Merchant Banking

Preface to the Fourth Edition......Page 8
Preface to the First Edition......Page 10
Contents......Page 14
List of Tables and Statements......Page 26
Money Changer and Exchanger......Page 28
Merchant Banks in the United Kingdom......Page 29
Merchant Banking in India......Page 30
Services Rendered by Merchant Banks......Page 31
Investment Banking......Page 32
Investment Banking in USA......Page 33
Glass-Stegall Banking Act, 1933......Page 34
Activities of Investment Banks in USA......Page 35
Universal Banking......Page 39
Definition of Universal Banking......Page 40
Nature of Merchant Banking......Page 42
Notifications of the Ministry of Finance and SEBI......Page 43
Definition of Merchant Banker......Page 44
Categories of Merchant Bankers......Page 45
Exemption from RBI Regulations......Page 46
Responsibilities of Lead Manager......Page 47
Procedure for Inspection......Page 48
Defaults of Merchant Bankers and Penalty Points......Page 49
Minor Defaults......Page 50
Defaults in Prospectus......Page 51
Investment Recommendations......Page 52
Project Identification......Page 55
Feasibility Study......Page 56
Financial Appraisal......Page 57
Pay Back Period......Page 58
Internal Rate of Return (IRR)......Page 59
Net Present Value Method......Page 60
Acid Test or Quick Ratio......Page 62
Interest Coverage Ratio......Page 63
Derivation of BEP from Income Statement\n......Page 64
Capacity of Plant......Page 66
Evaluation of Technology......Page 67
Interdependence of the Parameters of Project\n......Page 68
Net Foreign Exchange Effect......Page 69
Social Cost-Benefit Analysis......Page 71
Nature and Kinds of Securities......Page 74
Negotiability......Page 75
Convertibility......Page 76
Other Debt Securities in Vogue Abroad Income Bonds......Page 79
Securitised Debt Instruments (2007)......Page 80
Recent Trends in Instrument Design and Bond Issues by all India Financial Institutions\n......Page 81
Easy Exit Bond\n......Page 83
IFCI’s Deep Discount, Easy Exit, Regular Income and  Retirement Bonds (1996)\n......Page 84
Index Bond......Page 85
GOI Guidelines on Issue of Debentures (28.10.1980)......Page 86
Procedure for Issue of Debentures......Page 87
Pricing of Bonds......Page 88
Example\n......Page 89
Yield Measures\n......Page 90
Measures of Bond Price Volatility......Page 92
Debt Issues by Government......Page 93
Repos and Reverse Repos......Page 94
Liquidity Adjustment Facility (LAF)......Page 96
Primary Dealers......Page 97
Nature......Page 98
Differential Shares\n......Page 99
Share Capital\n......Page 103
Cash Dividends......Page 104
Transfer of Shares......Page 105
Fully Convertible Cumulative Preference Share (EQUIPREF)\n......Page 106
Preference Shares with Warrants Attached......Page 107
Capital Structure and Financial Structure......Page 108
Debt-Equity Ratio......Page 111
Long-Term Debt......Page 112
Financing Decision......Page 113
Debt and Financial Risk\n......Page 117
Financing Decision and Cost of Capital\n......Page 118
Cost of Borrowing......Page 120
Cost of Equity Capital......Page 121
Period of Subscription\n......Page 124
Compliance Officer to be Appointed by Lead Merchant Banker......Page 125
Dematerialisation......Page 126
Credit Rating for Debt Instruments......Page 127
IPO by Bank\n......Page 128
Promoter\'s Participation in Excess Over Minimum is Preferential Allotment......Page 129
Lock-In of Excess\n......Page 130
Obligations of Lead Merchant Banker......Page 131
Registrars to Issue\n......Page 132
Mandatory Collection Centres\n......Page 133
Reservations and/or Firm Allotments......Page 134
Firm Allotments and Reservations\n......Page 137
Guidelines for Preferential Issues\n......Page 138
Pricing of the Issue\n......Page 139
Non-Transferability of Financial Instruments......Page 140
Currency of Shareholders Resolutions\n......Page 141
Non-Applicability of the Guidelines......Page 142
Other Issue Requirements\n......Page 143
Guidelines for Bonus Issues\n......Page 146
General Information\n......Page 147
Capital Structure of the Company\n......Page 148
Company, Management and Project......Page 149
Eligibility Norms\n......Page 151
Guidelines on Initial Public offers Through the Stock Exchange Online System (E-IPO) (30.11.2000)......Page 152
