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Mahesh Kumar Sarva, Lovely Professional University Unit 12: Merchant Banking and Venture Capital

Unit 12: Merchant Banking and Venture Capital Notes

CONTENTS
Objectives
Introduction

12.1 Meaning and Role
12.2 Functions
12.3 SEBI Guidelines Regarding Merchant Banking
12.4 Underwriting Services in India
12.5 Venture Capital
12.6 Meaning
12.7 Techniques

12.8 Indian Venture Capital Scenario
12.9 Summary
12.10 Keywords
12.11 Review Questions
12.12 Further Readings

Objectives

After studying this unit, you should be able to:

 Understand meaning and role of merchant banking;
 Understand functions of merchant banking;
 Understand SEBI guidelines regarding merchant banking;

 Understand role and importance of venture capital;
 Understand functions and techniques of venture capital.

Introduction

In banking, a merchant bank is a financial institution primarily engaged in offering financial
services and advice to corporations and to wealthy individuals. The term can also be used to
describe the private equity activities of banking. The chief distinction between an investment
bank and a merchant bank is that a merchant bank invests the banks own capital in a client
company whereas an investment bank purely distributes (and trades) the securities of that
company in its capital raising role. Both merchant banks and investment banks provide fee
based corporate advisory services including in relation to mergers and acquisitions.

12.1 Meaning and Role

A merchant bank can be defined as a bank that deals mostly in (but is not limited to) international
finance, long-term loans for companies and underwriting. Merchant banks do not provide
regular banking services to the general public.

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