In 1969, Grindlays Bank established the first merchant bank. At first, they handled share issuances and helped the company raise funds as issue managers. At first, merchant bankers in India handled public offerings and gave financial advice to foreign banks. Later, though, they grew their services to include working capital management, syndication of project finance, global loans, mergers, capital restructuring, and many other things.
SBI launched commercial banking in 1973. In August 1986, SBI Capital Market was established as a full-fledged merchant banking services. The merchant banker promoted numerous enterprises between 1974 and 1985.
However, in 1992, SEBI was given responsibility over them. Since then, SEBI has constantly been ensuring it is the guarding force for SMEs. All authorized setups come together to save businesses under water. So let’s see, in the current world, how can merchant banking services be of some help?
What are Merchant Banking Services?
A mix of banking and consulting services is known as merchant banking. It offers consulting services for its clients’ financial, marketing, management, and legal needs. Giving advice, direction, and services in exchange for money is called consulting. A businessman can start one with its assistance.
It aids in the raising (collection) of funds. Merchant banking services aid in the business’s growth and modernization. It aids in a company reorganization.
It helps revive struggling business units. Additionally, merchant banking services aid businesses in stock exchange share registration, acquisition, and trading.”
Any person engaged in the business of issue management,” according to the SEBI (Merchant Bankers) Regulation Act of 1992, “whether by making arrangements about selling, buying, or subscribing of securities or by acting as a manager, consultant, adviser, or providing corporate advisory service concerning such issue management.”
What are the Offerings of Merchant Services for Small Businesses?
For all small business owners, merchant services are a boon that can help any business take off. Read ahead to find out how!
Helping Customers Raise Capital
Merchant banking services assist its customers in raising capital through issuing shares, debentures, bank loans, etc. It assists its clients in obtaining funding from both the domestic and global markets.
Stock Exchange Broker
Merchant bankers serve as stock exchange brokers. In the name of their customers, they purchase and sell shares. They conduct analysis on stock shares. Additionally, they offer their clients advice on which shares to purchase, when to do so, in what amount, and at what time. Big brokers, mutual funds, venture capital firms, and investment banks provide the best merchant services.
Merchant bankers advise on project location, create a project report, conduct feasibility studies, create a plan for financing the project, identify sources of funding, and give advice on government concessions and incentives.
Expansion and Modernization Advice
Merchant banking services offer business unit expansion and modernization guidance. They offer professional guidance on business diversification, foreign partnerships and joint ventures, technology advancement, mergers and amalgamations, acquisition, and takeovers, etc.
Managing Public Issue of Companies
The services they offer are as follows:
- Offer suggestions for the public issue’s timing
- Offer advice on the scope and cost of the problem
- Serving as the issue’s manager and assisting with the receipt of applications and the allocation of securities
- Assistance with selecting underwriters and brokers for the issue
- Stock exchange listing of shares, etc.
Handling Government Approval for Industrial Projects
Before a project can begin, a businessman must obtain government approval. Similarly to this, a business needs approval for growth or modernization projects. Numerous formalities must be accomplished to do this. All this labor is done by merchant banking service providers.
Special Help for Small Businesses and Entrepreneurs
Best merchant services include advice for small business prospects, new laws, financial incentives, and other benefits. Taking advantage of these chances, breaks, etc., also benefits them.
Services for Public Sector Units
Merchant banking service providers support the acquisition of long-term financing through term lending institutions, the marketing of securities, international cooperation, and the raising of long-term capital.
The Resurrection of Sick Industrial Units
Merchant banks assist in the Resurrection (Cure) of Sick Industrial Units. It bargains with various organizations, including banks, term lending institutions, and the BIFR (Board for Industrial and Financial Reconstruction). It also organizes and carries out the entire regeneration program.
A merchant banking service oversees its clients’ portfolios of investments. This makes investments for the client profitable, safe, and liquid. It gives its clients professional advice while making financial decisions.
This comprises selling an existing business unit, disinvestment, or mergers or acquisitions of existing company units. This calls for appropriate negotiations, document preparation, and fulfilment of legal requirements. All of these services are provided by merchant bankers to their clients.
- Government bonds are one example of a short-term money market asset that merchant bankers deal with and underwrite
- Banks and other financial entities may issue certificates of deposit
- Business debt issued by significant corporations
- Government-issued Treasury bills (Here in India by RBI)
Best merchant service provider can also provide leasing assistance. In a lease, the lessor and lessee agree that the lessee may use a specified asset, like equipment, for a predetermined amount of time. Rent is a fee levied by the lessor.
Interest and Dividend Management
Merchant banking services assist clients with managing interest on bonds, loans, and stock dividends. They also advise their client on the timeframe (interim/annual) and dividend rate.
Which Merchant Banking Service Provider Should you Choose?
When you look for merchant banking services, your search page will be full of results, confusing you and giving you questions. So, we have simplified everything for you. Choose HDFC’s SmartHub Vyapar app for a hassle-free experience. You do not have to go around asking people. It is as simple as downloading the application and connecting with support. Through this app, you unlock your doors to the best merchant services.