Investment banker, Financial Management

The Role of Merchant Banker

The issuer appoints the Merchant Banker (or Investment Banker) to undertake the issue activity. A Merchant Banker performs multiple functions during the preliminary issue of security. He advises and advocates the issuing firm regarding the regulations for equity issue. He also decides the timing and pricing of the issue so that the issue gets fully subscribed.

The Investment Banker performs the underwriting function for an issue and is specifically called as Underwriter to the Issue. The Investment Banker guarantees a fixed amount to the issuer in exchange of its securities for which it pays an underwriting fee. The issue is underwritten depending on the reputation of the issuer and the environment for new issues in the market. In underwriting, the investment banker runs the risk of undersubscription of issue and has the obligation to purchase the unsubscribed portion as guaranteed in the underwriting issue. So he is careful in selecting the issuer for underwriting and sometimes underwrites the issue in a syndication of Investment Bankers to reduce the risk and also discourage firms with low public image.

The Merchant Banker also performs activities like drafting and design of Offer Documents, Prospectus, statutory advertisements and marketing campaigns, and the memorandum containing salient features of the Prospectus. He also ensures that the issuer complies with stipulated requirements and completes the prescribed formalities with the Stock Exchanges, Registrar of Companies, and the SEBI including finalization of Prospectus and filing. He also performs the activity of distributing the shares through marketing channels.

 

Posted Date: 9/10/2012 5:14:53 AM | Location : United States







Related Discussions:- Investment banker, Assignment Help, Ask Question on Investment banker, Get Answer, Expert's Help, Investment banker Discussions

Write discussion on Investment banker
Your posts are moderated
Related Questions
lso from the auditor's report, they have reported that the company has used funds raised on short-term basis for long-term investment. The company has purchased certain fixed asses

Question 1 Define 'Trust'. Explain in detail the various types of Trust Question 2 Discuss the concept of Tax Planning. Identify difference between Tax Planning and Tax Ev

Q. Interest Rate Risk in financial management Interest rate risk is the variation in the single period rates of return caused by the fluctLlaoons in the market interest rate. M

Assume you are a professional financial analyst working for a wealthy investor.  Your client has $2.6 million to invest and wants to sink it into a single stock (diversification is

Mount Hutt Ltd. just paid dividend of $2.20 per share. The dividends are expected to grow at a constant rate of 4% per year, indefinitely. If investors require an 11% return on Mou

Market development A strategy which seeks to sell existing products in new geographical markets or new market segments. A strategy to find new uses for existing products or ser

APPLICABILITY OF OPERATING CYCLE

Callable bonds give the right to the issuer to redeem the bond prior to its maturity date, at a specified call price. These bonds are beneficial to the

Market Capitalization : Often referred to as market cap, it refers to the value of a company, that is, the market worth of its outstanding shares. A common misconception is that

Suppose the bid-ask spot prices for one British pound are $1.50 and $1.60 respectively. 1. Compute the bid-ask prices for one US dollar in terms of British pound. 2. Suppose