MA0041 -MERCHANT BANKING AND FINANCIAL SERVICES

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ASSIGNMENT

DRIVE FALL	2013
PROGRAM	(SEM 4/SEM 6) / MBAN2 / MBAFLEX – (SEM 4)
SUBJECT CODE & NAME	MA0041 -MERCHANT BANKING AND FINANCIAL SERVICES
SEMESTER	4
BK ID	B1812
CREDITS	4
MARKS	60

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.

Q1. Assume that you are the CFO of a company and you wish to take over another small sized company. How will you proceed in this course of action?

(Merchant banking scope-5 marks, functions-5 marks) 10 marks

Answer.

For that course of action merchant banking should be follow. In merchant banking one can take over another small sized company.

Merchant banking scope

Merchant banking is an essential service provided by financial institutions that help in the growth of corporate sector, which eventually reflects in the overall growth and economic development of the country. Merchant banks invest their capital in client companies and provide fee based services for mergers and acquisitions. Many companies approach merchant banks to enhance their financial stability or to meet an essential

capital requirement. Due to their knowledge in international finances, merchant banks specialize in dealing with multinational corporations.

Merchant banks do not offer regular banking services

Q2. Suppose you are an investor who wants to purchase a public issue in such a manner that your money does not get blocked. What is the procedure that you would follow?

(Public issue-5 marks, Investor guidelines-5 marks) 10 marks

Answer.

Public issue

All public issues must be managed by merchant bankers who function as lead managers.  Public issue means an issuer is providing an offer for the public to subscribe to debt securities. Corporate may raise capital in the primary market by way of an initial public offer, rights issue or private placement. An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. This Initial Public Offering can be made through the fixed price method, book building method or a combination of both.

 There are two types of Public Issues:

Q3. Suma is in the service sector. She would like to insure the life of her kids, spouse and parents. Suggest her the future course of action to be taken based on the marketing strategies in financial services.

(Refer advisory service agent-2 marks, Marketing strategies in financial services-8 marks) 10 marks

Answer.

Life insurance is a policy that people purchase from a life insurance company which can be a way of protecting the family and its financial stability after one's death. These financial services facilitate certain financial functions such as managing capital issues, making arrangements for the placement of capital and debt instruments, and arrangement of funds from financial institutions. They also undertake the responsibility of getting all government and other clearances. In addition, this sector does a large number of other services like rendering project advisory services,

Q4. Suppose you are the owner of a factory and you want to make use of a latest type of machinery without purchasing it. Find out the best options that are available. Discuss the differences between Hire Purchase, Leasing and Commercial Loans.

(differences between Hire Purchase, Leasing and Commercial Loans-9 marks, conclusion-1 marks) 10 marks

Answer.

Hire-purchase vs. leasing and commercial loans

A lease transaction is a commercial arrangement whereby an equipment owner or Manufacturer conveys to the equipment user the right to use the equipment in return for a rental. In other words, lease  is a contract between the owner of an asset (the lessor) and its user (the lessee) for the right to use the asset during a specified period in return for a mutually agreed

Q5. India’s mergers and acquisitions activity during the first quarter of 2012 increased by 33 per cent with total transaction value estimated at US$14 billion. Discuss the legal Aspects Related to Mergers, Acquisition and Takeovers in India.

(legal Aspects Related to Mergers, Acquisition and Takeovers in India-6 marks, benefits-4 marks) 10 marks

Answer.

Legal Aspects Related to Mergers, Acquisition and Takeovers in India

Qualified people like lawyers, chartered accountants, and investment bankers examine every aspect of the target company usually before mergers, acquisitions, strategic investments and so on.

A scheme of merger/acquisition can be structured differently and each have their own tax and regulatory issues.  The following scheme of Merger/Acquisition raises some important legal issues for our discussion. At times an Indian resident, holding the entire share capital of an Indian company, intends to transfer his entire share holding to a foreign company in exchange for shares in the latter. This makes the Indian Company a 100% subsidiary of the foreign corporation.

Q6. Suppose you are the owner of a company and you have approached a CRA for rating your company. List the process and methodology adopted by the agency.

(Process-5 marks, methodology-5 marks) 10 marks

Answer.

Process of CRA

The process of credit rating is as follows:

1. Request of the company

The process of rating begins when the issuer of the instrument issues the rating request letter and signs the rating agreement.

2. Assignment to analytical team

The credit rating agency (CRA) assigns an analytical team on receipt of the request letter. The team comprises of two or more analysts, one lead analyst serving as the issuers’ primary contact. To carry out the rating assignments, only those analysts are responsible who

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