MERCHANT BANKING SERVICES

INTRODUCTION

The function of the financial market is to facilitate the transfer of funds from surplus sectors
(lenders) to deficit sectors (borrowers). Normally, households have investible funds or savings,
which they lend to borrowers in the corporate and public sectors whose requirement of funds far
exceeds their savings. A financial market consists of investors or buyers of securities, borrowers
or sellers of securities, intermediaries and regulatory bodies. Financial market does not refer to a
physical location. Formal trading rules, relationships and communication networks for
originating and trading financial securities link the participants in the market.

Indian financial system

Indian financial system consists of money market and capital market. The Money market is
regulated and governed by RBI. The Capital market is regulated and governed by SEBI.

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The Money Market

The money market has two components - the organized and the unorganized.

Organized money market

The organized market is dominated by commercial banks. The other major participants are the
Reserve Bank of India, Life Insurance Corporation, General Insurance Corporation, Unit Trust of
India, Securities Trading Corporation of India Ltd., Discount and Finance House of India, other
primary dealers, commercial banks and mutual funds. The core of the money market is the inter-
bank call money market whereby short-term money borrowing/lending is affected to manage
temporary liquidity mismatches. The Reserve Bank of India occupies a strategic position of
managing market liquidity through open market operations of government securities, access to
its accommodation, cost (interest rates), availability of credit and other monetary management
tools. Normally, monetary assets of short-term nature, generally less than one year, are dealt in
this market.

Un-organized money market

Despite rapid expansion of the organized money market through a large network of banking
institutions that have extended their reach even to the rural areas, there is still an active
unorganized market. It consists of indigenous bankers and moneylenders. In the unorganized
market, there is no clear demarcation between short-term and long-term finance and even
between the purposes of finance. The unorganized sector continues to provide finance for trade
as well as personal consumption. The inability of the poor to meet the "creditworthiness"
requirements of the banking sector make them take recourse to the institutions that still remain
outside the regulatory framework of banking. But this market is shrinking.

The Capital market

The capital market consists of Primary and Secondary (stock) markets. The primary market deals
with the issue of new instruments by the corporate sector such as equity shares, preference shares
and debt instruments. Central and State governments, various public sector industrial units
(PSUs), statutory and other authorities such as state electricity boards and port trusts also issue
bonds/debt instruments.

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The primary market in which public issue of securities is made through a prospectus is a retail
market and there is no physical location. Offer for subscription to securities is made to investing
community. The secondary market or stock exchange is a market for trading and settlement of
securities that have already been issued. The investors holding securities sell securities through
registered brokers/sub-brokers of the stock exchange. Investors who are desirous of buying
securities purchase securities through registered broker/sub-broker of the stock exchange. It may
have a physical location like a stock exchange or a trading floor. Since 1995, trading in securities
is screen-based and Internet-based trading has also made an appearance in India.

Earlier, the secondary market consists of 24 stock exchanges. Now, there are mainly two
exchanges NSE and BSE. Others are demutualised with NSE. The secondary market provides a
trading place for the securities already issued, to be bought and sold. It also provides liquidity to
the initial buyers in the primary market to re-offer the securities to any interested buyer at any
price, if mutually accepted. An active secondary market actually promotes the growth of the
primary market and capital formation because investors in the primary market are assured of a
continuous market and they can liquidate their investments.

Capital Market Participants

There are several major players in the primary market. These include the merchant bankers,
mutual funds, financial institutions, foreign institutional investors (FIIs) and individual investors.
In the secondary market, there are the stock exchanges, stockbrokers (who are members of the
stock exchanges), the mutual funds, financial institutions, foreign institutional investors (FIIs),
and individual investors. Registrars and Transfer Agents, Custodians and Depositories are capital
market intermediaries that provide important infrastructure services for both primary and
secondary markets.

National Stock Exchange(NSE)

The National Stock Exchange commenced its operations in 1994 as a first step in reforming the
securities market through improved technology and introduction of best practices in
management. It started with the concept of an independent governing body without any broker
representation thus ensuring that the operators’ interests were not allowed to dominate the
governance of the exchange.

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The NSE introduced screen-based trading system (SBTS) where a member can punch into the
computer the quantities of shares and the prices at which he wants to transact. The transaction is
executed as soon as the quote punched by a trading member finds a matching sale or buys quote
from counter party. SBTS electronically matches the buyer and seller in an order-driven system
or finds the customer the best price available in a quote-driven system, and hence cuts down on
time, cost and risk of error as well as on the chances of fraud. SBTS enables distant participants
to trade with each other, improving the liquidity of the markets. The high speed with which
trades are executed and the large number of participants who can trade simultaneously allows
faster incorporation of price-sensitive information into prevailing prices. This increases the
informational efficiency of markets. With SBTS, it becomes possible for market participants to
see the full market, which helps to make the market more transparent, leading to increased
investor confidence. The NSE started nation-wide SBTS, which have provided a completely
transparent trading mechanism.

Gala is a practice of extracting highest price of the day for "buy" transaction irrespective of the
actual price at which the purchase was actually done and give lowest price of the day for "sell"
transactions irrespective of the price at which sale was made. The clients did not have any
method of verifying the actual price. The electronic and now fully online trading introduced by
the NSE has made such manipulation difficult. It has also improved liquidity and made the entire
operation more transparent and efficient.

