DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : MAJOR K. SIVA KUMAR
Designation : HEAD OF SECTION
Branch : Diploma in Commercial and
Computer Practice
Institute : Government Polytechnic, Srikakulam
Year/Semester : V Semester
Subject : Banking
Subject Code : CCP504(B)
Topic : Lead Banks and Merchant Banking
Duration : 50 Mts
Sub Topic : Services of Merchant Bankers
Teaching aids : PPT and Animations
CCP504(B).84 1
Services of Merchant Banker :

Objectives :
On completion of this period, you would be able to:

 Understand the portfolio management by

merchant bankers.
 Understand the venture capital financing by
merchant bankers.

CCP504(B).84 2
Recap :
In the previous class, you have learnt the functions of
Issue management and debenture trusteeship by
Merchant Bankers.
Issue Management includes the very important
functions such as:
 Determining the capital structure,
 Preparation of Prospectus and application,
 Appointment of banker, brokers, registrars to
the issue etc.
 Submitting Compliance report to the SEBI.
CCP504(B).84 3
Recap (Contd..) :

 Appointment of merchant Bankers are necessary for

all the Public issues as per SEBI guide lines.
 Debenture Trusteeship is also another function
Performed by merchant bankers.
 Debenture Trusteeship is also another function Per
formal by merchant bankers.
 They Protect the interests of the debenture holders.
 They help in dispatch of interest warrants on due
dates and Payment on the date of redemption.

CCP504(B).84 4
Known to Unknown :

 What is Portfolio management?

 What is venture or adventure?
 Why it is needed to finance the entrepreneurs who
take risk?
 Is investment management and portfolio
management one and the same?
 Why firms need the services of merchant bankers
to manage their investments?

CCP504(B).84 5
Portfolio Management :

 The term portfolio means the total holdings of

securities belonging any person
 In ordinary sense we can say that portfolio
management is nothing but management of funds
of any person or a company.

CCP504(B).84 6
Portfolio Management :
 The Portfolio management can be
 Discretionary or
 Non-discretionary

 The first type of portfolio management permits the

exercise of discretion in regard to investment
management of the securities/funds.

CCP504(B).84 7
Portfolio Management (Contd..) :

 The discretionary portfolio manager should individually

and independently manage the funds of each client in
accordance with the needs of the client in a manner,
which does not partake the character of a mutual fund.
 The non-discretionary portfolio manager should
manage the funds in accordance with the directions of
client.

CCP504(B).84 8
 Venture Capital Financing :

 Venture capital is defined as an equity / equity

related investment in a growth-oriented
small/medium business to enable investors to
accomplish corporate objectives, in return for
minority shareholding in the business or the
irrevocable right to acquire it.
 Venture capital financing is a long term financing.
 This financing involves high risk-return spectrum.

CCP504(B).84 9
Venture Capital Financing (Contd..) :

 There is a substantial degree of active involvement

of the venture capital undertaking.
 In brief, a venture capital institution is a financial
intermediary between investors looking for high
potential returns and entrepreneurs who need
institutional capital as they are yet not ready/ able
to go to the public.

CCP504(B).84 10
Summary :
 Portfolio means total holdings securities belonging
to any person.
 It is also known as investment management.
 Venture capital financing is a long-term financing
which involves high risk.
 Merchant bankers are intermediaries between
investors looking for high return and entrepreneurs
who need institutional capital as they are not yet
ready to go for public issue.
CCP504(B).84 11
Quiz :

1. Portfolio Management can be

a) Discretionary
b) Non-discretionary
c) Both a & b

CCP504(B).84 12
Quiz :

2. Venture capital financing is a

a) Short term financing
b) Medium term financing
c) Long term financing
d) Working capital financing

CCP504(B).84 13
Frequently Asked Questions :

1. Write about venture capital financing ?

2. Write about portfolio management by
merchant bankers.

CCP504(B).84 14