What is Merchant Banking: Definition, responsibilities, careers, and more

Merchant banking refers to a specialized area of banking that offers financial advice and solutions to individuals, corporations, and the government with a high net worth. They function slightly differently from conventional banks that are primarily involved in loans and deposits. This blog aims to provide a detailed merchant banking overview and help you understand how this can be a potential career option for you.

How does Merchant Banking work?

We learned briefly about what exactly merchant banking entails at the start of this blog. Let us now take a quick look at how it works. 

Merchant bankers essentially serve as mediators between their clients and financial markets. Their role is to assist the clients in functions like risk management, capital-raising, and investment decisions. Some of the core services they provide clients include syndication, portfolio management, financing projects, underwriting, acquisitions and mergers, and corporate restructuring. 

Functions of merchant banking

Let us now understand some of the key functions of Merchant Bankers in India. Listed below are some of the top merchant banking responsibilities:

• Assisting with organizational restructuring of corporations
• Facilitating mergers and acquisitions of companies
• Guiding portfolio companies on value enhancement
• Helping to mitigate the risks involved in business operations
• Assisting companies in raising funds via equity share issuance
• Enabling conversion of foreign currencies and foreign exchange transactions
• Helping companies go public by providing underwriting services 
• Offering expertise in financing industrial projects
• Providing corporate advisory services 
• Managing investment portfolios for high net-worth clients
• Conducting a detailed analysis of industries, sectors, market trends, and economic conditions for making informed investment decisions

How to establish a career in merchant banking?

If the above profile description of a merchant banker sounds like you and you are keen on exploring the possibility of charting out a career path for yourself in the domain, here is a step-by-step approach to how to enter merchant banking careers:

1. Get an undergraduate degree in one of the following domains – economics, accounting, finance, or business administration.

2. You may consider pursuing an advanced degree or postgraduate qualification such as a Master’s or MBA in finance or a related field of study for skill enhancement.

3. Work on earning the relevant skills and technical knowledge in tools such as Bloomberg and Excel. 

4. Also work on your soft skills such as communication, both written and verbal, to be able to convey complex financial information to customers in a more digestible way.

5. Keep securing add-on certifications in the domain, for instance, CPA, CFA, and the relevant securities licenses.

6. Work towards obtaining the desired professional experience by taking up internships or fresher roles in the finance or investment industries.

7. Build your network. Join professional associations and attend industry events to network with experts.

8. Build your niche. It could be a specialization in a specific industry or service such as capital-raising, M&A, and corporate restructuring. 

9. Stay abreast of the latest market trends and participate in continuous learning opportunities via webinars and knowledge workshops.

Benefits of merchant banking

Some of the top advantages of entering the domain and considering careers in merchant banking are listed as follows:

• Merchant bankers offer expert guidance and advice to organizations in matters like mergers, acquisitions, and investments.
• They help clients identify potential opportunities for investment and help them make informed decisions.
• They offer continual support to individuals and organizations in risk mitigation.
• They help ensure compliance with anti-money laundering laws, securities laws, and tax regulations. 
• They help conduct a thorough analysis of the risks involved in client investments.

Examples of merchant banking

To help you better understand the merchant banking job roles and how they play an integral role in the banking and finance industry, let us take a few simple examples:

Example 1: A startup tech company wishes to expand its operations in the market. A merchant banker can help in the following ways –

• Underwriting the IPO
• Ensuring compliance with laws and regulations
• Offering expert advisory services 
• Helping market the company’s shares to potential investors to generate sufficient demand 

With the help of merchant bankers, the company is likely to go public successfully, raise the desired capital, and expand its wings in the targeted market.

Example 2:  A mid-sized firm is considering acquiring a relatively smaller competitor company to increase its market share. Here’s how merchant banking can play a vital role in this scenario:

• Identifying potential targets for acquisition that best align with the company’s objectives
• Assistance in negotiating the acquisition terms
• Identifying any potential risks involved in the acquisition
• Conducting a thorough evaluation of the target to determine a fair price for the acquisition
• Helping arrange the desired financing for the acquisition to happen, for instance, equity or loans

As a result of the advice and expert guidance of the merchant banker, the company can successfully acquire its competitor and achieve its desired market share and objectives. 

Top 10 merchant banks in India

If you’re keen on kickstarting your career in merchant banking, shared below is a comprehensive list of the top 10 merchant banks in India that you can consider working with:

Axis Capital Limited

A subsidiary of Axis Bank, it offers services such as mergers and acquisitions, structured finance, equity capital markets, private equity, and institutional equities.

HDFC Bank Investment Banking

Its investment banking division offers a host of services to clients, such as debt advisory services and advice on equity capital markets.

SBI Capital Markets Limited

One of the leading investment banks in India, it is a subsidiary of the State Bank of India. Services include project advisory, capital market advice, and M&A

Avendus Capital

Serving a variety of sectors with a strong presence in the Indian capital market, the bank is renowned for its robust advisory services, including in private equity, M&A, and debt capital markets.

Motilal Oswal Investment Advisors

The company offers a host of merchant banking services such as private equity, capital market advisory, and corporate restructuring. 

ICICI Securities Limited

One of the top names in the investment banking sector, it is a subsidiary of the renowned ICICI Bank offering a wide range of services spanning institutional securities, financial advisory, investment banking, and retail and financial product distribution.

Kotak Mahindra Capital Company Limited

A subsidiary of Kotak Mahindra Bank, the bank offers M&A, capital-raising, and advisory services to clients.

JM Financial Limited

Services include M&A, corporate restructuring, capital raising, and advisory services.

Edelweiss Financial Services Limited

Serving a wide range of clients, its merchant banking services range from M&A and equity and debt financing to a host of advisory services to corporates. 

Yes Securities (India) Limited

A fully-owned subsidiary of Yes Bank, its investment banking services include debt capital markets, equity capital markets, M&A, and structured finance.

Conclusion

Does the merchant banking profile excite you? Does it sound like you? If you’re ready to take the first step to this lucrative and profitable career, enroll in the online BCom and MCom programs by Sikkim Manipal University offered online on the Online Manipal platform.

Equipping students with the necessary skills in finance and accounting, the online BCom program by Sikkim Manipal provides a strong foundation in the investment and banking industry. The MCom course builds on that foundation further, assisting students in finding the right roles for themselves in their merchant banking career trajectory.