Top 10 Merchant Bankers in India

Who can be a Book Running Lead Manager (Merchant Banker)?

Merchant Bankers in India are involved in financial transactions that include fund raise activities, portfolio management and other activities. They operate as an intermediary between the Issuer and the Investors. SEBI (Merchant Bankers') Regulation Act, 1992 regulates the functions of merchant banking in India. An organization has to obtain a certificate of registration to act as a merchant banker.

 

What is the role of Merchant Banker and services provided?

• Underwriting

It usually involves assessing financial risk and quantifying the risk for a loan or an investment. In IPO and listing, merchant bankers have to underwrite some minimum portion of the Issue size as per the norms. In a SME IPO, 100% underwriting is compulsory; 15% has to be underwritten by the lead manager. However, in Mainboard IPOs, there is no mandatory underwriting. Merchant bankers in India charge Underwriting fee for such activities which form a part of IPO cost and expenses.

• Portfolio management

Large Institutional banks who undertake merchant banking activities also manage the investors’ portfolio funds. Portfolio management refers to managing individuals’ investments to maximize returns in within a given time horizon.  

• Raising funds through Mainboard and SME IPO

Many companies opt for raising funds by going public through listing on NSE Emerge or BSE SME on SME platform or on BSE and NSE respectively. Merchant bankers in India have a crucial role to play in the listing process. Listing involves role of many intermediaries like Underwriters, bankers, Registrars and IPO Advisors. Consultants to IPO smoothen the IPO process through their expertise and knowledge.

• Valuations

Book Running Lead Managers to the Issue are involved in various IPO process like preparation and filing of DRHP, RHP and prospectus. BRLM also structure the IPO and determine the valuation of a company based on its sector, peer average and future forecasts. IPO valuation is an important step as it determines the IPO size and the funds that a company can raise from the public. IPO pricing is also forms a part of merchant bankers’ roles and responsibilities.

• Restructuring, mergers and acquisitions

Structuring the deals for mergers and acquisitions. Merchant Bankers also act as financial intermediaries for strategic transactions like takeover and mergers.

• Project Finance

Credit Financing from banks and financial institutions. Merchant bankers tend to bridge the gap between the companies who are seeking fund raise for their projects. They assist in preparing project reports, assessing the project's viability, and determining financing patterns.

• Other Services

Merchant bankers apart from Issue management and services listed above, also provide services like leasing.

 

Here are some factors to consider for selecting the best Merchant Bankers in India

Market Share/No. of IPOs- A higher number of successfully managed IPOs usually reflects strong market presence and reliability of the merchant bankers associated with managing the Issue. A company with a visibility for IPO has to fulfill eligibility criteria as laid down under SEBI ICDR Regulations. 

Listing Gains- A merchant banker with a track record of strong listing gains can help companies achieve better value when going public. Listing gains is the difference between the Issue price and the listing price of a company listed. Usually higher GMPs which reflect high demand of the IPO among the public often result in higher listing prices. Though it should be noted that one should not rely on GMPs for making financial decisions.

Subscription- QIB, NII and Retail investors have quota under which they can subscribe for the upcoming IPOs in India. Subscription refers to the number of applications received in each category of investors against the applications offered in the Initial public offer. The no. of times an IPO is oversubscribed (demand exceeds the number of shares) is crucial for success of any IPO. Book running lead managers with strong investor base and reputation can attract more investors, increasing the chances of successful subscription.

Success Ratio- The percentage of successful IPOs or financial deals managed by the merchant banker is an important factor to be considered while choosing the Merchant Banker. A higher success ratio reflects their ability to close deals efficiently and meet client expectations.

Innovative Solutions- While selecting Merchant bankers one should consider those who offer creative and customized financial solutions, such as innovative fundraising strategies or unique advisory services that can provide a competitive edge to businesses.

Post Listing Performance- After a successful IPO, it is also important to guide the client for the next steps to be taken for a smooth transition, this measures how well companies perform in the stock market after being listed. Merchant bankers with a track record of IPO performance post-listing demonstrate their long-term support and market understanding.