The NSE has set up a clearing corporation to provide legal counter party guarantee to each trade
thereby eliminating counter party risk. The National Securities Clearing Corporation Ltd.
(NSCCL) commenced operations in April 1996. Counter party risk is guaranteed through fine
tuned risk management systems and an innovative method of on-line position monitoring and
automatic disablement. Principle of "innovation" is implemented by NSE capital market
segment. Under this principle, NSCCL is the counter party for every transaction and, therefore,
default risk is minimized. To support the assured settlement, a "settlement guarantee fund" has
been created. A large settlement guarantee fund provides a cushion for any residual risk. As a
consequence, despite the fact that the daily traded volumes on the NSE run into thousands of
crores of rupees, credit risk no longer poses any problem in the marketplace.

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Capital Market Intermediaries

There are several institutions, which facilitate the smooth functioning of the securities market.
They enable the issuers of securities to interact with the investors in the primary as well as the
secondary arena.

Merchant Bankers

Among the important financial intermediaries are the merchant bankers. The services of
merchant bankers have been identified in India with just issue management. It is quite common
to come across reference to merchant banking and financial services as though they are distinct
categories. The services provided by merchant banks depend on their inclination and resources -
technical and financial. Merchant bankers (Category I) are mandated by SEBI to manage public
issues (as lead managers) and open offers in take-over’s. These two activities have major
implications for the integrity of the market. They affect investors' interest and, therefore,
transparency has to be ensured. These are also areas where compliance can be monitored and
enforced. Merchant banks are rendering diverse services and functions. These include organizing
and extending finance for investment in projects, assistance in financial management, raising
Eurodollar loans and issue of foreign currency bonds. Different merchant bankers specialize in
different services. However, since they are one of the major intermediaries between the issuers
and the investors, their activities are regulated by:(1) SEBI (Merchant Bankers) Regulations,
1992.(2) Guidelines of SEBI and Ministry of Finance.(3) Companies Act, 1956.(4) Securities
Contracts (Regulation) Act, 1956.

Credit Rating Agencies

The 1990s saw the emergence of a number of rating agencies in the Indian market. These
agencies appraise the performance of issuers of debt instruments like bonds or fixed deposits.
The rating of an instrument depends on parameters like business risk, market position, operating
efficiency, adequacy of cash flows, financial risk, financial flexibility, and management and
industry environment.

The objective and utility of this exercise is two-fold. From the point of view of the issuer, by
assigning a particular grade to an instrument, the rating agencies enable the issuer to get the best

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price. Since all financial markets are based on the principle of risk/reward, the less risky the
profile of the issuer of a debt security, the lower the price at which it can be issued. Thus, for the
issuer, a favorable rating can reduce the cost of borrowed capital.

From the viewpoint of the investor, the grade assigned by the rating agencies depends on the
capacity of the issuer to service the debt. It is based on the past performance as well as an
analysis of the expected cash flows of a company, when viewed on the industry parameters and
performance of the company. Hence, the investor can judge for himself whether he wants to
place his savings in a "safe" instrument and get a lower return or he wants to take a risk and get a
higher return.

Stock Brokers

Stockbrokers are the intermediaries who are allowed to trade in securities on the exchange of
which they are members. They buy and sell on their own behalf as well as on behalf of their
clients. Traditionally in India, partnership firms with unlimited liabilities and individually owned
firms provided brokerage services. Therefore, restrictions on the amount of funds they could
raise by way of debt. With increasing volumes in trading as well as in the number of small
investors, lack of adequate capitalization of these firms exposed investors to the risks of these
firms going bust and the investors would have no recourse to recovering their dues. With the
legal changes being effected in the membership rules of stock exchanges as well as in the capital
gains structure for stock-broking firms, a number of brokerage firms have converted themselves
into corporate entities. In fact, NSE encouraged the setting up of corporate broking members and
has today only 10% of its members who are not corporate entities.

Custodians

In the earliest phase of capital market reforms, to get over the problems associated with paper
based securities, large holding by institutions and banks were sought to be immobilized.
Immobilization of securities is done by storing or lodging the physical security certificates with
an organization that acts as a custodian - a securities depository. All subsequent transactions in
such immobilized securities take place through book entries. The actual owners have the right to
withdraw the physical securities from the custodial agent whenever required by them. In the case
of IPO, a jumbo certificate is issued in the name of the beneficiary owners based on which the

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depository gives credit to the account of beneficiary owners. The Stock Holding Corporation of
India Limited (SHCIL) was set up to act as a custodian for securities of a large number of banks
and institutions who were mainly in the public sector. Some of the banks and financial
institutions also started providing "Custodial" services to smaller investors for a fee. With the
introduction of dematerialization of securities there has been a shift in the role and business
operations of Custodians. But they still remain an important intermediary providing services to
the investors who still hold securities in physical form.

Mutual Funds

Mutual funds are financial intermediaries, which collect the savings of small investors and invest
them in a diversified portfolio of securities to minimize risk and maximize returns for their
participants. Mutual funds have given a major filliped to the capital market - both primary as
well as secondary. The units of mutual funds, in turn, are also tradable securities. Their price is
determined by their net asset value (NAV), which is declared periodically.

Depositories

The depositories are important intermediaries in the securities market that is scrip-less or moving
towards such a state. In India, the Depositories Act defines a depository to mean, "A company
formed and registered under the Companies Act, 1956 and which has been granted a certificate
of registration under sub-section (IA) of section 12 of the Securities and Exchange Board of
India Act, 1992." The principal function of a depository is to dematerialize securities and enable
their transactions in book-entry form.

