III SEMESTER/II YEAR BA 5011 MERCHANT BANKING AND FINANCIAL SERVICES

UNIT-I

PART-A

1. Merchant banking

A Merchant bank is a financial institution primarily engaged in internal finance

and long term loans for multinational corporations and governments. It can also be used
to describe the private equity activities of banking. Merchant banks tend to advise
corporations and wealthy individuals on how to use their money. The advice varies from
counsel on mergers and acquisitions to recommendation on the type of credit needed. The
job of generating loans and initiating other complex financial transactions has been taken
over by investment banks and private equity firms.

2. Merchant banker
Securities and Exchange Board of India (Merchant Bankers) Rules, 1992 ― A
merchant banker has been defined as any person who is engaged in the business of issue
management either by making arrangements regarding selling, buying or subscribing to
securities or acting as manager, consultant, adviser or rendering corporate advisory
services in relation to such issue management.

3. Financial system
It is a system for the efficient management and creation of finance. According to
Robinson, financial system provides a link between savings and investment for the
creation of new wealth and to permit portfolio adjustment in the composition of the
existing wealth. According to Van Horne, financial system is defined as the purpose of
financial markets to allocate savings efficiently in an economy to ultimate users – either
for investment in real assets or for consumption.

4. OTCEI
OTCEI • Over the Counter Exchange of India • It is a Stock Exchange without a
proper trading floor All stock exchanges have a specific place for trading their securities
through counters. But, OTCEI is connected through a computer network and the
transactions are taking place through computer operations. Thus, the development in
information technology has given scope for starting this type of stock exchange. This
stock exchange is recognized under the Securities Contract ( Regulation) Act and so all
the stocks listed in this exchange enjoy the same benefits as other listed securities enjoy.

S.PAVITHRA AP/MBA
III SEMESTER/II YEAR BA 5011 MERCHANT BANKING AND FINANCIAL SERVICES

5. Definition Of Underwriting

Underwriting is a guarantee given by the underwriters to take up whole or part of

the issue of securities not subscribed by the public. It is a marketing technique where by
corporate enterprises are able to sell their securities to the public and thereby achieve
success in the public issue.

6. Prospectus

A document through which public are solicited to subscribe to the share capital of a
corporate entity is called prospectus. The purpose of a prospectus issued under the
provisions of the Companies Act,1956, is to invite the public for the
subscription/purchase of any securities(shares/debentures)of a company.

7. Stock Exchange

Stock exchanges provide an organized marketplace for the investors to buy and
sell securities freely. The market offers perfectly competitive conditions where a large
number of sellers and buyers participate.

8. Portfolio Manager

According to SEBI portfolio manager who exercises or may under a contract

relating to portfolio management exercises any degree of discretion as to the investments
or management of the portfolio of securities or the funds of the client as the case may be.

9. Portfolio Management

It refers to the effective management of securities i.e., the merchant banker helps
the investor in matters pertaining to investment decisions. taxation and inflation are taken
into account while advising on investment in different securities.

10. Book Building

Book building is actually a price discovery method in this method the company does not
fix up particular price for the shares but instead gives a price range e.g. Rs 80-100. Based on
the demand and supply of the shares the final price is fixed.

11. Primary Market

Primary market also known as new issues market for raising fresh capital in the form of
shares and debentures. corporate enterprises which are desirous of raising capital funds

S.PAVITHRA AP/MBA
III SEMESTER/II YEAR BA 5011 MERCHANT BANKING AND FINANCIAL SERVICES

through the issue of securities approach the primary market issuers exchange financial
securities for long term funds

12. SERA

Securities Contracts(Regulation) Act, 1956.The Securities Contracts(Regulation) Act, 1956 a

lso known as SCRA is an Act of the Parliament of India enacted to prevent
undesirable exchanges in securities and to control the working of stock exchange in India. It
came into force on February 20, 1957.

13. FEMA

The (Foreign Exchange Management Act, 1999 ) (FEMA) is an Act of the Parliament of
India "to consolidate and amend the law relating to foreign exchange with the objective of
facilitating external trade and payments and for promoting the orderly development and
maintenance of foreign exchange market in India".

