Merchant Banker

Career Information

Career Title
Merchant Banker


A Merchant Banker is a finance professional who acts as an intermediary between a Company and a regulator like a stock exchange, and also between a company and investors like retail investors, High Net Worth Individuals (HNI’s) or Institutional Investors. Merchant Banking is a subset of Investment banking. Merchant banking is financial activities relating to SEBI or other financial regulatory related activities. The activities encompasses a large set of functions including doing a buy back of your company shares, completing a take over of another company, or doing a public issue where a company offers its shares to the public through an authorised regulatory body like SEBI. In cases where companies do private equity deals or even in cases of strategic disinvestment along with transfer of management control, merchant bankers are advisors. So whenever a company needs permissions from SEBI, those activities are known as Merchant Banking activities. The key attributes of a merchant banker are understanding laws, sharp understanding of numbers, commercial aspects and holistic overview of businesses.

Starting Salary

What does a Merchant Banker do?
A merchant banker is actually an intermediary. She is an intermediary between the regulator (the regulator could be the SEBI or any other stock exchanges) and the company she is representing. The regulator assigns the responsibility of doing the due diligence to the Merchant Banker. Even though the best of lawyers have done the due diligence, in terms of understanding what the company has done in the past, it's the duty of the merchant banker to sign off the due diligence certificate. In this certificate the Merchant Banker has to acknowledge and declare they have seen what has been stated about the company, is true and fair and everything has been represented. So that’s one role she plays as an intermediary, between the regulator and the company. The other role that she plays is the intermediary between the company and the shareholders coming in. So she has to do the role of selling also. In that case she is playing the role of intermediary between the monied people, who could be retailers, HNI’s or institutions. As a merchant banker, you could specialize in different things. There could be some one who specializes in institutional sales, there could be some other person in the merchant banking team who specializes in High Networth Individual (HNI) sales and someone else with expertise in retail. In fact it is seen that there are many companies who just specialize in institutional sales, there are other companies who specialize in HNI sales and there are companies with specialization in retail investment. It has been observed in fund raising scenarios, there would be multiple merchant bankers acting in tandem. You would have 9-10 merchant bankers selling one single company having their own expertise and experiences come together. There are 2 markets in financial services. One is the primary market, and one is the secondary market. Merchant banking is not about the secondary market but it is about the primary market. Wherein, you are working under guidelines and regulations set by SEBI or other stock exchanges or regulatory bodies only. You have to file various documentations to get approvals for carrying out various financial activities which could be a Qualified Institutional Placement (QIP), it could be an Initial Public Offering (IPO) it could be a Follow-On Public Offer (FPO), or it could be a rights issue. All this is done under merchant banking.

What is the difference between a Merchant Banking professional and an Investment Banker?
Merchant Banking is a subset of Investment Banking. So no one proclaims to be only a Merchant Banker. She could be registered as a merchant banker because there is no registration as an Investment Banker. But when she gives her card she will give a card of investment banking only. Merchant Banking relegates you to only SEBI specific assignments. Which is like a takeover or a buyback or a public issue of a SME issue, something where you need the blessings of SEBI or a stock exchange. Investment Banking is about selling companies. It could be through an M&A, it could be through IPO, It could be through debt restructuring. Generally debt is not part of merchant banking but debt is a part of investment banking.

Why should one pursue Merchant Banking as a career opportunity?
Merchant banking is a very lucrative career opportunity for students with the acumen for finance and management. There are lots of opportunities it opens up and one can go on to become a financial analyst, investment banker, risk analyst, financial head or chief financial officer at corporations. There is a stable and consistent demand for merchant bankers and this trend looks to continue for a long time. Technology has come to be a great ally for merchant banking professionals. Professionals with Merchant banking skills and knowledge will be valuable for corporations that deal with financial data. A combination of finance, management and technology will be the winning combination for corporates and professionals with these skill sets will be in high demand.

What education do Merchant Bankers have?
For a Career in Merchant Banking, prerequisites are that you need to really work hard and you need to really work smart also. You need to be either a CA, CS or MBA to get into this field. In fact, only CS doesn't work, you need to be either an MBA or Chartered Accountant to really do well in this field. You need to be very good at networking because you need to interact with the top management. Whenever there is a dilution or fund raising, it is the top management that decides whether they want to go ahead, so a merchant banker needs to have that kind of charisma, to be able to make them trust you to hand over their fundraising. It’s like when you are becoming a parent first so you will go to the best doctor so that the baby is delivered healthy and fine. So similarly here, when you are raising an equity, so you are bringing in these people into the Company. So even the promoters are very finicky and they want to be sure that you're working with the best merchant banker for this. That is why the top 5 to 10 brands in the country tend to do really well. A CA does well in Merchant baking as a CA understands how a balance sheet is prepared or has to be presented. This is one key part as far as due diligence is concerned. An MBA course, especially one with a Majors in Finance, also covers the aspects of understanding the balance sheets and other important financial aspects of business. So if you are specifically thinking about talking merchant banking as a career, then it is better to have a combination of a CA or a CS wherein you have company laws or understanding of laws. Even a combination of CA + LLB or CS + LLB works. But the main money or the main thing happens on the selling side. So there it seems being an MBA works better.

What are some top companies in India for Merchant Banking?
KPMG, Ernst and Young LLP, Deloitte Touche Tohmatsu India LLP, ICICI Securities, DAM Capital Advisors, IIFL Securities, JM Financial Ltd, RBSA Capital Advisors LLP, Axis Capital, Edelweiss Financial Services, Credit Suisse Securities (India), Nomura Financial Advisory and Securities (India) and SBI Capital Markets are some of the top companies offering merchant banking as a service.

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