Dematerialization of securities occurs when securities issued in physical form are destroyed and
an equivalent number of securities are credited into the beneficiary owner's account. In a
depository system, the investors stand to gain by way of lower costs and lower risks of theft or
forgery, etc. They also benefit in terms of efficiency of the process. But the implementation of
the system has to be secure and well governed. All the players have to be conversant with the
rules and regulations as well as with the technology for processing. The intermediaries in this
system have to play strictly by the rules.

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A depository established under the Depositories Act can provide any service connected with
recording of allotment of securities or transfer of ownership of securities in the record of a
depository. A depository cannot directly open accounts and provide services to clients. Any
person willing to avail of the services of the depository can do so by entering into an agreement
with the depository through any of its Depository Participants.

The services, functions, rights and obligations of depositories, with special reference to NSDL
are provided in the letter section of this Workbook.

Depository Participants

A Depository Participant (DP) is described as an agent of the depository. They are the
intermediaries between the depository and the investors. The relationship between the DPs and
the depository is governed by an agreement made between the two under the Depositories Act,
1996. In a strictly legal sense, a DP is an entity who is registered as such with SEBI under the
provisions of the SEBI Act. As per the provisions of this Act, a DP can offer depository related
services only after obtaining a certificate of registration from SEBI.

SEBI (D&P) Regulations, 1996 prescribe a minimum net worth of Rs. 50 lakh for the applicants
who are stockbrokers or non-banking finance companies (NBFCs), for granting a certificate of
registration to act as a DP. If a stockbroker seeks to act as a DP in more than one depository, he
should comply with the specified net worth criterion separately for each such depository. If an
NBFC seeks to act as a DP on behalf of any other person, it needs to have a net worth of Rs. 50
crore. in addition to the net worth specified by any other authority. No minimum net worth
criterion has been prescribed for other categories of DPs. However, depositories can fix a higher
net worth criterion for their DPs. NSDL stipulates a minimum net worth of Rs. 100 lakh to be
eligible to become a DP as against Rs. 50 lakh prescribed by SEBI (D&P) Regulations

INTRODUCTION TO SECURITIES

Security analysis and portfolio management require discipline and patience, and the work is not
always rewarded by exceptional returns. We propose that investors are interested primarily in
eventually selling a security for more than they paid for it. Including the receipt of interest or
dividends during the time the security is held, the investor hopes to achieve a higher reward than

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would have been possible by simply placing the same amount of money in a savings account.
This reward or return must be measured and estimated for each security being considered, with
appropriate adjustments for decision making costs.

But in seeking rewards that exceed those available on savings accounts, every investor,
consciously or not, faces the very real risk that his hoped – for return will fall short of his
expectations. Risk means the uncertainty in the profitability distribution of returns. This aspect of
investing insecurities must also be measurable and estimated for each security being considered.

The entire process of estimating return and risk for individual securities is known as security
analysis.

Traditionally analysts have attempted to identify undervalued securities to buy, and overvalued
securities to sell. Modern day thinking strongly influenced by the efficient market hypothesis –
sometimes popularly called the random walk theory –questions the validity of or benefit to be
derived from traditional security analysis.Briefly stated, the concept of market efficiency means
that stock prices nearly always fully reflect all available information. If this is so, it would be
exceedingly difficult for the average investor or analyst to earn exceptional returns – particularly
on a consistent basis. In fact, the only way for the analyst in such a market to achieve superior
performance is by having (1) access to “secret” or “inside” information (2) superior analytical
tools (3) superior forecasting abilities.

Traditional investment analysis, when applied to securities, emphasizes the projection of prices
and dividends. That is, the potential price of a firm’s common stock and the future dividend
stream are forecast, and then discounted back to the present. This intrinsic value is then
compared with the security’s current market price. If the current market price is below the
intrinsic value, a purchase is recommended and vice –versa.

INVESTMENT CATEGORIES

Investments generally involve real assets or financial assets. Real assets are tangible, material
things such as buildings, automobiles, and textbooks. Financial assets are pieces of paper
representing an indirect claim to real assets held by someone else. These pieces of paper
represent debt or equity commitments in the form of IOU’s or stock certificates.

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Among the many properties that distinguish real from financial assets, one of special interest to
investors is liquidity. Liquidity refers to the ease of converting an asset into money quickly, and
at little exchange cost. Real assets are generally less liquid than financial assets, largely because
real assets are more heterogeneous, often peculiarly adapted to a specific use. Financial assets
can be categorized into:

Debentures

These are issued by companies and regulated under the SEBI guidelines of June 11, 1992. These
are issued under a prospectus, which has to be approved by SEBI like in the case of equity
issues. The rights of investors as debenture holders are governed by the Companies Act, which
prohibits the issue of debentures with voting rights. There are a large variety of debentures that is
available. This includes: Participating debentures, Convertible debentures with options, Third
party convertible debentures, Debt/equity swaps, Zero coupon convertible notes, Secured
premium notes, Zero interest fully convertible debentures, fully convertible debentures with
interest, partly convertible debentures.

Bonds

Indian Development Financial Institutions (DFIs) in India, like IDBI, ICICI and IFCI have been
raising capital for their operations by issuing bonds. These include: Income bonds, Tax-free
bonds, Capital gains bonds, Deep discount bonds, Infrastructure bonds, Retirement bonds

In addition to the interest rates and maturity profiles of these instruments, the issuer institutions
have been including a put/call option on especially the very long-dated bonds like deep discount
bonds. Since the tenures of some of these instruments spanned some 20 or 25 years during which
the interest rate regimes may undergo a complete change, the issuers have kept the flexibility to
retire the costly debt. This they do by exercising their option to redeem the securities at pre-
determined periods like at the end of five or seven years.