Access to Anchor Investors- Merchant bankers with a strong base of anchor investors (large institutional investors who invest before an IPO opens to the public) can help secure stable and high-profile investors, boosting the IPO’s credibility and success.

Migration to Mainboard- Merchant Banker’s ability to assist SME companies to migrate to the Mainboard can be crucial for long-term growth and value creation.

 

Who are the top merchant bankers?

Merchant Bankers in India are those institutions registered with SEBI who can carry out the Issue and listing management process. Becoming a public listed entity involves various regulatory compliances, filings and approvals from the relevant stock exchanges of NSE and BSE in India. Merchant banking fee is the major part of IPO cost and expenses.

Major merchant banks in India include large financial institutions such as ICICI Securities, Axis Capital, Kotak Mahindra Capital, SBI Capital Markets, and global investment banks like Goldman Sachs, Morgan Stanley, and JPMorgan Chase etc. are the merchant banker as a IPO lead manager.

SME Merchant Bankers include Beeline Corporate Advisors, Corporate Capital Ventures, Hem Securities, Holani Consultants and others. (list of NSE and BSE SME Merchant Bankers in India).

TOP 10 SME Merchant Bankers in India

 

Why do we need merchant banking in India?

Companies who need funds, strategic arrangements like sell off and buy out needs merchant bankers for their financial transactions. Merchant Bankers provide solution to their corporate clients, facilitates fund raise for SME companies through IPOs on NSE Emerge or BSE SME platforms. Large Merchant Bankers underwrites IPOs on Mainboard.

Rights issues of shares, preferential allotment of shares, private placement of shares and debentures, and other instruments are also undertaken by them.

 

Comparison between merchant Bankers 

Appointment of lead managers to the Issue is an important step while going for IPO either on SME platform or on mainboard. One must do a complete research on performance of lead managers on various parameters like list of IPOs, listing gains of IPOs and current market performance. Anchor investors who participated in a particular merchant bakers IPO is also an important factor to consider. 

For comparing the merchant banker on the basis of above points please click on the below link Compare Merchant Bankers (ipoplatform.com) where one can compare the various famous and top Merchant bankers in India.

 

What is the role of IPO Advisor?

IPO advisors can assist a prospective IPO company whether SME or Mainboard to select the top merchant banker by analyzing various crucial factors. They also provide insights to choose merchant banker as per their sector coverage and type of investors they would bring in for success of an IPO. The IPO Advisors can provide a set of merchant bankers to work with its pros and cons and the company can choose the right merchant banker as per its suitability. IPO advisors are also known as IPO consultants in India.

IPO advisory assist in regulatory compliances of SEBI by preparing necessary documentation, fair valuation and IPO pricing for value creation of promoters. Post IPO services are also provided by IPO consultants for successful navigation of its “new public status”.

 

Conclusion 

Merchant bankers play a crucial role in the financial ecosystem of India, particularly in the context of IPOs, fundraising, mergers, acquisitions, and portfolio management. As intermediaries between issuers and investors, they provide essential services such as underwriting, valuations, project financing, and strategic advisory. Their expertise is vital for companies looking to raise capital through IPOs, whether on the mainboard or SME platforms. Selecting the right merchant banker involves evaluating key factors such as market share, subscription success, track record of listing gains, and post-listing performance.

Top merchant bankers like ICICI Securities, Axis Capital, and Kotak Mahindra Capital, along with SME-focused players like Beeline Corporate Advisors, offer tailored services that help companies navigate the complexities of going public. It is also important for businesses to work with IPO advisors to ensure compliance, accurate valuation, and a smooth IPO process. Ultimately, the right merchant banker can significantly impact the success of a company’s IPO and its long-term growth.

Whether opting for SME or mainboard IPOs, a strategic partnership with an experienced and reliable merchant banker is crucial for a successful fundraising journey.