Merchant Banking by H.R. Machiraju

By H.R. Machiraju

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The findings at this stage are embodied in a pre-feasibility study or opportunity study. For the purpose of screening and priority fixation, project ideas are developed into pre-feasibility studies. Pre-feasibility studies give output of plant of economic size, raw material requirement, sales realisation, total cost of production, capital input/output ratio, labour requirement, power and infrastructural facilities. The project selection exercise should also ensure that it conforms to overall economic policy of the government.

DEFINITION OF MERCHANT BANKER The Notification of the Ministry of Finance defines a merchant banker as, “any person who is engaged in the business of issue management either by 18 Merchant Banking making arrangements regarding selling, buying or subscribing to securities as manager, consultant, advisor or rendering corporate advisory service in relation to such issue management. The Amendment Regulations specify that issue management consists of prospectus and other information relating to the issue, determining financial structure, tie-up of financiers and final allotment and refund of the subscriptions, underwriting and portfolio management services.

Association of trustee with either the issue or its investment banker is prohibited under the Trustee Indenture Act, 1939. To protect the interests of security holders the trust indenture had to be filed with SEC. 4. The investment and portfolio activities became subject to SEC supervision. The increased regulation and control of domestic operations gave a fillip to large US banks to undertake merchant banking functions in international capital markets. The US investment banks have extended their operations to the international level.

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