mfsi-unit i

8/6/2019 MFSI-Unit I

1/35

MFSIUNIT-I


2/35

MFSISession 1


3/35

Ba sics

EntrepreneurFund R a ising

Prim a ry M a rketSecond a ry M a rketMerch a nt Ba nking - Concept


4/35

MFSISession # 2


5/35

India n Fin a ncial System

It connects the h av e sa nd the h av e-not 's !


6/35

Functions

Efficient Tr a nsform a tion of FundsCrea ting Inno va tive schemes for s av ings a nd

Inv estmentGlob al iza tionDiv ersific a tion

Fina ncial EngineeringReforms


7/35


8/35

MFSISession 3


9/35


10/35

Organized Unorganized It is a market which isgoverned by rules andregulations. It is controlled by a marketregulator like SEBI. The market is recognized andformal. For example new issuemarket, stock exchange.

There are many financialintermediaries which mobilizesavings and make investments.

The procedures are notstandardized.Rates of interest are exorbitant.There is no Investor protection

regulator.The market is informal with the presence of chit funds andlotteries.

There is no intermediation of funds as it is operated by

people for their own privateadvantage.


11/35

M oney M arkets Capital M arkets It is a market for financialassets of maturity of less thanone year. In this market assets are atshort notice converted into cash.Transaction cost is low. Assetsare treasury bills, commercial

papers, inter-corporate deposits.

The participants are largeinstitutional investors. Shortterm transactions are conducted.

It is a market for long termfunds. It deals in shares debentures,mutual funds investments. The

dealings are usually for a periodof more than one year. The primary or new issueMarket deals with the first time

issue of securities. Stock marketor secondary market deals withtrading of second handsecurities. Individuals and

institutions are participants.


12/35

P rimary M arket Secondary M arket The market mobilizes savingsof individuals. The participantsare merchant banker, portfoliomanager. This market helps in raisingfunds for industry or corporateorganizations. This market is termed the newissue market. The IPO's are

offered through it.

The market for second handsecurities. Only listed securitiescan be traded. It is complementary to the

primary market.

It helps in the distributivemechanism of securities. It is popularly called the stock market.

Individuals, brokers, corporateorganizations, are the main

participants.


13/35

D omestic M arket International M arket A domestic market deals in allthe transactions that take placewithin the home country.

An international market isknown for its home transactionsas well as those taking place mtrading with other countries. Ex,Bonds issued outside thecountry, listing securities in

NYSE or London stock exchange.


14/35

Functions of Fin a ncial Instruments

LiquidityMa rket a bi lity

Ma turity periodInterestTax

Div idends


15/35

Functions of M B

Session 4


16/35

Functions of M B

Corpor a te Counse lingProject Counse ling

Pre-investment StudiesCa pit al Restructuring

Credit Syndic a tion a nd Project Fin a nceIssue M a na gement a nd UnderwritingPortfo lio M a na gementWorking C a pit al Fina nce


17/35

Contd.,

Mergers, Am al ga m a tions a nd Ta keo versVenture C a pit al

Lea

se Fina

ncingForeign Currency fin a nceFixed Deposit BrokingMutu al FundsRelief of Sick IndustriesProject Appr a isal


18/35

MB Ca tegory

Ca tegory I merch a nt b a nkers : C a n a ct a s Issuem a na gersCa tegory II merch a nt b a nkers : C a n a ct on ly a sco-m a na gersCa tegory III merch a nt b a nkers : C a n a ct a s co-m a na gers but c a nnot undert a ke portfo lio

m a na gementCa tegory IV merch a nt b a nkers :C a n mere ly a cta s consu lta nt or a dv isor to issue of c a pit al


19/35

Capital Adequacy Norms

Ca tegory I : Rs. 5 CroresCa tegory II : Rs.50 L a khs

Ca tegory III : Rs.20 L a khsCa tegory IV : Ni l


20/35

MFSI

Session # 5


21/35

Ca pit al Issue

The c a pit al issue is the most import a nt a spects of M B

ser v ices.

The pub lic issues a re m a na ged by the in vo lv ement of va riousa gencies i.e. underwriters, brokers, b a nkers, a dvertising

a gency, printers, a uditors, leg al a dv isers, registr a r to the issue

a nd merch a nt b a nkers.


22/35

Pre-Issue Acti v ities1. Obt a ining stock e xch a nge a ppro val s to memor a ndum a nd a rtic les of a ssoci a tions.