Preference Shares

As the name suggests, owners of preference shares enjoy a preferential treatment with regard to
corporate actions like dividend. They also have a higher right of repayment in case of winding up
of a company.

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Preference shares have different features and are accordingly available as: Cumulative and non-
cumulative, Participating, Cumulative & Redeemable fully convertible to preference shares,
Cumulative & Redeemable fully convertible to equity shares, Preference shares with warrants,
Preference shares

Equity Shares

As the name indicates, these represent the proportionate ownership of the company. This right is
expressed in the form of participation in the profits of the company. There has been some
innovation in the way these instruments are issued. Some hybrid securities like equity shares
with detachable warrants are also available.

Government Securities

The Central Government or State Governments issue securities periodically for the purpose of
raising loans from the public. There are two types of Government Securities - Dated Securities
and Treasury Bills. Dated Securities have a maturity period of more than one year. Treasury Bills
have a maturity period of less than or up to one year. The Public Debt Office (PDO) of the
Reserve Bank of India performs all functions with regard to the issue management, settlement of
trade, distribution of interest and redemption. Although only corporate and institutional investors
subscribe to government securities, individual investors are also permitted to subscribe to these
securities. An investor in government securities has the option to have securities issued either in
physical form or in book-entry form (commonly known as Subsidiary General Ledger [SGL]
form). There are two types of SGL facilities, viz., SGL-1 and SGL-2. In the SGL-1 facility, the
account is opened with the RBI directly. There are several restrictions on opening SGL-1
accounts and only entities, which fulfill all the eligibility criteria, are permitted to open SGL-1
account. The RBI has permitted banks, registered primary dealers and certain other entities like
NSCCL, SHCIL and NSDL to provide SGL facilities to subscribers. A subscriber to government
securities who opts for SGL securities may open an SGL account with RBI or any other
approved entity. Investments made by such approved entity on its own account are held in SGL-
1 account and investments held on account of other clients are held in SGL-2 account.

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COMPANY PROFILE

Background and inception of the company

Indbank Merchant Banking Services Limited [Indbank] had its genesis as a Merchant Banking
Division of Indian Bank in 1982 to provide specialized Merchant Banking & allied services. The
division had managed 133 issues for an aggregate value of Rs.2250 crore between 1982 & 1989.
The division was also involved in investor education programs in various centers across the
country.

Indbank was incorporated as a wholly owned Subsidiary of Indian Bank in 1989 to take over the
business of Merchant Banking division of Indian Bank & to undertake other specialized
activities like Leasing, Hire Purchase etc which banks were permitted to undertake only through
their subsidiaries. Indbank was one among the few subsidiaries to be formed by nationalized
banks for undertaking Merchant Banking & allied services.

Incorporation and Certificate of commencement of business

Indbank was incorporated on 11th August 1989 & obtained certificate of registration bearing No.
18-17883 of 1989 from the Registrar of Companies, Tamilnadu. Indbank obtained certificate for
commencement of business from the Registrar of Companies, Tamilnadu on 17th August 1989.

Promoters

Indbank was promoted by Indian Bank, which was among the first native banks to be
incorporated in south India in 1907. Indian Bank was nationalized in 1969. Indian Bank is also
the promoter of Indian Bank Mutual Fund [trusts] for mutual fund activities, Indbank Housing
Limited [along with HUDCOs] & Indfund Management limited [asset management Comp. for
Indian Bank mutual funds].

Management

Indbank is managed by President & Whole Time Director under the supervision of Board of
Directors of company. The President & Whole Time Director is assisted by Executive Vice

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President, Vice President's, Asst. Vice President's, Senior Project Executive, Project Executives,
Senior Secretarial Officers and Secretarial Officers.

Board of
Directors

Shri. Anup SankarExecutive Director, Indian Bank

Bhattacharya

Shri. M K NarayanIPS (Retd) National Security Advisor Government of India

Shri. T M Nagarajan
Former Whole Time Member of SEBI

Shri Sri Ramanan

General Manager, Indian Manager

Shri G Rangarajan
President & Whole Time Director

Nature of the business carried

Indbank has Registered & Corporate Office at Chennai & branches at Mumbai, Chennai, Delhi,
Bangalore, Coimbatore, Ahmadabad, Tirunelveli, Madurai, Hyderabad & Puducherry where the
fee based activities are carried on.

1. Merchant Banking and Advisory Services

Indbank is a Category 1 Merchant Banker registered with SEBI. Indbank undertakes:

a. Acting as Merchant Bankers: Under various capacities like Lead Manager, Co-Manager,
Advisor, Arranger etc. for public issues, rights issues & private placement.

b. For acquisition of shares and takeovers under Securities Exchange Board of India [Substantial
Acquisition of shares & Takeover’s] Regulations, 1997, Securities Exchange Board of India
[Buyback of Securities] Regulations, 1998 & Securities Exchange Board of India [De-listing of
Securities] Guidelines, 2003.

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c. For Employee Stock Option Scheme / Stock Purchase Scheme by Corporates under the
Securities Exchange Board of India [Employee Stock Option Scheme & Employee Stock
Purchase Schemes], Guidelines, 1999.

