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HOW TO BECOME A MERCHANT BANKER VALUER :BY-ER. AVINASH KULKARNI

Saturday Brain Storming Thought (240) 14/09/2024

MERCHANT BANKER VALUER

A Merchant Banker is a financial expert who works for a merchant bank, a financial institution that offers services to large corporations, high-net-worth individuals, and institutional investors

Merchant Banker Valuation Report Requirements

1) Income Tax

When a company issues new shares or transfers shares, or when a startup issues shares to investors

2) Regulatory Compliance

To ensure that financial assessments are accurate and transparent

3) Investment and tax decisions

To support investment and tax decisions

To become a Merchant Banker Valuer

Registered Valuer with IBBI (Insolvency Bankruptcy Board of India)

Individuals must meet eligibility criteria, pass specific examinations and have relevant experience in valuation methods

The IBBI website provides details on the registration process and qualifications

Difference between income tax registered valuer & merchant banker valuer

A income tax registered valuer shall arrive at the valuation as per Valuation Standards and Methodologies

Merchant Banker Valuer shall arrive at the valuation only using DCF method

DCF method of valuation

Discounted Cash Flow (DCF) is a valuation method that estimates the value of an investment using its expected future cash flows

Analysts use DCF to determine the value of an investment today, based on projections of how much money that investment will generate in the future

Fields for Merchant Banker Valuer

1) Valuation

Raising funds from private equity, fund raising, mergers, acquisitions

2) Financial Consulting

Offer broader financial guidance and planning

3) Long Term Funding

Equity funding or debt syndication, help to obtain both secured and unsecured loans to financial needs

4) Intermediary

They act as matchmakers in the financial world, connecting companies issuing securities (like stocks) with investors looking to buy them

5) IPO/FPO Management

Managing IPO/FPO, ensuring compliance with SEBI regulations and overseeing the entire process from prospectus preparation to final share allotment

6) Underwriting Expertise

They can act as underwriters, guaranteeing to buy unsold shares to ensure your fund raising success

Scope of Merchant Banker Valuers

1) Changing policy of financial institutions

FIs require the services of merchant banker valuer due to changing policies

2) Growth of new issues market

Both domestic and foreign investors are establishing businesses, leading to a surge in public and private issues

3) Financial Engineering

New financial instruments are constantly being innovated

4) Disinvestment

To obtain funds, companies may reduce some assets, and merchant banker valuers assist in this process

5) Corporate Restructuring

Merchant Banker Valuers help companies review their strategies, structure and operations, resulting in corporate restructuring

6) Debt Market Development

Significant capital is raised through debt instruments, leading to the development of the debt market

Importance of Merchant Banker Valuation

1) Promote the growth of the primary markets

2) Assist in purchasing securities

3) Ensure capital flow

4) Promote financial surplus

5) Coordinate activities related to share issues

6) Ensure compliance with rules and regulations

7) Help give guidance or a roadmap to a company

8) Help raise funds for small businesses and large corporations

Advantages of Merchant Banker Valuers

1) Provide investment advice

2) Have access to companies owned by dealers, financial institutions and clients

3) Aid in the distribution of profiles to investors

4) Assist in cash management and leasing operations

Disadvantages of Merchant Banker Valuers

1) Limited access to all potential products

2) Lack of control over interest rates or returns

3) Size constraints that must be met

4) No guarantee of start-up funding

Categories of Merchant Banker Valuers

1) Category I Merchant Banker Valuer

Certified by SEBI, authorized to perform a wide range of activities including issue management, portfolio management and advisory services

2) Category II Merchant Banker Valuer

These can act as advisors, consultants, co-managers and underwriters

3) Category III Merchant Banker Valuer

These can act as underwriters, advisors and consultants to an issue, they cannot act as lead managers for issue management

4) Category IV Merchant Banker Valuer

These are limited to acting as advisors or consultants to an issue, they do not engage in underwriting or issue management activities

Functions of a Merchant Banker Valuer

1) Fund raising assistance

2) Stock brokerage services

3) Project management

4) Handling public issues

5) Portfolio management

6) Advisory services

Merchant Banker Valuers Reports can be used by

1) Reserve Bank of India (RBI)

2) Securities Exchange Board of India (SEBI)

3) Stock Exchange

4) Income Tax authorities

5) Companies Act

6) Court cases

Merchant Banker Valuer can offer services for

1) Business valuation

2) ESOP accounting – Intrinsic value and black scholes

3) ESOP for taxation

4) Acquisition – Domestic & Cross Border

5) Merger – Assessment of Swap ratio

6) Fairness opinion

7) Valuation for spinoff/restructuring

8) Share purchase / investment / Fund raising

9) Good will and Asset impairment testing (US GAAP / IFRS / Indian GAAP)

10) Forensic valuations including court cases and legal proceedings

11) Valuations for Family settlements

12) Brand valuation

13) Intellectual property valuation

14) Asset valuation for purchase price allocation (US GAAP / IFRS)

15) Carried interest valuation

16) Derivative valuation under IFRS

COMPILED BY:-

Er. Avinash Kulkarni
9822011051

Chartered Engineer, Govt Regd Valuer, IBBI Regd Valuer

 

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