14. Capital market

A capital market is a financial market in which long-term debt (over a year) or equity-
backed securities are bought and sold.[6] Capital markets channel the wealth of savers to
those who can put it to long-term productive use, such as companies or governments making
long-term investments.

15. Money market

The money market is where financial instruments with high liquidity and very short
maturities are traded. It is used by participants as a means for borrowing and lending in the
short term, with maturities that usually range from overnight to just under a year.

16. functions of merchant banking

 corporate counseling
 project counseling
 issue management
 portfolio management
 capital restructuring

17. SEBI Regulations On Merchant Banking

 Registration of merchant banker
 Responsibilities of merchant banker
 Procedure for inspection
 Procedure for action in of default
18. structure of Indian financial system
 financial institutions

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III SEMESTER/II YEAR BA 5011 MERCHANT BANKING AND FINANCIAL SERVICES

 financial instruments
 financial services
19. Portfolio management
Portfolio management refers to minimizing the risk and maximizing return. The term
portfolio management can be applied only to shares and debentures. Merchant bankers
render portfolio management services to their customer and help the investors to choose
right type of securities which is safe and ensures liquidity and profitability.

20. Mergers and takeover

The term merger means combination of two companies in the manner such that only one
company survives and other goes of existence Takeover refers to the purchase of a
company and in the process acquiring and controlling interest to the share capital of
another existing company.

.PART –B

1. Briefly explain the financial structure of India

2. What is mean by capital market? And what are the constituent of capital market and
explain its function?
3. Explain the recent development and challenges faced by merchant banking in India.
4. Explain the merchant banking relations with stock exchange.
5. Explain the regulatory framework under which merchant banking operate.
6. Define merchant banking. Explain its advantages and disadvantages
7. Explain the frame work under which merchant banking operate.
8. Explain the important of stack exchange in India.
9. Explain the amendments to SEBI regulations, 1992.
10. Differentiate between primary market and secondary market.

S.PAVITHRA AP/MBA
III SEMESTER/II YEAR BA 5011 MERCHANT BANKING AND FINANCIAL SERVICES

UNIT II - ISSUE MANAGEMENT

Part-A

1. Definition of capital structure

According to Weston and Brigham “capital structure is the permanent financing of the
firm, represented primarily by long term debt preferred stock and common equity but
excluding all short term credit.

2. Green shoe option

The term green shoe came from the green shoe manufacturing company, founded in
1919. It was the first company to implement the green shoe clause into their underwriting
agreement.

The legal term for the green shoe is over-allotment option because in addition to the
shares originally offered shares are set aside for underwriters.

3. Bought out deals

A bought out deal is a process by which an investor buys out a significant portion of the
equity of an unlisted company with a view to make it public within an agreed time frame.

4. Meaning –mutual funds

A mutual fund is a professionally managed type of collective investment scheme that

pools money from many investors and invests typically in investment securities(stocks,
bonds, short-term money market instruments ,other mutual funds other securities and
commodities).

5. OFF shore issues

An offshore is an bank located outside the country of residence of the depositor, typically
in a low tax jurisdiction or tax haven that provides financial and legal advantages.

 Greater privacy
 Low or no taxation
 Easy access to deposits

6. Equity share
Equity shares are earlier known as ordinary shares or common shares. Equity
shareholders are the real owners of company as they have the voting and enjoy decision
making authority on important matters related to company.

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III SEMESTER/II YEAR BA 5011 MERCHANT BANKING AND FINANCIAL SERVICES

7. Preference share
Preference capital represents hybrid form of financing it par takes some characteristics of
equity and some distributes of debentures.
Preference dividend is not a tax-deductible payment
.
8. Debenture
A debenture is an instrument issued by the company under this common seal
acknowledging a debt and setting forth the term under which they are issued are to be
paid.