Advisory Services

a. Valuation of shares and other financial instruments, b.Syndication of Loans , c.Stock Audit ,
d. Mergers and Amalgamations ,e. Project Counseling, appraisal & feasibility studies

Under Merchant Banking, Indbank is governed by SEBI [Merchant Bankers Rules], 1992, SEBI
[Merchant Bankers] Regulations, 1992, Guidelines issued to Merchant Bankers & Lead
Managers prior to issue of codified RBM [GI Series], SEBI Guidelines, Rules & Regulations
primarily governing companies & the relevant circulars issued by SEBI from time to time.

2. Stock Broking

Indbank is a SEBI registered member National Stock Exchange of India [NSEs], Madras Stock
Exchange [MSEs] & Over the Counter Exchange of India [OTCEIs]. At present Stock Broking is
done only through NSE as virtually no activity takes place in MSE & OTCEI.

Under broking, Indbank is governed by SEBI [Stock Brokers and Sub Brokers] Rules, 1992,
SEBI [Stock Brokers and Sub Brokers] Regulations, 1992, SEBI Circulars & Circulars issued by
Stock Exchanges from time to time.

3. Depository Participant Activities

Indbank is a SEBI registered Depository Participant with National Securities and Depository
Limited [NSDLs] & is governed by Depositories Act 1996, SEBI [Depositories and Participants]
Regulations, 1996 & circulars issued by SEBI & NSDL from time to time.

4. Distribution of Mutual Fund & other Investment products

As part of broking, Indbank distributes Mutual Fund & investment products & is registered with
the Association of Mutual Funds of India [AMFIs] for distribution of Mutual Fund products.

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VISION

Be the most preferred, socially responsible and profitable merchant bank in the country

MISSION

 To provide an optimum return to shareholders by maximizing the return on equity

 To provide business solutions that adds value to clients’ business ventures and ensures
their continuous growth in wealth
 To create a pleasant work environment for employees through training, empowerment
and recognition of good performance.
 To be a socially responsible organization that maintains high standards of business ethics
and to have good corporate governance practices.

COMPANY’S PHILOSOPHY
The Company firmly believes in transparency, professionalism, accountability, risk management
and code of ethics, which are the fundamental principles of Corporate Governance. The company
will constantly endeavor to improve on these aspects on an ongoing basis.

SERVICES

Indbank, under one roof, offers a truly comprehensive range of financial services at one-stop
shop by having a breed of professionals drawn from various disciplines form the core, ably
supported by the cumulative experience of personnel at Indian bank offices all over the country,
backed by the most sophisticated communication network for instant access to information and
constant updations. The services include

 Merchant Banking and Corporate Advisory Services

 Stock Broking
 Online Trading
 Depository Participant Activities
 Distribution of Mutual Funds and other Investment products

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Equity
Instruments

Corporate
Advisory
Debt
Instruments

Indbank
Financial
Restructurin
g&
Compliance
Loan
Syndication

Institutiona
l
Broking

Merchant Banking and Corporate Advisory Services

Indbank is a Category 1 Merchant Banker registered with Securities Exchange Board of India
(SEBI) undertaking assignments
 Under various capacities like Lead Manager, Co-Manager, Advisor, Arranger etc. for
public issues, rights issues and private placement.
 For acquisition of shares & takeovers under SEBI (Substantial Acquisition of shares and
Takeovers) Regulations, 1997, SEBI (Buyback of Securities) Regulations, 1998 and
SEBI (De-listing of Securities) Guidelines, 2003.
 For Employee Stock Option Scheme / Stock Purchase Scheme by Corporate under the
SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme),
Guidelines, 1999.

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Merchant banking today has become so complex and sophisticated in nature that it’s truly multi-
faceted. Indbank has identified the major areas of services and has assigned specialist personnel
to each

 Management of Equity & Debt Issues

 Rights /Public issues
 IPOs/Offer for sale of equity-through fixed price/book building routes, obtaining
clearances for the same and drafting prospectus
 Compliance with Pre and Post issue requirements
 Underwriting
 Liaison with brokers and bankers
 ESOP/ESOS issues
 Private Placements of debt for banks, FIIs, industrial houses
 Venture Capital Tie-Ups
 Corporate Advisory service
 Valuation of shares & other financial instruments
 Capital restructuring
 Delisting
 Buyback
 Efficiency improvement studies
 Mergers and Acquisitions
 Identification of opportunities
 Evaluation of prospects
 Negotiations and working out of mechanics
 Documentation
 Managing open offers
 Loan Syndication
 Sourcing of Finance
 Detailed Project Appraisals
 Preparation of Information Memorandum
 Application for Assistance

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 Negotiation of Terms and Documentation

 Project Counseling
 Collaboration Arrangement
 Detailed Project Appraisals
 Financial Closure
 Assistance in Project Implementation

Stock Broking

Indbank is a SEBI registered member of National Stock Exchange of India (NSE), Madras
Stock Exchange (MSE) and Over The Counter Exchange of India (OTCEI). Indbank currently
operates in the Cash & Wholesale Debt Market Segments of NSE for both retail and institutional
investors.

Indbank is one amongst very few subsidiaries of nationalized banks who have entered into
Stock Broking activity.

Indbank is an empanelled broker for major financial institutions and banks.

The website of Indbank is www.indbankonline.com, which provides a host of market

information like quotes, indices, economy, industry and corporate news, and provides facilities
for creating client’s own portfolio, posting client’s queries etc.

