Case Study Related To Merchant Banking In India

Abstract

In Bangladesh the establishment of merchant bank added value to the stock market which plays a vital role in the progress of economic development. This study tried to analyze the performance of Lanka Bangla Investment Ltd., Prime Finance Capital Management Ltd., IDLC Investment Ltd. and Uttara Finance and Investment Ltd. Seven trend equations have been tested for different activities of the selected merchant banks. It is observed that the selected merchant banks were able to achieve a stable growth of investment in securities, margin loan to clients, brokerage commission, capital gain/loss from securities, portfolio management services, issue management fees, corporate advisory fees and underwriting commission during the period of 2011-2015. Among them the trend equation of investment in securities, margin loan to clients, and corporate advisory fees are positive incase of all the selected merchant banks. Square of correlation coefficient (r2) has also been tested for all trend equations. The r2 of interest income from merchant bank, portfolio management services, settlement and transaction fees and documentation fees, is more than 0.5. It indicates the prospect of merchant banks in Bangladesh is bright.



Note: OE: Overall Excellence; FSS: Financial Soundness ; QPS: Quality Product/Service; QM: Quality Management; INN: Innovativeness.

Objectives of Merchant Banking in Prevailing Economy:

* To study the significance of Merchant Banking towards the development of securities industry.
* To analyze issue management regulations.
* To analyze the functions of Merchant Banking in relation to rules and regulations of SEBI.
* To evaluate the performance of Merchant Bankers, both activity performance and operational and financial performance.
* To draw a conclusion and suggestions based on the analysis and experiences.

Conclusion of the study:

A new competition has started among Merchant Banking outfits in approving higher and higher premium to attract the business. In many cases their pricing emphasis is one qualitative actors like promoters experience, marketing network, brand name and export potential and performance.

Finally, it has been concluded that, there is no uniform pricing methodology and no Lead Manager is following the same methodology for all the issues handled.

References:

* Bhat, V.V., Japan: Main Bank system and India: Lead Bank system, International Journal banks, vol. 12, No.1, 1992 and  the world bank, 1990.
* Verma, V., "Merchant Banking", 1995
* SEBI, "Indian Securities Market – Agenda for Development and Reform – A Discussion Paper".
* SEBI: Merchant Banking Regulations, 1992.
* G.B. Desai, " stock Market Reforms," The stock Exchange Review, March 1993 (Speech delivered by Shri. G.B. Desai, President), BSE, at the seminar on "Stock Market  Reforms" at the Indian Merchant Chamber on 13 th February 1993.
* Manchiraju, H.R., "Merchant banking – Principles and Practice, New Age International (p) Limited Publishers, New Delhi.
* The Economic Times, "SEBI plans to triple Merchant Bankers Net worth Criteria," June 25, 1997.
* The Financial Express, "SEBI lists 120 errant Merchant Bankers list," May 24,1997.

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