MA0041 &MERCHANT BANKING AND FINANCIAL SERVICES

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ASSIGNMENT

DRIVE
FALL 2015
PROGRAM
MBADS (SEM 4/SEM 6)MBAFLEX/ MBA (SEM 4)
PGDBMN (SEM 2)
SUBJECT CODE & NAME
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.

Q.1. Explain the maintenance of books of accounts, records etc. under the general obligations and responsibilities of merchant bankers.

Answer:Every asset management company for each scheme shall keep and maintain proper books of accounts, records and documents, for each scheme so as to explain its transactions and to disclose at any point of time the financial position of each scheme and in particular give a true and fair view of the state of affairs of the fund and intimate to the Board the place where such books of accounts, records and documents are maintained. The asset management company shall follow the accounting policies and standards as specified in Ninth Schedule so as to provide appropriate details of the scheme wise disposition of the assets of the fund at the relevant accounting date and the performance during that period together with information regarding distribution or accumulation of income accruing to the unitholder in a fair and true manner.

Maintenance of books of accounts, records, etc.

Every Portfolio Manager shall keep and




Q.2. The methodology of issuing securities by giving a price range is known as book building method. A book building is a price discovery mechanism. Based on this write the methods and guidelines of book building. Explain the offer in a prospectus on book building 75 percent. Write the key role of the under writer and benefits for the company.

Answer: Book building is a process of generating, capturing, and recording investor demand for shares during an initial public offering (IPO), or other securities during their issuance process, in order to support efficient price discovery. Usually, the issuer appoints a major investment bank to act as a major securities underwriter or bookrunner.

The "book" is the off-market collation of investor demand by the bookrunner and is confidential to the bookrunner, issuer, and underwriter. Where shares are acquired, or transferred via a bookbuild, the transfer occurs off-market, and the transfer is not guaranteed by an exchange’s clearing house. Where an underwriter has been appointed, the underwriter bears the risk of non-payment by an acquirer or non-delivery by the seller.

Book building is a common practice in developed countries and has recently been making inroads into emerging markets as well. Bids may be submitted on-line, but the book is maintained off-market by the bookrunner and bids are confidential to the bookrunner. Unlike a public issue, the book building route will see minimum number of applications and large order size per application. The price at which new shares are issued is


Q.3. Bancassurance means selling insurance product through banks. Give a brief introduction of bancassurance and write the benefits of bancassurance to the banks and insurance companies.

Answer:Bancassurance arrangements are very common in Europe, where the practice has a long history. In the United States, bancassurance was prohibited until the repeal of the Glass Steagall Act in 1999, and has not yet caught on as a practice for most forms of insurance. Bancassurance remains prohibited in a number of other countries; however, the global trend has been toward the liberalization of banking laws.

The bank insurance model (BIM), also sometimes known as bancassurance, is the partnership or relationship between a bank and an insurance company whereby the insurance company uses the bank sales channel in order to sell insurance




Q.4.Explain the procedure for mergers under the merchant banking.

Answer:A merchant bank is a financial institution that provides capital to companies in the form of share ownership instead of loans. A merchant bank also provides advisory on corporate matters to the firms they lend to. In the United Kingdom, the term "merchant bank" refers to an investment bank.

The term Merchant Banking has its origin in the trading methods of countries in thelate eighteenth and early nineteenth century when trade-taking place was financed by bill of exchange drawn by merchanting houses. At that time the merchants weremerely financing their own activities. As international trade grew and other lesser” known names wanted to import goods from abroad, the established merchants “lenttheir names‘ to the newcomers by agreeing to accept bills of exchange on their behalf.The acceptance houses




Q.5. Explain the concept of credit rating. Write the important parameters of a company under credit rating and aim of credit rating.

Answer:It is an assessment of the credit worthiness of a borrower in general terms or with respect to a particular debt or financial obligation. A credit rating can be assigned to any entity that seeks to borrow money – an individual, corporation, state or provincial authority, or sovereign government. Credit assessment and evaluation for companies and governments is generally done by a credit rating agency such as Standard & Poor’s or Moody’s. These rating agencies are paid by the entity that is seeking a credit rating for itself or for one of its debt issues. For individuals, credit ratings are derived from the credit history maintained by credit-reporting agencies such as Equifax, Experian and TransUnion.

Credit ratings for borrowers are based on substantial due diligence conducted by the rating agencies. While a borrower will strive to have the highest possible credit rating since it has a major impact on interest rates charged by lenders, the




Q. 6. Money market is a financial instruments and financial assets that are traded. Explain the features of money markets in India. Write down the important participants of in money market.

Explanation of features of money markets in India
Important participants of money markets
Answer:The main features of Indian Money Market are as follows:

1. Dichotomy:The Indian Money market is divided between two sectors, namely organised sector and unorganised sector. There is very little cooperation and contact between them.Consequently the rate of interest in both the markets varies widely.

2. Seasonal Variations:Considering the demand f

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