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Financial Intermediaries: Merchant Bankers, Venture Capitalists, and Factoring, Lecture notes of Financial Market

Christ University Financial Market

A comprehensive overview of financial intermediaries, focusing on merchant bankers, venture capitalists, and factoring. It delves into the roles, features, and processes of each type of intermediary, highlighting their importance in facilitating financial transactions and supporting businesses. The document also explores the key characteristics, risks, and benefits associated with each type of intermediary, offering valuable insights for students of finance and business.

Typology: Lecture notes

2024/2025

Available from 04/09/2025

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

Unit05:FinancialIntermediaries

MerchantBankers

MerchantBankersmanage the issuanceofsecurities shares bonds debentures andprovide

corporate advisory services to their

clients

Features ofMerchantBankers

Expertise merchant bankers are expertswith specialised knowledge in areas like IPO's merge

and acquisitions andcapitalmarkets

DueDiligence merchantbankers alsoconduct duediligence on behalfoftheir clients to

evaluate feasible investments andtransactions

Fundraising theyassist

theclient companies in raising capital through IPO's Bonds an

private placements

Advisoryservices theyalso advise their clients on variousfinancialmatters like corporate

strategy restructuring andfundraising

Marketknowledge merchant bankerspossess specialised knowledge on capitalmarkets itstren

and regulation whichallowsthem to provide valuable insights and advice to theirclients

Preissue Activitiesof Merchant Bankers

Assessing FundRequirement merchant bankersassess the variousfund requirements ofthe

business along withthefinancingoptionsavailable

Preparation ofofferDocuments preparestheofferdocumentsincludingtheprospectusandother

Finishingeroadshows it markets theissue to theinvestors to raisefunds

Allocation

ofshares credits thesharesto the

demataccounts

oftheeligiblelistofinvestors

Regulatory compliance takescareofallthe approvalsrequiredfromtheregistraras wellas SEB

Companyvaluation determines thecompany sharevaluation

coordinationwith

other intermediaries coordinateswithotherintermediaries like underwriters

piiy.si

aijj detimiesin infiringiitigyto valuesnaresbased on marketdemand

PostissueActivitiesofMerchantBankers

investorRelations merchantbankers assist companies in maintaining goodrelations with

all of itsinvestors

Regulatory compliance theytake care of the regulatory compliance on behalf

oftheir

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Merchant Bankers

manage

the

issuance

of

securities shares bonds

debentures

and provide

corporate advisory

services

to their

clients

Features

of

Merchant Bankers

Expertise

merchant bankers

are expertswith

specialised knowledge in areas like

IPO's

merge

and

acquisitions andcapital

markets

Due Diligence

merchant bankers also

conduct due diligence

on behalf

of

their

clients to

evaluate

feasible

investments

and

transactions

Fundraising they

assist

the

client companies in raising capital through

IPO's Bonds an

private

placements

Advisory

services

they

also advise their

clients on

various

financial

matters

like corporate

strategy

restructuring and fundraising

Market

knowledge

merchant bankers

possess

specialised knowledge on capital

markets its tren

and regulation

which allows

them

to provide

valuable

insights

and

advice to their

clients

Pre issue

Activities

of

Merchant

Bankers

Assessing

FundRequirement

merchant bankers assess the

various

fund

requirements

of

the

business

along

with the financing

optionsavailable

Preparation

of

offer

Documents

prepares

the

offer

documents

including

the

prospectus andother

Finishing

e

roadshows

it

markets

the

issue to the

investors to raisefunds

Allocation

of

shares

credits

the

shares to the

demat

accounts

of

the eligible

list

of

investors

Regulatory

compliance takescare

of

all the

approvals requiredfromthe registrar

as well

as SEB

Company

valuation

determines

the company

sharevaluation

coordination

withother

intermediaries coordinates

with

other

intermediaries

like

underwriters

piiy.si

aijj

detimies

in

infiring

iitigy

to value

snares

based

on

market

demand

Post issueActivities

of

Merchant Bankers

investor

Relations merchantbankers assist companies in maintaining

good

relations with

all

of

its

investors

Regulatory

compliance

they

take

care

of

the regulatory compliance on behalf

of

their

clients

including

periodical

filings

and

other

disclosures

investor Education

they

may

also

conduct

investor education awareness

programes

to

educate

them regarding

IPO's

listingof

companies

merchant bankers also

takecare

of

the

listing

procedure

involved

to

list

companies on the

stock

exchanges

to allow buying

and selling

of

its

shares

Ongoing Advisory

services

they

have specialised knowledge in the

fieldof

capital

markets

corporate strategy restructuring

etc and provide

valuable

insights

and

advice to their

clients

Venture capitalists

venture

capital

is a

type

of

private equity

as it provides funding

to

innovative

startups

and

early

stage

companies in exchange

for

a

stake in

their

equity

Apart fromfunding

venture

capitalists also provide

mentorship and strategic guidance

to

these startups enabling

them to

grow

Features characteristics

High

Risk as

venturecapitalists

generally

invest in the

early

stages

of

a

business

there is high

risk due to

noprevioustrack

record

of

theprofitability

of

a company

Equity

based

investments VC's generally provide financing in exchange

for

equity

stake in the

company

Since

they

are part

owners

of

the

business

they

have

vested interest

in its

success

Long

Term

Investment

VC's

generally

invest

for

long

term and wait

for

several

years

before

gettin

returns

Active

involvement

unlike

traditionalinvestors VC's are more

hands on in the

affairs

of

the

business

They

provide

theirmentorship and strategicguidance

to

these startups to

enable them to

grow

High

Returns

as there is

high

risk

involved

VC'sexpect higher

returns

as well

limited

liquidity

venture capital

investments

are relatively illiquid

as

investors

wait

for

several

years

to

encash their

investments

smaller portfolios

VC's invest in

fewer

companies this

allows them to

focus their

attention

and

resources

on

each

investment

Focus

on

innovation VC's are

interested

to

invest

in

innovative

startups and disrupting

technologi

It

enables

the

seller to attain

immediate

cash flow

Thecompany has to no longer

monitor its

sales

ledgersand can

focus

on production

marketability

exploring

new

markets andother

business

avenues

Types

of

Factoring

Recourse

Factoring in

recourse

factoring

a factor

purchasesthe

bookdebts and

accounts receivables

of

its

business

concerns

clients

In caseone

of

the

debtors defaults

in making

the payment the

client

reimburses

the

amount to thefactor

Non

Recourse

Factoring

This

typeof

factoring

involves default risk In

case

of

a

default in payment

one

of

the

debtors

thefactor

does not get

the

amount back

fromits

clients

Oldline Factoring

Thisisalso

known

as

full

factoring as it

involves

a

spectrum

of

services

like

collection

credit

protection sales

ledger

administration

and

short term loans it

contains features

of

advanced as wellas non

recourse

factoring

Advanced

Factoring in

advance

factoring

the factor pays

a

pre

specified portion

of

the

accounts

receivable

to the clientupfront on

submission

of

certaindocuments

Matured

Factoring

no

advance

payment

is made

Instead

the

amount

is paid only

on the

guaranteed payment

date or date

of

collection

Domestic

Factoring

when all 3

factor parties

client customer factor

reside in thesame

country

Export Factoring

it

isalso

known as cross

Border factoring and

involves

an

exporter client

importer

customer

exportfactor and import

factor

This is

also

called

as a twofactorsyste

Financial Intermediaries: Merchant Bankers, Venture Capitalists, and Factoring, Lecture notes of Financial Market

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