Merchant Banking Firm – Overview, Role And Services

What is a merchant bank?

A merchant banking firm is a financial organisation that provides you with an amalgamation of banking and financial consultancy services. Not only does a merchant bank help you arrange your loans, but it also offers you appropriate guidance as to how to plan and invest your finances.

Running a business and maintaining its finances is not everyone's cup of tea. One has to look at a number of aspects in order to make the corporation run steadily. If you are a company owner and are looking for assistance in handling your finances, look no further than availing a merchant bank's service.

Overview of a merchant banking firm.

As per the definition given by the Ministry of Finance, a merchant banker is a person who is involved in the business of issue management, i.e. either by making arrangements for selling, buying or accepting the securities as a manager, consultant or advisor.

In India, merchant Banking firms were first introduced in the year 1967 by the Grindlays bank. Currently, there are more than 200 SEBI registered merchant banks in India.

Services of merchant banking firms.

Obtaining merchant banking services for your business can reap innumerable benefits for your business. Here is a list of services offered by them.

• Project Counselling: Starting from the initial phase, i.e. preparing an application to obtaining sponsors, the project is managed by a team of specialists from a merchant banking firm.
• Issue Management - Another service offered by merchant banks in marketing corporate securities such as corporate shares or bonds by giving them to the public. In addition to this, the pricing is also decided by Merchant bankers.
• Underwriting of the public issue: In this, an underwriter guarantees that in case an under subscription occurs, all the liabilities would be borne by him.
• Managing debt and equity offerings: It is one of the main services offered by a merchant bank. The service includes assisting businesses in obtaining funding from the market.
• Managing portfolio: Under this service, the securities are maintained efficiently. This ensures good returns are obtained from them along with reduced risks.
• Loan syndication: Merchant bankers help their clients to raise syndicated loans from various financial institutions like banks.
• Financial advisory services and corporate counselling: Merchant banking firms assist you in taking care of your corporation's finances. In addition to it, corporate counselling services are given to help businesses thrive.
• Corporate restructuring / reorganisation techniques: When one company takes over the other, a merchant bank acts as a mediator in the companies' negotiation process. A fee is charged for the merchant banks’ service, ensuring that it takes place without any hassle.