Appointment of Registrar to the Issue\n......Page 153
Mode of Operation\n......Page 154
Requirement in Respect of Debenture Trustee\n......Page 157
Creation of Debenture Redemption Reserves (DRR)......Page 158
Disclosure and Creation of Charge\n......Page 159
Requirement of Letter of Option\n......Page 160
Additional Disclosures in Respect of Debentures\n......Page 163
Reservation for Employees\n......Page 164
Pricing of Issues\n......Page 165
Specific Disclosures\n......Page 166
Rollover of Debentures/Bonds......Page 167
Bonus Issues by DFIs......Page 168
Other Requirements\n......Page 170
Indian Depository Receipts (IDRs)......Page 171
Savings and the Primary Market\n......Page 172
Types of Issues\n......Page 177
Decline in Investor\'s Interest\n......Page 178
Par Offers\n......Page 179
Return on All IPOs\n......Page 180
Activate the Primary Market\n......Page 181
Transparency and Requirements in Prospectus\n......Page 182
Dating of Prospectus (Sec.55)......Page 183
Contents of Prospectus\n......Page 184
Offer for Sale by Issue House\n......Page 185
Criminal Liability for Misstatements in Prospectus\n......Page 186
Offers for Sale\n......Page 187
Bought-out Deals (BoDs)\n......Page 188
Private Placement\n......Page 190
Private Equity Funding\n......Page 191
Grey Market\n......Page 193
Cover Pages\n......Page 195
Notes to Capital Structure\n......Page 197
Terms of Payments\n......Page 200
Applications by NRIs......Page 201
Undertaking by the Issuer Company\n......Page 202
Utilisation of Issue Proceeds......Page 203
Deployment of Funds in the Project......Page 204
Location of the Project......Page 205
Future Prospects\n......Page 206
Stock Market Data\n......Page 207
Financials of Groups Companies\n......Page 208
Basis for Issue Price\n......Page 210
Outstanding Litigations or Defaults\n......Page 211
Risk Factors and Management Perception on the Same, if Any......Page 212
Financial Information\n......Page 213
Principal, Terms of Loan and Assests Charged as Security\n......Page 215
Option to Subscribe......Page 218
Purchase of Property\n......Page 219
Capital Structure of the Company\n......Page 221
Terms of the Present Issue\n......Page 222
Future Prospects\n......Page 224
Basis for Issue Price......Page 225
Option to Subscribe\n......Page 226
Material Contracts and Time and Place of Inspection\n......Page 227
Brokers to Issue\n......Page 228
Registrar to Issue or Issue House......Page 229
Publicity Campaign\n......Page 230
Code of Advertisements -Capital Issues  \n......Page 231
Need and Definition\n......Page 233
SEBI Guidelines......Page 234
Underwriting Commission Rates......Page 235
Undersubscription and Devolvement......Page 236
Reasons for Devolvement......Page 238
SEBI\'s Model Underwriting Agreement......Page 239
Underwriting Risk......Page 240
Pre-Issue Management: Time Bound......Page 241
Free Pricing of Issues\n......Page 243
Book Building......Page 244
75 Per cent Book Building Process\n......Page 246
Additional Disclosures......Page 251
Part A......Page 255
Part B......Page 256
Comparison of the Indian Concept with US Practice......Page 257
Basis for Issue Price in Issues with Premium......Page 259
Net Asset Value......Page 260
Profit Earning Capacity Value (PECV)......Page 262
Assessment of the Profitability of Fresh Issue of Capital......Page 263
Fair Value......Page 264
Malegam Committee: Justification of Price......Page 265
Premium......Page 266
Rights Issues......Page 267
Consequences of Overpricing......Page 268
Performance of the Rights Issues, 1995-96......Page 271
SEBI Guidelines......Page 276
IDBI ‘Safety Net Option\' for IEL (April 1997)\n......Page 277
Evaluation......Page 278
Appendix 9.1......Page 280
Major Features......Page 283
Financial and Other Information......Page 285
Justification of Offer Price According to the Company......Page 286
Deduct Contingent Liabilities......Page 287
Calculation of PECV......Page 288
Calculation of Fair Value......Page 289
Capacity Utilisation......Page 291
Capital Structure of the Company\n......Page 292
Premium Decided by Company Rs.20......Page 294
Registrars to the Issue......Page 295
Mandatory Collection Centres......Page 296
Advantages of Listing......Page 297
