by Merchant banking provides a wide range of financial, advisory, and managerial services to corporate clients, institutions, and high-net-worth individuals. These services are designed to facilitate capital raising, manage investments, mitigate risks, and support corporate growth. The main services offered by merchant bankers can be classified into issue management, underwriting, advisory, project financing, investment management, regulatory compliance, and specialized corporate services. Each of these services plays a vital role in ensuring financial efficiency, smooth market operations, and long-term business growth.
1. Issue Management Services
Issue management is one of the core services of merchant banking. It involves handling all aspects of issuing securities such as shares, debentures, bonds, and other financial instruments, ensuring that companies can raise capital efficiently and transparently.
(a) Preparation of Prospectus and Offer Documents
Merchant bankers prepare a detailed prospectus or offer document for companies planning to issue securities. This document includes:
-
Company profile and history
-
Financial statements and analysis
-
Business objectives and strategies
-
Risk factors and disclosures
-
Regulatory compliance statements
A well-prepared prospectus ensures transparency and investor confidence while complying with SEBI and stock exchange requirements.
(b) Pricing of Securities
Merchant bankers assist in determining the issue price of securities. Pricing is based on:
-
Company valuation
-
Market conditions
-
Investor demand
-
Expected returns and growth potential
Proper pricing ensures that the company raises adequate funds without underpricing or overpricing its securities, balancing the interests of investors and the issuing company.
(c) Marketing and Distribution of Securities
Merchant bankers coordinate the marketing and distribution of securities to various investors, including institutions, high-net-worth individuals, and the public. Activities include:
-
Roadshows and presentations
-
Investor meetings
-
Advertising campaigns
Effective marketing ensures maximum investor participation, successful subscription, and enhanced visibility of the company in the capital market.
(d) Underwriting Services
Merchant bankers provide underwriting services to guarantee subscription for securities. If public demand is insufficient, they purchase the remaining securities, ensuring that the company raises the required funds. Underwriting reduces financial risk and enhances investor confidence.
(e) Coordination with Regulatory Authorities
Merchant bankers ensure that the issue process complies with SEBI and stock exchange regulations. They handle:
-
Submission of documents
-
Obtaining approvals
-
Adherence to legal and regulatory guidelines
This ensures a smooth, legal, and transparent issue process, minimizing the risk of penalties or litigation.
2. Advisory Services
Merchant bankers provide expert advisory services to support corporate decision-making and strategic financial planning.
(a) Corporate Financial Advisory
Merchant bankers guide companies on capital structuring, mergers, acquisitions, takeovers, and corporate restructuring. Their advice helps firms optimize debt-equity ratios, reduce cost of capital, and enhance shareholder value.
(b) Investment Advisory Services
Merchant bankers advise corporate and high-net-worth clients on investment strategies, portfolio management, and asset allocation. They help in:
-
Risk assessment
-
Diversification strategies
-
Selection of appropriate investment instruments
This ensures efficient capital utilization, maximized returns, and minimized risks.
(c) Strategic Planning and Restructuring
Merchant bankers assist in strategic financial planning, including capital budgeting, resource allocation, and long-term investment planning. They also advise on corporate restructuring, mergers, and demergers to improve operational efficiency and profitability.
3. Project Financing Services
Merchant banking plays a critical role in financing industrial and infrastructure projects.
(a) Project Appraisal and Feasibility Studies
Before providing financial support, merchant bankers conduct detailed project appraisals. They evaluate:
-
Technical feasibility
-
Financial viability
-
Market demand and competition
-
Expected profitability and risks
This ensures that resources are allocated to viable projects and minimizes the risk of financial losses.
(b) Loan Syndication Services
For large-scale projects, merchant bankers arrange loan syndication, where multiple banks or financial institutions provide funds collectively. This spreads financial risk, ensures adequate funding, and reduces dependency on a single lender.
(c) Project Monitoring and Control
Merchant bankers often monitor ongoing projects to ensure that funds are used efficiently and that projects adhere to budgetary, technical, and operational standards. This protects the company’s investment and ensures timely project completion.
4. Underwriting and Risk Management Services
- Underwriting of Securities
Merchant bankers underwrite the securities issued by companies to guarantee subscription and fund availability. They assume the risk of unsold securities and ensure the company secures the required capital.
- Risk Assessment and Mitigation
Merchant bankers identify and mitigate financial, market, and credit risks. They provide strategies such as hedging, insurance, and derivatives to reduce potential losses, ensuring safeguarding of investor and company interests.
5. Investment and Portfolio Management Services
- Asset Allocation and Diversification
Merchant bankers assist in allocating funds across various investment avenues. This reduces exposure to market volatility and ensures balanced risk-return ratios.
- Performance Evaluation and Optimization
They monitor portfolio performance and recommend adjustments to maximize returns and minimize risks. Strategic portfolio management ensures long-term wealth creation for clients.
- Advisory for Mutual Funds and Other Securities
Merchant bankers provide guidance on mutual fund investments, bonds, debentures, and other securities, assisting clients in selecting optimal investment instruments.
6. Corporate Restructuring and Advisory
Merchant bankers support companies in mergers, acquisitions, demergers, and corporate restructuring.
(a) Mergers and Acquisitions Support
They provide advisory services for:
-
Business valuation
-
Due diligence
-
Negotiations and agreements
-
Regulatory approvals
This ensures that mergers and acquisitions create value for shareholders.
(b) Capital Restructuring
Merchant bankers advise on debt restructuring, equity infusion, and refinancing to improve the company’s financial health and operational efficiency.
7. Regulatory Compliance and Documentation Services
- Legal Compliance
Merchant bankers ensure that all activities, including securities issuance, corporate restructuring, and project financing, comply with SEBI, RBI, and stock exchange regulations.
- Documentation and Reporting
They handle contracts, agreements, filings, and disclosures to ensure legal compliance and reduce the risk of penalties, disputes, or reputational damage.
- Investor Protection
Merchant bankers provide transparent information and disclosures to investors, maintaining trust and confidence in the capital markets.
8. Foreign Investment Advisory
Merchant bankers guide companies in foreign direct investment (FDI), joint ventures, and portfolio investment. Services include:
-
Complying with foreign exchange regulations
-
Obtaining government approvals
-
Structuring international collaborations
This helps companies expand globally and access international capital efficiently.
9. Specialized Merchant Banking Services
- Credit Rating Advisory
Merchant bankers help companies obtain favorable credit ratings from agencies, improving access to debt and investment opportunities.
- Structured Finance Solutions
They provide hybrid instruments like convertible bonds, preference shares, and debentures to meet unique financing requirements.
- Rights Issues, IPOs, and FPOs
Merchant bankers manage rights issues, initial public offerings (IPOs), and follow-on public offerings (FPOs), ensuring successful capital raising and market compliance.
- Wealth Management Services
For high-net-worth clients, merchant bankers offer personalized financial planning, portfolio management, and investment advisory, ensuring long-term wealth growth.
