Merchant Banking And Financial Services PDF
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Merchant Banking and Financial Services Second Edition About the Authors Madhu Vij is Professor of Finance at the Faculty of Management Studies, University of Delhi, where she has been teaching for over three decades. Her professional and teaching interests include the areas of International Finance, Risk Management, Banking and Financial Services, Corporate Finance and Accounting. She has received the Alumni Excellence Award from Shri Ram College of Commerce, University of Delhi. Dr Vij has participated and attended the Global Colloquium on ‘Participant Centered Learning’ at Harvard Business School, Boston, USA. She was on the Panel of Judges for the award of PM’s trophy for selecting the best steel plant during 2011–2013 and has also been a member of Ad-hoc Task Force, Results-Framework Document (2011–2013). Dr Vij has been an Independent Director of MOIL Limited. Currently, she is an independent director for four private limited companies. She has published several research papers in international and national journals of repute and has by national bodies like UGC, RBI, ICSSR, SAIL and Delhi University. She serves on the editorial board and is also a reviewer for several academic journals, national and international conferences. Dr Vij is actively involved in research, consultancy and training for several leading public and private Swati Dhawan is Assistant Professor at the Shri Ram College of Commerce, University of Delhi. She is a graduate from Shri Ram College of Commerce, a postgraduate from Delhi School of Economics and PhD from the Faculty of Management Studies, University of Delhi. She has a rich teaching experience of more than 10 years in the areas of Accounting and Finance in several colleges of University of Delhi and management institutes of repute like Faculty of Management Studies, Institute of Management Technology, Lal Bahadur Shastri Institute of Management, etc. She has several research papers to her credit and has presented papers in several national and international conferences. Dr Dhawan has also been a resource faculty in management development programmes at GAIL and Alchemist in the past. She has also worked as a research scholar in several ICSSR sanctioned examination. In pursuit of her personal training and development, she has successfully completed curriculum for Living program at Landmark Worldwide. Merchant Banking and Financial Services Second Edition Madhu Vij Professor of Finance Faculty of Management Studies University of Delhi Swati Dhawan Assistant Professor Shri Ram College of Commerce University of Delhi McGraw Hill Education (India) Private Limited CHENNAI McGraw Hill Education Offices Chennai NewYork St Louis SanFrancisco Auckland Bogotá Caracas Kuala Lumpur Lisbon London Madrid Mexico City Milan Montreal San Juan Santiago Singapore Sydney Tokyo Toronto McGraw Hill Education (India) Private Limited Published by McGraw Hill Education (India) Private Limited Merchant Banking and Financial Services, 2e Copyright © 2018, 2012 by McGraw Hill Education (India) Private Limited. recording, or otherwise or stored in a database or retrieval system without the prior written permission of the publishers. The program listings (if any) may be entered, stored and executed in a computer system, but they may not be reproduced for publication. This edition can be exported from India only by the publishers, McGraw Hill Education (India) Private Limited 1 18 Printed and bound in India Print Edition: 2 e-Book Edition: 10-3 Managing Director: Kaushik Bellani Director—Science & Engineering Portfolio: Vibha Mahajan Senior Portfolio Manager—B&E: Nikhil Wadhera Portfolio Manager—B&E: Shivkant Singhal Senior Manager—Content Development: Shalini Jha Production Head: Satinder S Baveja Sr. Manager—Production: Piyaray Pandita General Manager—Production: Rajender P Ghansela Manager—Production:Reji Kumar Information contained in this work has been obtained by McGraw Hill Education (India), from sources believed to be reliable. However, neither McGraw Hill Education (India) nor its authors guarantee the accuracy or completeness of any information published herein, and neither McGraw Hill Education (India) nor its authors shall be responsible for any errors, omissions, or damages arising out of use of this information. This work is published with the understanding that McGraw Hill Education (India) and its