Standard Denomination for New Issues\n......Page 298
Prospectus......Page 299
Minimum Issued Capital, Minimum Public Offer and Minimum Number of Shareholders......Page 300
SEBI Guidelines on Advertisement (7.8.2000)......Page 301
The Lead Merchant Banker shall also Comply with the Following......Page 303
Post-issue Monitoring Reports......Page 304
Basis of Allotment......Page 306
Other Responsibilities......Page 309
Listing Agreement\n......Page 310
Cost of Public Issue\n......Page 311
Fees......Page 313
Guidelines for Listing of Companies on the Over the Counter Exchange of India (OTCEI)......Page 314
Introduction......Page 318
Deposits According to Rules......Page 319
Other Requirements......Page 320
Introduction......Page 322
Issue of Commercial Paper......Page 323
Issuers of Commercial Paper......Page 324
Issue Expenses......Page 325
Pricing of CP\n......Page 326
Underwriting......Page 327
Origin......Page 328
Nature of Ratings......Page 329
Determinants of Quality Ratings......Page 330
Utility of Ratings......Page 331
Ratings and Yields......Page 332
Credit Rating Information Services of India Limited (CRISIL)......Page 333
CRISIL Rating Symbols......Page 335
Investment Information and Credit Rating Agency (ICRA)......Page 336
ICR Rating Symbols......Page 337
CARE’s Rating Symbols\n......Page 338
Credit Rating for Finance Companies......Page 339
Bond Ratings in USA......Page 340
Differences in Quality Ratings......Page 341
Shortcomings of Security Ratings......Page 342
Report of the Committee on Draft Regulations for Credit Agencies (1998)......Page 344
Promoter of Credit Rating Agency......Page 345
Eligibility Criteria......Page 346
Conditions of Certificate and Validity Period......Page 347
Effect of Refusal to Grant Certificate......Page 348
General Obligations of Credit Rating Agencies......Page 349
Internal Procedures to be Framed\n......Page 351
Maintenance of Books of Accounts Records, etc.......Page 352
Rating Process......Page 353
Securities Issued by Certain Entities, Connected with a Promoter, or Rating Agency not to be Rated......Page 354
Notice Before Inspection or Investigation......Page 355
Communication of Findings etc., to the Credit Rating Agency......Page 356
Appeal to the Securities Appellate Tribunal......Page 357
Term Loans\n......Page 358
Industrial Development Bank of India (IDBI)......Page 359
Sources of Funds of DFIs \n......Page 362
Small Industries Development Bank of India(SIDBI)......Page 363
Tourism Finance Corporation of India Ltd. (TFCI)......Page 364
Foreign Currency Loans......Page 365
Promoter\'s Contribution......Page 366
Appraising Term Loans......Page 367
Debt Service Coverage Ratio (DSCR)......Page 368
Loan Syndication......Page 370
Syndication Document......Page 371
Guidelines for External Commercial Borrowing......Page 372
Procedure for Approval......Page 374
Modified Guidelines for ECBs (1.4.1997)\n......Page 375
Commercial Borrowings......Page 378
Definition and Nature......Page 379
Collateralised Loan Obligations......Page 380
Structure of Syndicated Loans......Page 381
Defaults and Recoveries......Page 382
Secondary Market......Page 383
Globalisation\n......Page 384
I. ECB Policy......Page 386
On-lending by SFIs and Other Financial Intermediaries......Page 387
Other Terms and Conditions\n......Page 388
Validity of Approval......Page 389
II. Procedure for Seeking ECB Approval......Page 390
Review......Page 391
Rationale\n......Page 392
Distinction between Private Limited Company and Public Limited Company......Page 393
Default\n......Page 394
Conversion by Choice\n......Page 395
Conversion of Public Company into Private Company......Page 396
Fixed Price Tender Offers\n......Page 397
Liquidity Effects of FPTO and DA......Page 398
Book to Market Ratio......Page 399
Buy-Back in UK\n......Page 400
Provisions in Companies Act, 1956......Page 401
Defence Against Takeovers......Page 402
Buy-Back and Insider Trading\n......Page 403
Buy-Backs by Major Companies in India\n......Page 404
Advantages of Buy-Back......Page 405
SEBI Regulations for Buy-Back of Shares (1998)......Page 406
Filing of Offer Document\n......Page 409
Extinguish and Destroy\n......Page 410
Buy-Back through Book Building......Page 411
Revised Fee Structure (2008)......Page 413