Online Trading

To enable the customer to trade from anywhere under the Internet based trading system,
Indbank had recently launched a powerful and user-friendly Online trading facility, which is
completely safe and secure. The facility is designed to provide an expedient and seamless trading
experience. (www.indbankonline.com -> online trading -> login)

Indbank uses robust software, which utilizes highest levels of encryption standards to guard
against intrusion. The software has many user friendly features to enable the Indbank Online
Trading Client perform several functions over the Internet, including:

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 View the market information

 Enter / Modify / Cancel the Orders
 View Order and trade status
 View the portfolio and cash balance information
 View transaction history
 Use of information price ticker
 Online Alerts for client’s activities
 Hyperlinks to other services such as market historical information, exchange web sites,
news, charting and a host of other value added features.
 Access to digital contracts for trades that are executed and to back office accounts.
Indbank Merchant Banking Services Limited has entered into an agreement with Indian Bank
for the provision of online trading facilities to the customers of Indian Bank. For availing this
facility the customer has to open a net banking account and demat account with Indian Bank or
Indbank and online trading account with Indbank Merchant Banking Services Limited. This
would enable the customer to trade from anywhere under the Internet based trading system. This
will benefit all customers having account with CBS branches of Indian Bank for undertaking
stock market operations.

Depository Participant Activities

Indbank is a SEBI registered Depository Participant with NSDL, since 1998, and is governed by
the Depositories Act 1996, SEBI (Depositories & Participants) Regulations, 1996 and circulars
issued by SEBI and NSDL from time to time.

Demat is a safe and convenient way to hold securities eliminating the risks associated with
physical certificates like bad deliveries, fake securities, delays, thefts etc facilitating faster
transactions. Indbank offers demat services through its network of offices.

Distribution of Mutual Fund and other Investment products

Indbank distributes Mutual Fund and investment products and is registered with the Association
of Mutual Funds of India (AMFI) for distribution of mutual Fund products. Indbank offers this
service through its network of offices.

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 MERCHANT BANKING SERVICES

Area of operation : Office Networks (Locations)

S.No Location Type Address

1 Registered Khivraj Complex 1, 1st Floor, 480, Anna Salai, Nandanam,

Office Chennai (Madras), Tamil Nadu – India, Pin: 600035

2 Corporate Office No.2 (Old No. 26.27), 3rd Floor, Krest Building, Chennai
(Madras), Tamil Nadu – India Pin: 600001

3 Branch Office 3rd floor Raja Annamalai Bldg. 19 Marshall’s Road, Chennai
(Madras), Tamil Nadu – India, Pin: 600008.

4 Branch Office Upper Ground Floor World Trade Centre Babar Road, New
Delhi, Delhi – India, Pin: 110001

5 Branch Office Verma Chambers, Ground Floor, 11, Homiji Street, Fort,
Mumbai – 400 001.

6 Branch Office 5th floor, Premchand House Avenue 172/1 High Court Way
Ahmedabad, Gujarat – India, Pin: 380009

7 Branch Office 1st floor 29 Infantry Road, Bangalore, Karnataka - India

Pin:560001

8 Branch Office 5th floor 3-6-237 "Lingapur House" Block No.503 Himayat
Nagar Hyderabad, Andhra Pradesh – India, Pin: 500029

9 Branch Office Raheja Centre, 205,206 ‘A’ Block, II Floor, 1073 & 1074
Avinashi Road, Coimbatore 641 018.

Competitor’s information

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 MERCHANT BANKING SERVICES

India bulls
SKS Micro fin
Edelweiss Cap
Motilal Oswald F
India Info line
Delta Corp
Network 18
Future Capital
Geojit BNP
Kirloskar Broth

Milestones
 Progressive merchant banker with notable progress made in short span of period- more than
1000 clients served till date.
 Business built on strong relationships, innovation, and uncompromising ethical standards.
 Multi-disciplinary professionals with a collective banking and corporate finance advisory
experience of more than two decades.
 Excellent & intensely focused Transaction-closure orientation approach.
 Well entrenched relationships nurtured at the highest levels within the investor community,
market intermediaries and the corporate sector.
 Commitment to high standards of delivery & value creation timelines
 Enviable record of successful Relationships.
 Perpetual client engagement and advisory support
 Customer centric approach+ Enviable solutions+ Right capitalization strategy = Growth

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 MERCHANT BANKING SERVICES

Work flow model (Trading mechanism)

NSE carried the trading platform to the PCs at the residence of investors through the Internet and to
handheld devices through WAP for convenience of mobile investors. This made a huge difference in
terms of equal access to investors in a geographically vast country like India. The trading network is
depicted in NSE has main computer which is connected through Very Small Aperture Terminal
(VSAT) installed at its office. The main computer runs on a fault tolerant STRATUS mainframe
computer at the Exchange. Brokers have terminals (identified as the PCs in the Figure 1) installed at
their premises which are connected through VSATs/leased lines/modems. An investor informs a broker
to place an order on his behalf. The broker enters the order through his PC, which runs under Windows
NT and sends signal to the Satellite via VSAT/leased line/modem.

The signal is directed to mainframe computer at NSE via VSAT at NSE's office. A message relating to
the order activity is broadcast to the respective member. The order confirmation message is
immediately displayed on the PC of the broker. This order matches with the existing passive order(s),
otherwise it waits for the active orders to enter the system. On order matching, a message is broadcast
to the respective member. The trading system operates on a strict price time priority. All orders
received on the system are sorted with the best priced order getting the first priority for matching i.e.,
the best buy orders match with the best sell order. Similar priced orders are sorted on time priority
basis, i.e. the one that came in early gets priority over the later one. Orders are matched automatically
by the computer keeping the system transparent, objective and fair. Where an order does not find a
match, it remains in the system and is displayed to the whole market, till a fresh order comes in or the
earlier order is cancelled or modified.

