Merchant Banking Services

Merchant Banking is a specialised financial service that combines banking and consultancy services. Merchant bankers are financial intermediaries who provide a wide range of services to corporations, high-net-worth individuals, and governments.

Think of a merchant banker as a financial architect for a company. They don’t provide regular banking services like savings accounts or commercial loans. Instead, they help companies with complex financial needs like raising capital and corporate restructuring.


Key Services Provided by Merchant Bankers

1. Issue Management (Capital Raising)

This is the most important function of a merchant banker. They act as the lead manager for companies that want to raise money from the public through:

  • Initial Public Offerings (IPOs): Helping a private company go public for the first time.
  • Follow-on Public Offers (FPOs): Helping an already listed company raise more funds.
  • Rights Issues: Helping a company raise funds from its existing shareholders.

The merchant banker’s role in an IPO includes preparing the offer document (prospectus), pricing the issue, marketing the issue, and ensuring compliance with all SEBI regulations.

2. Corporate Advisory Services

Merchant bankers act as advisors to their corporate clients on a variety of strategic matters:

  • Mergers and Acquisitions (M&A): Helping companies buy other companies or merge with them.
  • Corporate Restructuring: Advising on how to reorganise a company’s operations or finances to improve efficiency and profitability.
  • Valuations: Determining the financial worth of a company.

3. Project Finance and Syndication

  • Project Finance: Advising on the financing of large infrastructure and industrial projects. They help in preparing the project report and determining the best way to raise funds.
  • Loan Syndication: If a company needs a very large loan that a single bank cannot provide, a merchant banker will arrange a group (syndicate) of banks and financial institutions to collectively provide the loan.

4. Underwriting

An underwriter provides a guarantee to a company that if its public issue (like an IPO) is not fully subscribed, the underwriter will buy the unsold shares. This ensures that the company successfully raises the required capital.


The Regulator

In India, all merchant banking activities are regulated by the Securities and Exchange Board of India (SEBI). An entity must be registered with SEBI to operate as a merchant banker.