authors are supplying information but are not attempting to render engineering or other professional services. If such services are required, the assistance of an appropriate professional should be sought. Cover Printer: Visit us at: www.mheducation.co.in Dedicated To Our Mothers Contents Preface to the Second Edition xix Preface to the First Edition xxii Acknowledgements xxv Part I 1. Financial System, Markets and Services: An Overview 3 Learning Objectives 3 Financial System: An Introduction 4 Indian Financial Sector 5 An Overview of India’s Financial Services Sector 6 Merchant Banking 10 Future Challenges for Financial Services Industry 12 Summary 17 Key Terms 17 Objective Type Questions 17 Review Questions 18 Critical Thinking Exercise 19 Group Learning Exercise 19 Answers to Objective Type Questions 19 Case 20 2. Financial and Money Markets 21 Learning Objectives 21 Financial Market—Meaning and Functions 22 23 Types of Financial Assets 25 Developments in the Financial Market in India 34 Legislative Framework 35 Summary 38 Key Terms 38 Objective Type Questions 39 Review Questions 40 Critical Thinking Exercise 40 Group Learning Exercise 41 Answers to Objective Type Questions 41 Case 41 viii Contents 3. Merchant Banking 43 Learning Objectives 43 Merchant Banks 44 Registration of Merchant Bankers with SEBI 45 Merchant Banking and Investment Banking 45 Investment Banks 46 Merchant Banking in India 46 Qualities of Merchant Bankers 47 48 SEBI Regulations for Merchant Banking 49 Red Herring Prospectus (RHP) 53 Summary 56 Key Terms 56 Objective Type Questions 56 Review Questions 57 Critical Thinking Exercise 58 Group Learning Exercise 58 Answers to Objective Questions 58 Case 59 Annexure 1 60 4. Issue Management 62 Learning Objectives 62 Issue Management—Meaning and Processes 63 Different Kinds of Issuses 63 Book Building 69 Eligibility for Registration 71 Types of Investors 72 Applications Supported by Blocked Amount (ASBA) 75 IPO Grading 76 Summary 77 Key Terms 77 Objective Type Questions 77 Review Questions 78 Critical Thinking Exercise 79 Group Learning Exercise 80 Answers to Objective Questions 80 Case 81 Annexure 1 81 Annexure 2 83 5. Depository System 84 Learning Objectives 84 Depository System—An Introduction 85 ix Contents Bank and Depository—An Analogy 86 Types of Depository Accounts 87 Functions of Depository 88 Advantages of Depository System 89 Services Offered by Depository Participants 92 SDL 94 CDSL (Central Depository Services Limited) 97 SHCIL (Stock Holding Corporation of India Ltd.) 97 Legal Framework 98 Recent Developments 101 Summary 102 Key Terms 103 Objective Type Questions 103 Review Questions 104 Critical Thinking Exercise 104 Group Learning Exercise 105 Answers to Objective Questions 105 Case 106 6. Broking Services/Stock Exchange 107 Learning Objectives 107 Stock Exchanges 108 Stock Exchanges in India 108 Stock Broker 110 Sub-Brokers 111 Stock Trading System 111 Order Types and Conditions 113 Order Matching 115 Order Management 116 Trade Management 116 Clearing and Settlement 118 Settlement Agencies 119 T + 2 Rolling Settlement Cycle 121 Risks in Settlement 121 Measures for Risk Management and Containment 122 Legal Framework 122 De-Mutualization and Corporatization of Stock Exchanges 125 Insider Trading 127 Online Trading 130 AlgoTrading 132 High Frequency Trading (HFT) 133 Summary 133 Key Terms 134 x Contents Objective Type Questions 135 Review Questions 135 Critical Thinking Exercise 136 Group Learning Exercise 137 Answers to Objective Questions 137 Case 138 Part II 7. Mutual Funds 141 Learning Objectives 141 Concept of Mutual Fund 142 Organization of Mutual Fund 142 Mutual Fund Schemes 144 150 Measuring Fund Returns 152 Performance Evaluation of Mutual Fund 153 Advantages and Disadvantages of Investing in Mutual Fund 158 History of the Indian Mutual Fund Industry and Recent Developments 159 Regulation of Mutual Funds in India 162 Summary 166 Key Terms 167 Objective Type Questions 167 Review Questions 168 Review Problems 168 Critical Thinking Exercise 169 Group Learning Exercise 169 Answers to Objective Questions 170 Case 170 Annexure 1 171 8. Insurance 174 Learning Objectives 174 Basics of Insurance 175 Key Concepts in Insurance 176 Insurance—Types and Products 177 181 Underwriting—The Backbone of Insurance 182 ALM in Insurance 185 Evolution and Development of Insurance in India 187 Recent Developments 192 Summary 199 Key Terms 199
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