9. Initial public offer

Initial Public Offering (IPO), also referred to simply as a “public offering”, is the first
sale of stock by a private company to the public. IPOs are often issued by smaller,
younger companies seeking capital to expand, but can also be done by large privately-
owned companies looking to become publicly traded

10. Follow on public offer

A follow on public offer is and issue made by company that as already gone public and
listed its shares through a ipo. Therefore ,any public issue or an offer for sale that made
after the initial public offer an FPO.

11. Rights issue

Rights issue involves selling securities in the primary market by issuing rights to the
existing share holders. When company issues additions equity capital it has to be offered
in the first in stands to the existing share holders on a pro rata basis

12. Offer for Sale

By offer for subscription, or direct offer, which is a public invitation by the issuing company
itself? the offer can be made at a price that fixed it advance or it can be by tender where investors
state the price they are prepared to pay.

13. Private Placement

A private placement is a capital raising event that involves the sale of securities to a
relatively small number of select investors. Investors involved in private placements can
include large banks, mutual funds, insurance companies and pension funds

14. Advertising strategies

SEBI issued guidelines in 1993 to ensure that the advertisement are fair and clear do not
come statements to mislead the investors to imitate their judgment. All lead managers are
expected to ensure that is companies strictly observe the code of advertisement set out in
the guidelines.

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III SEMESTER/II YEAR BA 5011 MERCHANT BANKING AND FINANCIAL SERVICES

15. NRI Marketing

Non resident Indian means a person resident outside india who is a citizen of india or is a
person of Indian origin.
The term NRI also includes companies partnership firms, trusts societies and other
corporate bodies

16. Post Issue Management

 Collection application forms,
 Deciding allotment procedures,
 Mailing allotment letters,
 Share certificates and refund order

17. Book building process

 Eligibility
 Earmarking securities
 Draft prospectus
 Appointment of book runner
 Price setting
 Underwriting
 Bank account
 Allotment
 Listing
 Inspection

18. Issue Pricing

One of the most important challenges for a merchant banker in a public offering.
Appropriate issue price only ensure success of the issue but provide good returns to the
proactive investors as well.

19. Types Of Green Shoe Option

 Full green shoe option
 Partial green shoe option
 Reverse green shoe option

20. Selection of bankers

 Registrars to the issue
 Bankers of the issue
 Underwriters
 Brokers
 Advertising consultants
 Printers

S.PAVITHRA AP/MBA
III SEMESTER/II YEAR BA 5011 MERCHANT BANKING AND FINANCIAL SERVICES

PART-B

1. Explain the role of merchant bankers in appraisal of project.

2. Discuss the designing of capital structure and its instruments
3. Explain the selection of bankers
4. Discuss the placement of issue
5. Explain the SEBI guidelines of post issue management.
6. Explain the process o book building process
7. Explain about marketing strategies and advertising strategies in merchant banker
8. Explain post issue management steps
9. Briefly explain the SEBI guidelines for post issue management.
10. Explain pre issue management steps in merchant banker.

S.PAVITHRA AP/MBA
III SEMESTER/II YEAR BA 5011 MERCHANT BANKING AND FINANCIAL SERVICES

UNIT III - OTHER FEE BASED MANAGEMENT

1. Meaning –Merger
A type of business combination where two or more firms amalgamate into one single
form is known as a merger.
Forms of merger
1. Merger through absorption
Under the absorption mode of merger a combination of two or more companies into an
existing company takes place.
2. Merger through consolidation
Under the consolidation mode of merger two or more companies merge into a new
company.

2. Meaning –Acquisition
The term acquisition is used to refer to the act of acquiring of ownership right in the
property and assets of another company and there by bringing about change in the
management of the acquiring company.

3. Credit Syndication
A project financing services offered by merchant bankers whereby financial facilities are
organized and procured from financial institutions, banks, or other lending agencies is
known as credit syndication service.

4. Credit Rating
According to standard & poor‟s credit ratings help investors by providing an easily
recognizable simple tool that couples a possibly unknown issuer with an informative and
meaningful symbol of credit quality.