The trading system provides tremendous flexibility to the users in terms of kinds of orders that can be
placed on the system. Several time-related (good till cancelled, good till day, immediate or cancel),
price-related (buy/sell limit and stop loss orders) or volume related (all or none, minimum fill, etc)
conditions can be easily built into an order. The trading system also provides complete market
information on-line. The market screens at any point of time provide complete information on total
order depth in a security, the five best buys and sells available in the market, the quantity traded during
the day in that security, the high and the low, the last traded price, etc. Investors can also know the fate
of the orders almost as soon as they are placed with the trading members. Thus the NEAT system
provides an Open Electronic Consolidated Limit Order Book (OECLOB). Limit orders are orders to

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 MERCHANT BANKING SERVICES

buy or sell shares at a stated quantity and stated price. If the price quantity conditions do not match, the
limit order will not be executed. The term “Limit Order Book” refers to the fact that only limit orders
are stored in the book and all market orders are crossed against the limit orders sitting in the book.
Since the order book is visible to all market participants, it is termed as an ‘Open Book’.

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 MERCHANT BANKING SERVICES

Balance Sheet ------------------- in Rs. Cr. -------------------

  Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

  12 mths 12 mths 12 mths 12 mths 12 mths

Sources Of Funds
Total Share Capital 44.39 44.38 44.38 44.38 44.38
Equity Share Capital 44.39 44.38 44.38 44.38 44.38
Share Application Money 0.00 0.00 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00 0.00 0.00
Reserves -29.08 -7.89 18.87 7.75 6.10
Revaluation Reserves 0.00 0.00 0.00 0.00 0.00
Networth 15.31 36.49 63.25 52.13 50.48
Secured Loans 42.08 17.90 0.00 0.00 0.00
Unsecured Loans 0.00 0.00 0.00 0.00 0.00
Total Debt 42.08 17.90 0.00 0.00 0.00
Total Liabilities 57.39 54.39 63.25 52.13 50.48
  Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

  12 mths 12 mths 12 mths 12 mths 12 mths

Application Of Funds
Gross Block 65.43 63.82 48.22 41.54 32.48
Less: Accum. Depreciation 54.91 54.17 38.06 34.47 25.65
Net Block 10.52 9.65 10.16 7.07 6.83
Capital Work in Progress 0.00 0.00 0.00 0.00 0.00
Investments 13.37 12.12 25.62 12.55 13.32
Inventories 3.12 1.06 0.44 0.39 0.00
Sundry Debtors 4.29 8.54 6.02 4.44 10.34
Cash and Bank Balance 2.93 3.56 4.47 4.42 5.07
Total Current Assets 10.34 13.16 10.93 9.25 15.41
Loans and Advances 35.19 33.42 39.01 33.10 28.29
Fixed Deposits 0.87 0.96 0.94 6.39 3.59
Total CA, Loans & Advances 46.40 47.54 50.88 48.74 47.29
Deffered Credit 0.00 0.00 0.00 0.00 0.00
Current Liabilities 12.77 14.77 15.46 12.03 16.39

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 MERCHANT BANKING SERVICES

Provisions 0.13 0.15 7.94 4.19 0.56

Total CL & Provisions 12.90 14.92 23.40 16.22 16.95
Net Current Assets 33.50 32.62 27.48 32.52 30.34
Miscellaneous Expenses 0.00 0.00 0.00 0.00 0.00
Total Assets 57.39 54.39 63.26 52.14 50.49

Contingent Liabilities 19.16 30.31 11.70 15.78 37.26

Book Value (Rs) 3.45 8.22 14.25 11.75 11.37

Profit &
Loss ------------------- in Rs. Cr. -------------------
account

  Ma '06 Mar '07 Mar '08 Mar '09 Mar '10

12mth
  12 mths 12 mths 12 mths 12 mths
s

Income
Sales Turnover 6.79 25.77 48.17 9.24 18.65
Excise Duty 0.00 0.00 0.00 0.00 0.00
Net Sales 6.79 25.77 48.17 9.24 18.65
Other Income 0.13 -0.20 -1.45 -4.61 3.30
Stock Adjustments 0.00 0.00 0.00 0.00 0.00
Total Income 6.92 25.57 46.72 4.63 21.95
Expenditure
Raw Materials 0.00 0.00 0.00 0.00 0.00
Power & Fuel Cost 0.00 0.00 0.00 0.00 0.00
Employee Cost 1.33 1.33 1.76 2.55 3.72
Other Manufacturing Expenses 0.00 0.00 0.00 0.00 0.00
Selling and Admin Expenses -0.78 -0.38 -0.81 -0.36 0.54
Miscellaneous Expenses 0.89 1.03 1.37 1.51 1.78
Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.00
Total Expenses 1.44 1.98 2.32 3.70 6.04
  Mar'06 Mar '07 Mar '08 Mar '09 Mar '10