Merger, Acquisition, Amalgamation and Takeover......Page 414
Leveraged Buyout......Page 416
Raghavan Committee on Competition Policy......Page 417
Role of Holding Companies in M & A......Page 418
Nature of Mergers......Page 419
Theories of Merger......Page 420
Inefficient Management......Page 421
Synergy......Page 422
Diversification......Page 423
Hubris and the \'Winner\'s Curse\'......Page 424
Carry Forward and Set Off of Loss and Depreciation......Page 425
Prescribed Conditions-Vide Rule 9C The following conditions are prescribed......Page 426
Principal Methods of Accounting for Mergers and Acquisitions......Page 427
Basis......Page 428
SEBI Takeover Regulations (1997)......Page 429
Purpose of Regulations......Page 430
Consolidation of Holdings\n......Page 431
Selection of the Target Company\n......Page 432
Triggering Points for Disclosures\n......Page 433
Triggering Points for Open Offer......Page 434
Disclosures in Public Announcement (PA)......Page 435
Letter of Offer\n......Page 436
Contents of the Public Announcement of the Offer......Page 437
Exemption from Public Offer but Reporting to SEBI Mandatory......Page 438
Preferential Allotment Not Exempt......Page 439
Exemption from Takeover Regulations......Page 440
Submission of Letter of Offer to SEBI......Page 441
Determination of Minimum Offer Price (MOP) in Open Offer......Page 442
General Obligation of the Acquirer......Page 443
Withdrawal of Offer\n......Page 444
Duration of Open Offer......Page 445
General Obligations of Board of Directors of Target Company Approval of General Body Necessary......Page 446
Notice before Investigation......Page 447
Evaluation of Bid\n......Page 448
Fee Structure (2008)......Page 449
Appendix 17(a)......Page 451
Appendix 17(b)......Page 455
Notification\n......Page 458
Introduction\n......Page 459
Justification for Merger\n......Page 462
Terms of Merger......Page 464
Calculation of Share Price by CCI Formula (HLL)\n......Page 466
Exchange Ratio\n Calculation......Page 468
Synergy Achieved......Page 472
Venture Capital in India\n......Page 473
Characteristics of Venture Capital......Page 474
Valuation\n......Page 476
Investment in Venture Capital by Banks\n......Page 477
Evaluation of Venture Proposal......Page 478
Investment\n......Page 480
Tax Aspects\n......Page 481
Technology Development and Information Company of India Limited (TDICI)......Page 482
Credit Capital Venture Fund (CCVF) India Ltd.......Page 483
Overseas Venture Capital Investments (Ministry of Finance, September 21, 1995)\n......Page 484
Appendix 18.(a)......Page 486
Section B: Chapter II – Eligibility Norms......Page 489
Avenues for Investment\n......Page 490
Non-resident (Non-repatriable) Rupee Deposit Scheme [NR(NR)RD] June, 1992......Page 491
Other Investments on Non-repatriation Basis......Page 493
Other Investments on Repatriation Basis......Page 494
Report of the Working Group on Non-resident Indian Investment......Page 495
Facilities to Returning NRIs/PIO......Page 496
Significance and Role of Foreign Investment......Page 498
Definition of FDI......Page 499
India\'s Share in FDI Flows......Page 503
Role of Foreign Investment......Page 504
Policy for Foreign Direct Investment......Page 505
FIPB Guidelines (20.1.1997)......Page 506
Recommendations......Page 510
Foreign Institutional Investors\n......Page 513
FIIs Investments in Government Securities......Page 514
Foreign Brokers (SEBI Guidelines 15.10.1993)......Page 515
Preferential Allotment to FIIs......Page 516
Approval Procedure......Page 518
Empirical Research and Befefits of Diversification......Page 519
Guidelines on Issue of GDRs and FCCBs......Page 520
Guidelines, May, 1994......Page 521
Guidelines on Pricing of Preferential Issues......Page 522
Initiatives in 2001-02......Page 523
Investment in GDRs by FIIs......Page 524
Advantages to the Investor......Page 525
Issue of GDRs and FCCBs......Page 526
Issue of Foreign Currency Exchangeable Bonds (FCEBs) Scheme,2008......Page 527
Benefits of Joint Ventures......Page 528
Investment in Joint Ventures......Page 529
Main Features of the Guidelines\n......Page 530
Clearance of Proposals by RBI\n......Page 531
Relaxation of Overseas Investment Norms......Page 532
Index......Page 534