5. Domestic Credit Rating Agencies;

CRISIL: CREDIT RATING AND INFORMATION SERVICES OF INDIA.
ICRA; INVESTMENT INFORMATION AND CREDIT RATING AGENCY OF INDIA
LIMITED.
CARE: CREDIT ANALYSIS AND RESEARCH.

6. Mutual Funds
Mutual funds are corporations that accept money from severs and then use this money to
buy stocks, long term bonds and short term debt instruments issued by business or
government units these corporations pool funds and thus reduce risk by diversifications.

7. Types of mutual funds

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III SEMESTER/II YEAR BA 5011 MERCHANT BANKING AND FINANCIAL SERVICES

7 common types of mutual funds

 Money market funds. These funds invest in short-term fixed income securities such as
government bonds, treasury bills, bankers' acceptances, commercial paper and certificates
of deposit.
 Fixed income funds.
 Equity funds
 Balanced funds.
 Index funds.
 Specialty funds.
 Fund-of-funds.
 Diversify by investment style

8. Steps of merger
 Defining the corporate strategy
 Implementing the corporate strategy
 Target identification
 Evaluation of the merger
 Merger implementation
 Post merger integration

9. Conglomerate merger
A merger between firms that are involved in totally unrelated business activities. There
are two types of conglomerate mergers: pure and mixed. Pure conglomerate mergers
involve firms with nothing in common, while mixed conglomerate mergers involve firms
that are looking for product extensions or market extensions.

10. Concentric merger

A concentric merger, often called a congeneric merger, is the merging of firms that
operate in the same industry but do not have a mutual relationship (such as a buyer-seller
relationship). In a merger, one firm maintains its existence as a corporation while
effectively absorbing the other firm, typically after offering substantial compensation and
a continued presence in the corporation.

11. Reasons OF Merger

 Economies of scale
 Operating economies
 Synergy
 Growth
 Diversification
 Increase in value
 Economy necessity

12. Steps involved in takeovers

 Manage the pre-acquisition phase
 Screen candidates
 Evaluate the remaining candidates

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III SEMESTER/II YEAR BA 5011 MERCHANT BANKING AND FINANCIAL SERVICES

 Determine the mode of acquisition

 Manage the post acquisition

13. Responsibilities of portfolio manager

The portfolio manage shall file with the board a coy of the disclosure document before it
is circulated or issued to any person and every six months thereafter or whenever any
material change is effected there in which ever is earlier along with the certificate in form.

14. Asset management company

An asset management company (AMC) is a company that invests its clients' pooled funds
into securities that match declared financial objectives. Asset management companies
provide investors with more diversification and investing options than they would have by
themselves. AMCs manage mutual funds, hedge funds and pension plans, and these
companies earn income by charging service fees or commissions to their clients.

15. Trustee
A trustee is a person or firm that holds and administers property or assets for the benefit
of a third party. A trustee may be appointed for a wide variety of purposes, such as in the
case of bankruptcy, for a charity, for a trust fund or for certain types of retirement plans or
pensions.
16. Open ended schemes
Subscriptions are received by offering units or shares a continuing basis there is no fixed
redemption periods in open ended schemes which can be terminated whenever need is
arises.
17. Close ended schemes
A closed-end fund (CEF) or closed-ended fund is a collective investment model based on
issuing a fixed number of shares which are not redeemable from the fund. Unlike open-
end funds, new shares in a closed-end fund are not created by managers to meet demand
from investors.
18. Giltfunds
Gilt funds seek to invest in government securities (gilts). While these can be short-term
securities, a good number are long-term gilts. Income fund, on the other hand, is a broad
category that represents funds that invest in a combination of bonds, certificates of
deposits, commercial paper as well as gilts.
19. Evaluating mutual fund performance
 Sharpe‟s ratio
 Treynor‟s measure
 Jensen measure
 Modigliani and modigliani measure
20. Business valuation
Business valuation is a process and a set of procedures used to estimate the economic
value of owners in business valuation is used by financial market participants to determine
the price they willing to receive to consummate a sale of a business
PART-B
1. Discuss the term merger. What are the reasons for merger?