12mth
  12 mths 12 mths 12 mths 12 mths
s

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 MERCHANT BANKING SERVICES

Operating Profit 5.35 23.79 45.85 5.54 12.61

PBDIT 5.48 23.59 44.40 0.93 15.91
Interest 0.00 0.00 5.06 0.00 12.50
PBDT 5.48 23.59 39.34 0.93 3.41
Depreciation 1.99 1.67 1.24 1.27 1.10
Other Written Off 0.00 0.00 0.00 0.00 0.00
Profit Before Tax 3.49 21.92 38.10 -0.34 2.31
Extra-ordinary items 0.00 -0.50 0.00 -0.52 0.00
PBT (Post Extra-ord Items) 3.49 21.42 38.10 -0.86 2.31
Tax 1.45 0.25 3.55 6.37 3.96
Reported Net Profit 2.04 21.17 34.55 -7.23 -1.65
Total Value Addition 1.43 1.98 2.31 3.70 6.04
Preference Dividend 0.00 0.00 0.00 0.00 0.00
Equity Dividend 0.00 0.00 6.66 3.33 0.00
Corporate Dividend Tax 0.00 0.00 1.13 0.57 0.00
Per share data (annualised)
Shares in issue (lakhs) 443.78 443.78 443.78 443.78 443.78
Earning Per Share (Rs) 0.46 4.77 7.79 -1.63 -0.37
Equity Dividend (%) 0.00 0.00 15.00 7.50 0.00
Book Value (Rs) 3.45 8.22 14.25 11.75 11.37

Key Financial Ratios ------------------- in Rs. Cr. -------------------

  Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

Investment Valuation Ratios

Face Value 10.00 10.00 10.00 10.00 10.00
Dividend Per Share -- -- 1.50 0.75 --
Operating Profit Per Share (Rs) 1.21 5.36 10.33 1.25 2.84
Net Operating Profit Per Share (Rs) 1.53 5.81 10.85 2.08 4.20
Free Reserves Per Share (Rs) -6.55 -1.78 4.25 1.75 1.37
Bonus in Equity Capital -- -- -- -- --
Profitability Ratios
Operating Profit Margin(%) -- -- 95.20 -- 67.61
Profit Before Interest And Tax
-- -- 92.57 -- 60.14
Margin(%)

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 MERCHANT BANKING SERVICES

Gross Profit Margin(%) -- -- 92.63 -- 61.73

Cash Profit Margin(%) -- -- 77.32 -- -17.51
Adjusted Cash Margin(%) 59.03 91.38 77.32 7.71 -17.51
Net Profit Margin(%) 29.02 81.83 71.68 -66.22 -8.63
Adjusted Net Profit Margin(%) -- -- 71.68 -- -8.63
Return On Capital Employed(%) -- -- 70.59 -- 23.78
Return On Net Worth(%) 13.33 58.02 54.62 -- -3.27
Adjusted Return on Net Worth(%) 14.10 60.22 56.96 -0.81 -8.81
Return on Assets Excluding
2.91 8.22 14.25 11.75 11.37
Revaluations
Return on Assets Including
2.91 8.22 14.25 11.75 11.37
Revaluations
Return on Long Term Funds(%) 6.29 40.86 70.59 11.41 23.78
Liquidity And Solvency Ratios
Current Ratio 3.60 3.19 2.17 3.00 2.79
Quick Ratio 1.38 1.45 1.11 1.97 2.14
Debt Equity Ratio 2.75 0.49 -- -- --
Long Term Debt Equity Ratio 2.75 0.49 -- -- --
Debt Coverage Ratios
Interest Cover -- -- 8.82 -- 0.96
Total Debt to Owners Fund 2.75 0.49 -- -- --
Financial Charges Coverage Ratio -- 47.16 9.06 1.22 1.05
Financial Charges Coverage Ratio
-- 46.66 8.07 -0.43 0.96
Post Tax
Management Efficiency Ratios
Inventory Turnover Ratio 2.26 24.49 -- -- --
Debtors Turnover Ratio 1.38 4.02 6.62 1.77 2.52
Investments Turnover Ratio -- 0.65 110.09 23.56 --
Fixed Assets Turnover Ratio 0.64 2.61 -- -- --
Total Assets Turnover Ratio -- -- 0.76 0.18 --
Asset Turnover Ratio 0.10 0.41 1.01 0.23 0.59
 
Average Raw Material Holding -- -- -- -- --
Average Finished Goods Held -- -- -- -- --
1,777.2
Number of Days In Working Capital 455.54 205.38 1,266.40 585.64
6
Profit & Loss Account Ratios
Material Cost Composition -- -- -- -- --
Imported Composition of Raw
-- -- -- -- --
Materials Consumed
Selling Distribution Cost Composition 1.55 0.67 0.62 1.59 1.00
Expenses as Composition of Total -- -- -- -- --

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Sales
Cash Flow Indicator Ratios
Dividend Payout Ratio Net Profit -- -- 22.54 -- --
Dividend Payout Ratio Cash Profit -- -- 21.76 -65.33 --
Earning Retention Ratio 100.00 100.00 78.39 -- --
Cash Earning Retention Ratio 100.00 100.00 79.11 -362.30 --
AdjustedCash Flow Times 10.13 0.76 -- -- --

  Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

Earnings Per Share 0.46 4.77 7.79 -1.63 -0.37

Book Value 3.45 8.22 14.25 11.75 11.37

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 MERCHANT BANKING SERVICES

Board of Directors

President & Whole Time Director

Executive Vice President

Vice Presidents
Core Team

Asst. Vice President

Sr. Project Executive/ Project Executive

Sr. Secretarial Officer/ Secretarial Officer

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