Question

what are the main responsibilities otherwise, the functionsof investment bankers and processes they employ in assisting businesses with issuing and selling new financial securities.

Answer 1

The services provided by them include for new issue and sale of securities :

(i) Preparation of the prospectus.

(ii) Preparation of a plan and budget to estimate total expenditure of the issue.

(iii) Preparation of CCI (Controller of Capital Issues) application and providing assistance in obtaining consent of the CCI.

(iv) Selection of institutional and broker underwriters and underwriting agreements.

(v) Appointment of registrars, brokers and bankers to the issue.

(vi) Advertising and arranging publicity agency for post and pre-issue.

(vii) Selection of issue house.

(viii) Compliance of listing requirements of stock exchanges.

(ix) Act as co-ordinator with underwriter’s brokers and bankers to the issue and stock exchanges.

(x) Merchant banker advises the client whether to go for

(a) A fresh issue or

(b) Additional issue or

(c) Bonus issue or

(d) A right issue of equity or preference or both, if both then, in what proportion it is to be made.

If debentures are to be issued, it advises on the type of debentures, whether convertible or non-convertible, whether redeemable or non-redeemable or whether linked with equity or preference shares etc.

Merchant banks also performs the function of taking a decision as to the size and timing of the public issue in the light of prevailing market conditions, press coverage, underwriting support from brokers institutional underwriters etc.

Thus, merchant bankers not only act as experts of the type, timing and terms of issues of corporate securities and make them acceptable for the investors on the one hand and also provide flexibility and freedom to the issuing companies.