S.PAVITHRA AP/MBA
III SEMESTER/II YEAR BA 5011 MERCHANT BANKING AND FINANCIAL SERVICES

2. Differentiate between merger and acquisitions.

3. What are the factors considered for choosing mutual funds?
4. Explain the SEBI guidelines for mutual funds.
5. What is business valuation? What are the approaches for business valuation?
6. Explain the types and factors of credit rating?
7. Write short note on:
Structure of mutual fund.
Merger and acquisitions.
8. Briefly explain about credit rating agencies?
9. Explain the evaluating methods of mutual fund performance?
10. Explain business valuation procedures.
UNIT-4
UNIT IV - FUND BASED FINANCIAL SERVICES

Part-A
1. Definition- Leasing
According to the institute of chartered accountants of India,” a lease is agreement where
by the leaser conveys to the lessee, in return for rent the right to use an asset for an agreed
period of time.
2. Meaning –Finance Lease
A financial lease is a lease that transfers substantially all the risks and rewards incident to
ownership of an asset title may or may not eventually be transferred.
3. Meaning-Operating Lease
An operating lease is any other type of lease where by the asset is not fully amortized
during the non cancelable period of the lease and where the lesser does not rely on the
lease rentals for profits.
4. Meaning –Hire Purchase
Hire purchase is the legal term for a contract in this persons usually agree to pay for
goods in parts or a percentage at a time.

5. Types of lease agreements

(a) Financial lease
(b)Operating lease.
(c) Sale and lease back
(d) Leveraged leasing and
(e) Direct leasing.
6. Sale And Lease Back
It is a sub-part of finance lease. Under this, the owner of an asset sells the asset to a party
(the buyer), who in turn leases back the same asset to the owner in consideration of lease
rentals. However, under this arrangement, the assets are not physically exchanged but it
all happens in records only. This is nothing but a paper transaction.

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III SEMESTER/II YEAR BA 5011 MERCHANT BANKING AND FINANCIAL SERVICES

7. Leveraged Leasing
Under leveraged leasing arrangement, a third party is involved beside lessor and lessee.
The lessor borrows a part of the purchase cost (say 80%) of the asset from the third party
i.e., lender and the asset so purchased is held as security against the loan.
8. Direct Leasing
Under direct leasing, a firm acquires the right to use an asset from the manufacturer
directly. The ownership of the asset leased out remains with the manufacturer itself. The
major types of direct lessor include manufacturers, finance companies, independent lease
companies, special purpose leasing companies etc

9. NPV
Net present value (NPV) is the difference between the present value of cash inflows and
the present value of cash outflows over a period of time. NPV is used in capital
budgeting to analyze the profitability of a projected investment or project.
10. IRR
Internal rate of return (IRR) is a metric used in capital budgeting to estimate the profitability of
potential investments. Internal rate of return is a discount rate that makes the net present value
(NPV) of all cash flows from a particular project equal to zero.
11. Challenges facing the leasing industry
 Funding
 Eroding tax benefits
 Regulatory environment changes
12. Down payment
A down payment is a type of payment made in cash during the onset of the purchase of
an expensive good or service. The payment typically represents only a percentage of the
full purchase price; in some cases, it is not refundable if the deal falls through.
13. Net cash price
Net cash is the result of a company's total cash minus total liabilities reported on
financial statements and is commonly used in evaluating a company's cash flows.Net
cash also refers to the amount of cash remaining after a transaction has been completed
and all associated charges and deductions have been subtracted
14. Hire purchaser
A hire purchaser is the people who buy goods through installment payments over time. Under
a hire purchase contract, the buyer is leases the goods and does not obtain ownership until the
full amount of the contract is paid.
15. Consumer installment
Consumer credit is a debt that a person incurs when purchasing a good or service.
Consumer credit includes purchases obtained with credit cards, lines of credit and some
loans. Consumer credit is also known as consumer debt. Consumer credit is divided into

