Introduction to Merchant Banking
Many of you might have not heard the term Merchant Banking.
Where other banks offer credit facilities to their customers, merchant banking such as Swastika offers different services such as IPO launching, SME & Startup funding, Venture capital funding, Angel investments, Valuation of shares, Mergers & Acquisition for clients and more.
What is Merchant Banking in India?
The primary function of merchant banker is managing the IPO’s by making arrangements and help the company to raise the capital from public markets. As manager to the issue it also act as an advisor, consultant thus merchant banker is a critical link between a company raising funds and investors.
Easy & hassle-free Merchant Banking services offered to corporate and SMEs, & Startups for private equity, funds and investments.
Services of merchant banks involve pre-counselling activities, issue management, Equity Funding & loan syndication, underwriting, SME IPO launching and more.
How Do Merchant Banks Different From Commercial Banks?
Understanding the differences between the two banks is of utmost importance as it helps to understand Indian Merchant Banking compared to other banks.
- Merchant Banks are regulated and registered by SEBI and other Commercial Banks are regulated by Banking Regulations Act, 1949 and registered with RBI.
- Merchant banks do not allow anyone to open an account, but commercial banks are available to everyone.
- Merchant banks usually do business in stock and securities of Company, but commercial banks usually buy and sell debt-related financings such as loan approvals and loan proposals.
- While main activities of merchants bankers are Managing Issues (IPOs and FPO), underwriting, other events in the corporate like mergers & Takeover, ESOPs planning, enterprise valuations, etc. , commercial banks primarily serve basic functions of bank accept deposits lending money etc.
Difference Between Merchant Banking and Investment Banking
Investment Banking and Merchant Banking are almost the same, although there is a slight difference between them.
Merchant Bankers offer services like bridge financing, equity financing, mezzanine financing etc.
Investment banker like Swastika Investmart, on the other hand, has wider scope then merchant banking.
The clientele of Investment Banks is quite large as compared to Merchant banking.
Under our Merchant banking segment we offer services such as underwriting, Market Maker, Transections in securities, SME IPO launching of SME and main Board IPO/ FPO migration from SME to Main Board.
In addition to this, Investment bankers also advise their clients on mergers and acquisitions, Startup funding & mentoring, Private equity, capital restructuring, Venture funding, ESOPs scheme and more.
Functions of Investment Banking
1. Raising Funds For Clients
Merchant Banking companies such as Swastika helps clients in raising funds from domestic and international markets.
Merchant banks raise funds by issuing securities like shares, debentures and more.
2. Leasing Activities
Merchant Banking services offer leases to their customers by coordinating the operation of intermediaries, concerning the issue of shares like underwriters, bankers, brokers, advertising agencies.
Also, it ensures compliance with the rule and regulations of the capital market.
3. Corporate Restructuring
Corporate restructuring involves mergers and acquisitions of existing businesses, sales or mergers of existing business units.
The process of corporate restructuring is very lengthy and complicated as it requires proper documents, negotiations, and the approval of legal authorities.
4. Money Market Operation
Merchant bank handles short-term money market instruments such as government bonds, certificates of deposits, treasury bills, certificates of deposits, commercial paper etc.
Merchant bank is a skill-oriented professional service provided to clients, concerning their financial needs, for adequate consideration, in the form of a fee.
The notification of the Ministry of Finance in India defines Merchant Banker as “any person who is engaged in the business of issue management either by making arrangements regarding selling, buying, or subscribing to the securities as manager, consultant, adviser about such an issue management”.
In general, merchant banks are financial institution that provides financial services, solutions, & advice to corporate houses. As Merchant Banking partners, we cater to the needs of corporate firms.
Services Provided by Merchant Banks
These are the following services provided by Merchant Banking Partners for you
- Project Counseling
- Management of debt and equity funding
- Issue Management
- Managers, Consultants or Advisers to the Issue
- Underwriter and Market Maker of Public Issue
- Restructuring strategies
- Off Shore Finance
- Non-resident Investment
- Loan Syndication
- Corporate Counseling and advisory services
- Placement and Distribution
Corporate counselling involves the entire field of merchant banking activities such as project counselling, capital restructuring, public issue management, loan syndication, working capital, fixed deposit, lease financing acceptance credit, etc.
Merchant Banking assists several companies in managing their lease, portfolio, and raising fund capital. These banks function in a different way than other banks.
If you are seeking a merchant banking services that fulfils small size and mid-size companies, Swastika Investmart comes second to none.
Swastika - As a Merchant bank
Swastika Investmart is a leading Merchant Bank of India, which aims to provide high-quality services to its clients.
Merchant bankers also provide customized solutions to their client’s financial problems.
Apart from this they also explore the refinancing alternatives of the client and evaluate cheaper sources of funds. Rehabilitation and turnaround management is another area of advice.
A merchant banker such as Swastika advises the client on different risk mitigation and growth strategies and suggests the appropriate action plans.
Frequently Asked Questions
There are two types of merchant banking: Public Sector Merchant Banks and Private Sector Merchant Banks.
Public sector merchant banks include commercial banks, national financial institutions, state financial institutions.
Private Sector Merchant banks include foreign banks, Indian private banks, leasing banks, finance and investment companies.
A service provider financial institution changed into traditionally one that dealt in industrial loans and investment.
It's number one cause was to facilitate and/or finance the manufacturing and alternate of commodities, subsequently the adoption of the Old French “merchant banking” which in flip derives from the Latin word “mercari” meaning “to alternate”.
The merchant bank is the one that supports the underwriting of securities.
Merchant banks play an important role and have many responsibilities such as managing issues like IPO and FPO, private placement of securities, Take over, ESOPs, , and international financial advisory services.