The Securities and Exchange Board of India (SEBI) controls the detailed application procedure for merchant banker licenses in India. It is Important to have this license if you have the interest in investment banking services such as portfolio management, underwriting, and consulting. In this blog we are going to discuss the essential documents required for the application process.
Who is a Merchant Banker?
A Merchant Banker is a company or person that helps big companies with financial services. They assist businesses in raising money by selling shares, providing financial advice, managing investments, and handling mergers or acquisitions. They mainly work with large corporations instead of everyday consumers.
Categories of Merchant Bankers
The Merchant Banker has been divided into four categories on the idea of activities done by them, which are as follows:
- Category I: These are top SEBI-certified merchant bankers who handle many different kinds of tasks, such as IPO management, portfolio management, and underwriting.
- Category II: They do not manage the lead for public issues; instead, they serve as consultants, co-managers, and underwriters.
- Category III: While they are unable to serve as lead managers for public concerns, this category focuses on advisory roles and underwriting functions.
- Category IV: This includes advisory positions only; underwriting and public issue management are not included.
Services are provided by Merchant Banking License
- Issue Management
- Credit Syndication
- Project Appraisal
- Handles Government consent for industrial projects
- Security Trustee Services
- Buy back assignment
- Share valuation
- Lead Managers to the IPO
- Issuing and Transfer Agent
- Capital Structuring
- Post Issue Management
- Underwriting
Key Documents Required for Merchant Banker License
- Memorandum of Association
- Article of Association
- Unique Identification Number (UIN) of the applicant
- Details about the directors, including their credentials and background in merchant banking and other associated financial services.
- Signed declaration by at least two directors
- Shareholding pattern of the corporate
- Detailed report from principal bankers
- Details of infrastructure facilities
- Organizational Structure of the corporate
- Financial Accounts of the applicant
- Report from principal bankers
- Details of associated registered intermediaries
- Undertakings
- Declaration by a minimum of two directors
- The following businesses were managed by the applicant over the last three years:
- Issue Management
- Investment Advisers
- Underwriting
- Portfolio Management
- Consultants/advisors to the problem
Earlier there was capital adequacy Requirement based on the category of merchant banker, however, now the same has been generalized at Rs 5 Crores.
- Submission Process
Once all the documents are prepared, they must be submitted to SEBI along with the application fee. After thorough scrutiny, SEBI may call for additional documents or clarifications before granting the license.
Conclusion
The process of obtaining a merchant banker license is difficult, but it may go much more smoothly if you have the necessary documents prepared. One should carefully maintain the papers and documents that were submitted to the Securities and Exchange Board of India when looking for a Certificate of Registration. Businesses and investors in India depend significantly on merchant bankers. They function as a bridge connecting customers and financial markets.