S.PAVITHRA AP/MBA
III SEMESTER/II YEAR BA 5011 MERCHANT BANKING AND FINANCIAL SERVICES

two classifications: revolving credit and installment credit. The most common form
consumer credit is a credit card.
16. Industrial and commercial credit
A commercial and industrial (C&I) loan is any type of loan made to a business or
corporation as opposed to an individual. Commercial and industrial loans can be made in
order to provide either working capital or to finance capital expenditures like machinery
or a piece of equipment. This type of loan is usually short-term in nature and is almost
always backed by some sort of collateral.
17. Hire purchase price
A hire purchase (HP) or known as installment plan in the United States is an
arrangement whereby a customer agrees to a contract to acquire an asset by paying an
initial installment (e.g. 40% of the total) and repays the balance of the price of the asset
plus interest over a period of time.
18. Hire purchase and lease difference
In a lease, ownership lies with the lessor. The lessee has the right to use the equipment
and does not have the option to purchase. Whereas in hire purchase, the hirer has the
option to purchase. The hirer becomes the owner of the asset/equipment immediately
after the last installment is paid.
19. Financial evaluation
Lessee’s Point of View:
(Lease or Buy/Lease or Borrow Decisions):
Once a firm has evaluated the economic viability of an asset as an investment and
accepted/selected the proposal, it has to consider alternate methods of financing the
investment. However, in making an investment, the firm need not own the asset. It is
basically interested in acquiring the use of the asset.

20. Advantages and disadvantages of hire purchase

Advantages
Interest free credit
Higher acceptance rates
Debt solutions
Disadvantages
Personal debt
Final payment
Bad credit
PART-B

1.what are the features and advantages of leasing?

2. explain the financial evaluation of leasing?
3. what are the elements and types of leasing?

S.PAVITHRA AP/MBA
III SEMESTER/II YEAR BA 5011 MERCHANT BANKING AND FINANCIAL SERVICES

4. Discuss the challenges faced by leasing industry

5. what are the rights of hirer and vendors?
6. Differentiate between leasing and hire purchase.
7. Explain the financial evaluation of hire purchase
8. Advantages and disadvantages of leasing
9. Advantages and disadvantages of hire purchasing
10.Explain the leasing process.

UNIT-5

UNIT V - OTHER FUND BASED FINANCIAL SERVICES

PART-A

1. Define Consumer Finance

According to E.R.A. Seligman, an authority on consumer finance,” the term consumer
credit refers to a transfer of wealth the payment of which is deferred in whole or in part to
future and is liquidated piecemeal or in successive fractions under a plan agreed upon at
the time of the transfer.
2. Meaning-Real Estate Financing
A set of all financial arrangements that are made available by housing finance institutions
to meet the requirements of housing is called „Real estate financing‟.
3. Meaning –Credit Card
Credit cards provide convenience and safety to buying process. credit cards enable an
individual to purchase certain products services without paying immediately. The buyer
only needs to present the credit card at the cash counter and to sign the bill.
4. Definition- Bill Discounting
According to the Indian negotiable instrument act 1881”Bill of exchange is an instrument
in writing containing an unconditional order, signed by the maker directing a certain
person to pay a certain sum of money only to or to the order of a certain person or to the
bearer of the instrument”.
5. Definition –Factoring
The term factoring as “a continuing legal relationship between a financial institution and
a business concern selling goods or providing services to trade customers, whereby the
factor purchases the clients book debts, either with or without recourse to the client and in
relation there to controls the credit extended to customers ,and administers the sales
ledger”.
6. Meaning-Forfeiting

S.PAVITHRA AP/MBA
III SEMESTER/II YEAR BA 5011 MERCHANT BANKING AND FINANCIAL SERVICES

In trade finance, forfeiting involves the purchasing of receivables from exporters. The
forfeiter takes on all risks involved with the receivables. It is different from the factoring
operation in the sense that forfeiting is a transaction based operation while factoring is a
firm based operation.
7. Meaning –Venture Capital
Venture capital is provided as seed funding to early –state high potential growth
companies and more often after the seed funding round as growth funding round in the
interest of generating return through an eventual realization event such as an ipo or trade
sale of the company.
8. Disclosed Factoring
In disclosed factoring, client‟s customers are aware of the factoring agreement. With
many businesses now having to wait up to 30 (and in some case even 90!) days for
invoices to be paid, it‟s no wonder business owners are looking for ways to access
working capital to ease their cash flow.

