contract between the lessor and lessee, whereby the lessor allows the
use of his specific asset such as equipment by the lessee for a certain
period. The lessor charges a fee called lease rentals.
Following are the services provided by merchant bankers in India
Corporate counseling: This service is rendered to the corporate unit
with a view for better performance and growth among the investors. It
includes with range of merchant banking activities such as project
management, loan syndication, project counseling .public issue
management, fixed deposit, lease financing etc.
Project advisory services: merchant bankers help their clients in
various stages of the project undertaken by the clients. They assist
them in conceptualizing the project idea in the initial stage. Once the
idea is formed, they conduct feasibility studies to examine the viability
of the proposed project. They also assist the client in preparing
different documents like the detailed project report.
Loan syndication: Merchant bankers arrange to tie up loans for their
clients. This takes place in a series of steps. Firstly they analyse the
pattern of clients cash flows, based on which the terms of borrowings
can be defined. Then the merchant banker prepares a detailed loan
memorandum, which is circulated to various banks and financial
institutions and they are invited to participate in the syndicate. The
banks then negotiate the terms of lending on the basis of which the
final allocation is done
Management of capital issues: Management of issue involves
marketing of corporate securities i.e. equity and preference shares,
debentures or bonds. The issue functions are broadly divide into preissue management and post issue management.
The pre-issue management is divided into:
(1) Issue through prospectus, offer for sale and private placement.
(2) Pricing of issues.
(3) Marketing and underwriting.
Post issue management it includes collection of application form
and statement of account received from bankers, screening
applications, mailing of allotment letters, shares certificates and
refund orders.
Providing venture capital: Merchant bankers help companies in
obtaining venture capital financing for financing their new and
innovative strategies.
Mutual funds: Mutual fund is a kind of trust that manages the pool of
money collected from various investors and it is managed by a team
of professional fund managers for a small fee. The investments by
the mutual funds are made in equities, bonds debentures, call money
etc. Depending on the terms of each scheme floated by the fund.
Management of debt and equity offerings: This forms the main function
of the merchant banker. He assists the companies in raising funds
from the market. The undergoing tasks include instrument designing,
pricing the issue, registration of the offer document, underwriting
support, marketing of the issue, allotment and refund and listing on
stock exchanges.
Importance of Merchant Banking in India
The need of merchant banking services in India arises from the fact that
high level industrialization is taking place in the country. So, there is need
for skilled professionals who can take care of various finance-related needs
of the advanced industrial sectors. These specialist services are also of
great importance for the small and medium sized enterprises to help them
operate smoothly.
Most of the rural areas still lack industrial advancement and the main
reasons for this include lack of funds and information. The merchant
banking services help the entrepreneurs to come up with industrial setups
in these areas. Besides, the merchant banks help the entrepreneurs to
explore the joint venture opportunities in the foreign markets.
The above discussion highlights the ways merchant banks are promoting
industrial development in India. The government in the country plays a
significant role by issuing rules and regulations for merchant banks so that
entrepreneurs can make most out of these services.
Banker while examining the firm's performance record.
TATA CAPITAL
Tata Capital is a finance company that fulfills the financial needs of retail
and institutional customers in India. It was established in 2007 as a wholly
owned subsidiary of Tata Sons and is registered with the Reserve Bank of
India as a systemically important non-deposit taking non-banking financial
company (NBFC).
The company is focused on providing multiple financial services through an
extensive network of over 1,000 customer touch-points covering tier I, tier II and
tier III cities.
Areas of business
Tata Capital has financial products and services in the following seven
sectors:
(1) Distribution and broking: Third-party investment products, equity
and commodity trading for retail and institutional customers.
(2) Retail finance: Passenger and commercial vehicle loans, used car
loans, personal loans, home loans, credit cards and consumer
durable loans for retail customers.
(3) Commercial finance: Financial products for small and medium
enterprises and project finance for capital equipment and
infrastructure.
(4) Investment banking: Advisory and debt and equity market products
for corporate and small and medium enterprises.
(5) Private equity: Investments in India and other countries.
(6) Wealth management: Suite of advisory and investment offerings for
high net worth individuals.
(7) Rural finance: Relevant financial products for rural customers,
including financing of farm equipment, agricultural inputs and
agricultural enterprises.
The company has entered into an understanding with Japan-based Mizuho
Securities Co to promote an alliance in private equity, investment banking
including cross border merger and acquisition, securities business including
broking and distribution, structured finance and other business areas such
as wealth management. It has also entered into an understanding with
Equifax Inc and CRISIL to develop plans to create a credit information
company in India.
Joint ventures, subsidiaries, associates
Tata Securities (TSL): A wholly owned subsidiary of Tata Capital
Limited engaged in retail and institutional distribution and broking.
