MF0017 - MERCHANT BANKING AND FINANCIAL SERVICES

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ASSIGNMENT

DRIVE	WINTER 2014
PROGRAM	MBADS – (SEM 4/SEM 6) / MBAN2 / MBAFLEX – (SEM 4) / PGDFMN – (SEM 2)
SUBJECT CODE & NAME	MF0017 - MERCHANT BANKING AND FINANCIAL SERVICES
SEMESTER	4
BK ID	B1815
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 concept of merchant banking. Give a small introduction on book building and write about the methods and guidelines for book building.

Ans :Concept of merchant banking  :

Merchant Banking is a combination of Banking and consultancy services. It provides consultancy to its clients for financial, marketing, managerial and legal matters. Consultancy means to provide advice, guidance and service for a fee. It helps a businessman to start a business. It helps to raise (collect) finance. It helps to expand and modernize the business. It helps in restructuring of a business. It helps to revive sick business units. It also helps companies to register, buy and sell shares at the stock exchange. In short, merchant banking provides a wide range of services for starting until running a business. It acts as Financial Engineer for a business.

The functions of merchant banking are listed as follows:

1. Raising Finance for Clients
2. Broker in Stock Exchange

Q.2 Explain the whole concept of issue management which includes pre-issue and post issue management.

Ans :Introduction of issue management :

Issues or issue management refers to the systematic examination of an organization (usually companies, public authorities, political parties, associations, etc.), with their environmental concerns. It's about the public to identify emerging, organization relevant issues early and to react accordingly. This can be through participation in shaping public opinion or done by adapting the organization policy. In addition, an organization also includes measures to bring subjects even in the public debate, the issue management. The term is also used in the project management and the software testing is used. There are, for example, the problem management , the task of management or the management and processing of reported errors so designated.

Pre-issue management :

Q.3 Financial services are of several kinds. Financial services are divided into two extensive categories. Explain in detail both the categories of financial services.

Ans : A. Fund based financial services:

1. These Involve provision of funds against assets, bank deposits, etc.

2.Fund based income comes mainly from interest spread (the difference between the interest earned and interest paid), lease rentals, income from investments in capital market and real estate

3. Major part of the income is earned through fund-based activities. At the same time, it involves a large share of expenditure also in the form of interest and brokerage.

1.Equipment leasing :

A lease is an agreement under which a company or a firm acquires a right to make use of a capital asset like machinery, on payment of a prescribed fee called „rental charges‟. Long-term.

Q.4 Give the difference between Bank Vs Depository. Explain the functions performed by depository.

Ans : Differences between bank and depository :

On the simplest level, depository is used to refer to any place where something is deposited for storage or security purposes. More specifically, it can refer to a company, bank or an institution that holds and facilitates the exchange of securities. Or a depository can refer to a depository institution that is allowed to accept monetary deposits from customers. Central security depositories allow brokers and other financial companies to deposit securities where book entry and other services can be performed, like clearance, settlement and securities borrowing and lending. On the other hand ,

A bank is a financial institution and a financial intermediary

Q.5 Give the introduction of leasing with an example. Explain all the four types of leasing.

Ans : Introduction of  leasing with example  :

Leasing is a process by which a firm can obtain the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax deductible payments.

The lessee is the receiver of the services or the assets under the lease contract and the lessor is the owner of the assets. The relationship between the tenant and the landlord is called a tenancy, and can be for a fixed or an indefinite period of time (called the term of the lease). The consideration for the lease is called rent.

Example:

Suppose the AB company takes a new automobile on lease for three year. Also assume that at the end of three years the AB company will be called to take the ownership of vehicle at no extra cost. Here not only the vehicle is taken on lease but also the AB company is using the lease agreement as a means of financing the automobile.

Explanation all the four types of leasing :

Q.6 Write about the concept of securitization and its features . Explain the process of securitization of debts and its advantages.

Ans : Introduction of securitization :

Securitization is the financial practice of pooling various types of contractual debt, such as residential mortgages, commercial mortgages, auto loans, or credit card debt obligations, and selling said consolidated debt as pass-through securities, or collateralized mortgage obligation (CMOs) to various investors. The cash collected from the financial instruments underlying the security is paid to the various investors who had advance money for that right. Securities backed by residential mortgage receivables are called residential-mortgage-backed securities (RMBS), while those backed by other types of receivables are asset-backed securities.

Features of securitization  :

1. Marketability:

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