9. Recourse factoring:
The client collects the money from the customer but in case customer don‟t pay the
amount on maturity then the client is responsible to pay the amount to the factor. It is
offered at a low rate of interest and is in very common use.
10. Nonrecourse factoring
In nonrecourse factoring, factor undertakes to collect the debts from the customer.
Balance amount is paid to client at the end of the credit period or when the customer pays
the factor whichever comes first. The advantage of nonrecourse factoring is that
continuous factoring will eliminate the need for credit and collection departments in the
organization.
11. How is forfeiting different from export factoring?
Forfeiting and factoring are services in international market given to an exporter or
seller. Its main objective is to provide smooth cash flow to the sellers. The basic
difference between the forfeiting and factoring is that forfeiting is a long term receivables
(over 90 days up to 5 years)while factoring is short termed receivables (within 90 days)
and is more related to receivables.
12. Venture capital in India
 Risk capital and technology finance corporation limited
 IDBI venture capital fund
 Technology development and information company of india limited
 Small industrial development bank of india
 Credit capital venture fund
13. Forms of venture capital
 Equity participation
 Conventional loan
 Conditional loan
 Income loan
14. Stages of ventures capital
 Seed capital

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III SEMESTER/II YEAR BA 5011 MERCHANT BANKING AND FINANCIAL SERVICES

 Start up capital
 Additional finance
 Second round financing
 Establishment finance
15. Types of bills
 Demand bill
 Usance bill
 Documentary bill
 Clean bills
 Inland bills
 Foreign bills
16. Maturing factoring
No advance payment is made by the factor to client. Factor pay the client only after
collection of account receivables/ debt or on a guaranteed payment date. The guaranteed
payment date is usually fixed taking into account the previous ledger experience of the
client and a period for slow collection after the due date of the invoice.
17. Bank participation factoring
Under this arrangement, a bank participate in factoring by providing an advance to the
client against the reserves maintained by the factor. For example, assume that a factor has
advanced 80 percent of the value of factored receivables and the commercial bank
provides an advance limited to 50 percent of the factor reserves. The client is required to
fund only 10 percent of the investment in receivables, the balance 90 percent being
provided by the factor and the commercial bank.
18. Domestic and Cross Border Factoring :
The basic difference in domestic and cross border factoring is on account of number of
parties involved in factoring process.In domestic factoring, three parties are involved –
seller (client), Factor, Buyer While in cross border or export factoring, four parties are
involved in transaction – Exporter (Seller/client), Importer (buyer), Export Factor,
Import Factor.
19. Cost of factoring
 Finance fee
 Service fee
20. SEBI guidelines for venture capital
(i)The minimum investment in a VCF from any investor would not be less than Rs. 5
lakh and the minimum corpus of the fund before it could start activities should be at least
Rs. 5 crore.

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III SEMESTER/II YEAR BA 5011 MERCHANT BANKING AND FINANCIAL SERVICES

(ii) The norms of investment were modified. A VCF seeking to avail benefit under the
relevant provisions of the Income Tax Act will be required to divest from the investment
within a period of one year from the listing of the VCU.

PART-B
1. What is real estate financing? Discuss the growth and issues of real estate financing in
India.
2. What is the meaning of bill discounting? Discuss the types and advantages o bill
discounting
3. What are the classifications of factoring and also discuss the process of factoring.
4. Explain the concept of forfeiting differentiate between factoring and forfeiting.
5. Discuss the SEBI guidelines with respect to the venture capital in India
6. Explain the sebi guidelines in india
7. Explain evaluation of venture capital.
8. Explain the stages of venture capital
9. Explain the types bills
10. Explain the issues of real estate financing

S.PAVITHRA AP/MBA