TSL distributes third-party investment products and offers stock
broking services of buying, selling or dealing in securities, including
futures and options, in its capacity as a member of the Bombay Stock
Exchange and the National Stock Exchange. TSL is also a depository
participant.
Tata Capital Markets (TCML): A wholly owned subsidiary of Tata
Capital engaged in debt and equity capital markets and M&A
advisory. TCML has a category I merchant banking license from the
Securities and Exchange Board of India.
E-Next: A KPO unit specializing in the area of financial services;
owned by Tata Capital, Tata Sons and others.
Tata Capital also owns around 4 per cent of equity capital of Development
Credit Bank, a growing private sector bank.
Tata Capital appraised at People Capability Maturity Model (P
CMM) Level 3
Tata Capital becomes the first NBFC in India to be appraised at P CMM
Level 3
Tata Capital announced today that it has been appraised at level 3 of the
CMMI Institute‟s People Capability Maturity Model (P CMM). This makes it
the first non-banking financial company (NBFC) in India and one of the first
few in the world to do so. CMMI is a process improvement approach that
provides organizations with the essential elements of effective processes
that ultimately improve their performance. The appraisal process for Tata
Capital was performed by KPMG.
An appraisal at maturity level 3 indicates the organization is performing at a
'defined' level. At this level, processes are well characterized and
understood, and are described in standards, procedures, tools and
methods. The organization‟s set of standard processes, which is the basis
for maturity level 3, is established and improved over time. An appraisal at
maturity level 3 indicates the organization is performing at a "defined" level.
Speaking on the announcement, Amar Sinhji, head – human resources,
Tata Capital, said, “We are very proud that Tata Capital has been
appraised at the highly coveted P CMM Level 3, making us the first NBFC
in India and the first non-IT company in the Tata group to do so. This is a
significant milestone in our quest for world-class people processes and a
commendable achievement for a new company like Tata Capital.”
CMMI is the result of more than 20 years of ongoing work at Carnegie
Mellon University by members of industry, government, and the software
engineering institute. Powered by Carnegie Mellon, the CMMI Institute is
working to build upon CMMI‟s success, advance the state of the practice,
accelerate the development and adoption of best practices, and provide
solutions to the emerging needs of businesses around the world.CMMI
models provide guidance for developing or improving processes that meet
the business goals of an organization as also used as a framework for
appraising the process maturity of the organization
‘It’s important to be flexible and innovative to provide the
type of products and services that your client wants’
Tata Capital in Europe is a corporate finance advisory business that
facilitates investment opportunities between Europe and India. The
company also provides corporate finance advice to Tata companies. Amit
Mehta, head of Tata Capital in Europe since its inception, works on
identifying opportunities, building relationships and providing solutions to
existing clients. In this interview with tata.com he talks about the company‟s
operations and future plans
Financial services are not new, however the attitude and sentiments of the
clients change. For example, investors are more cautious now than before
2008. So in order to remain credible it‟s important to be flexible and
innovative to provide the type of products and services that your client
wants. This credibility is vital in such a competitive sector.
Tata Capital home loans launches new ad campaign
Tata Capital home loans have launched its new advertising campaign
themed „Because memories cannot be shifted‟ or „Kyunki yaadein ghar
nahin badla karti‟.
Crafted from the insight that when we shift across rented houses there
always are some immovable things on which our fondest memories are
created, that cannot be shifted. The campaign highlights the significance of
an owned home. The communication features classic situations which most
people can relate to, such as the window which one grows up looking out
of, the wall on which siblings usually have their heights measured, a loving
mother-like neighbour and childhood best friends.
Conceptualized by Leo Burnett, the campaign conveys the message that
Tata Capital understands that the some memories cannot be shifted and
hence offers customized home loan solutions which help customers
acquire their own home.
Speaking at the launch of the campaign, R Vaithianathan, managing
director, Tata Capital Housing Finance, said, “Home loans are a key
segment for Tata Capital. Our constant endeavour is to provide customized
and innovative home loan solutions to help the customer own his dream
home. With the current campaign, we are confident of enhancing the
awareness of Tata Capital‟s home loan offering and reaching out to many
more potential customers.”
Also commenting on this unique campaign, Veetika Deoras, head, brand
marketing and corporate communication, Tata Capital, said, “This
campaign is Tata Capital home loans‟ second mass media campaign, and
it builds on our earlier campaign by highlighting another reason to own a
home. The campaign is based on a pertinent and warm insight – that as we
move across rented houses, we leave behind many beautiful memories. An
owned home allows us as individuals to grow with these memories, and not
without them.”
The campaign will run from December 6, 2012 across print, radio, outdoor
and online, specifically targeting the markets of Mumbai, Delhi, Bengaluru,
Pune, Ahmedabad, Indore and Raipur, among others. The duration of the
campaign will be around 30 days.