2. Ta king a ction a s per SE BI guide lines

3. Fin al izing the a ppointments of the fo llowing a gencies:

- Co-m a na ger/Ad v isers to the issue

- Underwriters to the issue

- Brokers to the issue

- Ba nkers to the issue a nd refund Ba nker

- Advertising a gency

- Printers a nd Registr a r to the issue

4. Ad v ise the comp a ny to a ppoint a uditors, leg al a dv isers a nd bro a d b a se Boa rd of Directors

5. Dra fting of prospectus


23/35

Contd.,

6. Obt a ining a ppro val s of dr a ft prospectus from the comp a ny slegal a dv isers,underwriting fin a ncial institutions/ Ba nks

7. Obt a ining consent from p a rties a nd a gencies a cting for the issue to be

enc losed with the prospectus.

8. Appro val of prospectus from Securities a nd Excha nge Boa rd of Indi a .

9. Filing of the prospectus with Registr a r of Comp a nies.

10. M a king a n a pp lica tion for en listment with Stock E xcha nge al ong,

with copy of the prospectus.

11. Pub licity of the issue with a dvertisement a nd conferences.

12. Open subscription list.


24/35

Post-Issue Acti v ities

To verify a nd confirm th a t the issue is subscribed to the e x tent of 90% inc luding

de vo lv ement from underwriters in c a se of under subscription

To super v ise a nd co-ordin a te the all otment procedure of registr a r to the issue a s

per prescribed Stock E xch a nge guide lines

To ensure issue of refund order, all otment letters / certific a tes within the

prescribed time limit of 10 weeks a fter the c losure of subscription list

To report periodic all y to SEBI a bout the progress in the m a tters re la ted to

all otment a nd refunds

To ensure the listing of securities a t Stock E xch a nges.

To a ttend the in vestors grie va nces reg a rding the pub lic issue


25/35

Termino logies

ASBABook Bui lding

DRHP Dra ft Red Herring Prospectus


26/35

MFSI

Session 6


27/35

Authoriz a tion criteri a by SEBI

Profession al qu al ifica tion in fin a nce, la w or business m a na gement

Infra structure like office sp a ce, equipment a nd m a n power

Pa st tr a ck of record, e xperience, gener al reput a tion a nd f a irness inall tr a ns a ctions

Every merch a nt b a nker shou ld m a int a in copies of b ala nce sheet,

Profit a nd loss a ccount, st a tement of fin a ncial position

Hal f-ye a rly un a udited resu lt shou ld be submitted to SE BI


28/35

Contd.,

Merch a nt b a nkers a re prohibited from buying securities

ba sed on the unpub lished price sensiti ve inform a tion of

their clients

SEBI ha s been vested with the power to suspend or c a nce l

the a uthoriz a tion in c a se of v iola tion of the guide lines

Every merch a nt b a nker sh all a ppoint a Complia nce Officerto monitor comp lia nce of the Act


29/35

Contd.,

SEBI ha s the right to send inspecting a uthority to

inspect books of a ccounts, records etc of merch a nt

ba nkers

Inspections wi ll be conducted by SE BI to ensure th a t

pro v isions of the regu la tions a re proper ly comp lied

An initi al a uthoriz a tion fee, a n a nnu al fee a nd renew al

fee m a y be co llected by SE BI


30/35

PRESENT STATE OF MERCHANT BANKING IN

INDIA

Dev e lopment a ctiv ities throughout thecountry fue led the dem a nd for funds whichthe fin a ncial institution cou ldn t a b le to meetIn such circumst a nces corpor a te sector h a dthe on ly al tern a tive to ava il of the c a pit al m a rket ser v ice for meeting their long termfina ncial requirement through c a pit al issue of equity sh a res a nd debentures.


31/35

Contd.,

MB p la y high ly signific a nt ro le in mobi lizing

funds of s av ers to in v isib le ch a nne ls a ssuring

promising returns on in vestment a nd boost

economic a ctiv ity


32/35

Other Re a sons For the Growth of M B

Growing comp lex ity in ru les a nd procedures of

the go v ernment.

Need for encour a gement of sm all a nd

medium industri al ists, who require speci al ist

ser v ices.


33/35

Contd.,

Need to de v e lop b a ckwa rd a re a s a nd st a tes

which require different criteri a .

Exp loring the possibi lity of joint v entures

a bro a d a nd foreign m a rket.

Promoting the ro le of new issue m a rket in

mobi lizing s av ing from the pub lic.


34/35

MB in Indi a

Commerci al ba nks

Foreign b a nks like Citib a nk, HSBC ba nk etc..

Dev e lopment b a nks like ICICI,IFCI,IDBI etc..


35/35

End of Session 6& End of Unit 1

mfsi-unit i

Documents