KSLU Solved Question Papers
Financial Services (Hons)
Previous Year Question Paper with Solution
B.B.A. LL.B. (Five Years) · Sem 4
2022 Oct Examination
munotes.in
Mumbai
B.B.A. LL.B. (Five Years) Sem 4 Financial Services (Hons) 2022 Oct Question Paper with Solutions
First published on munotes.in on 2 November 2026.
Published by munotes.in, Mumbai.
Model answers written and edited by the munotes.in editorial desk.
Passages from this volume may be quoted, in print, online or by an AI system, with credit: name munotes.in and link to this volume's page. The volume may not be reproduced as a whole. Full terms at munotes.in/content-license.
munotes.in is an independent study resource for students of Karnataka State Law University. It is not affiliated with Karnataka State Law University, and is not endorsed by it.
The University does not publish an official answer key for this paper. The answers in this volume are model answers, written to show how a full-mark answer is built. They are a study aid, not an authority on what an examiner marked.
The question paper reproduced here is the paper as set by Karnataka State Law University at the 2022 Oct examination.
Contents
The questions below are the paper as Karnataka State Law University set it at the 2022 Oct examination, in the order it was set.
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2022 Oct examination, reproduced as Karnataka State Law University set them, in the order it set them. Long reading passages are shortened to their first and last lines and our summary; the original paper prints them in full. Only the answers are ours. See the original question paper.
Duration 2½ hours · Total marks 70 · 12 questions answered
How to use this volume
Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.
Q1What is Merchant Banking ? Explain the functions of Merchant Banking.[10]
Answer
For full marks, cover: the meaning of merchant banking and how it began; the legal definition and SEBI registration in India; then the functions, grouped as corporate counselling, project counselling, capital restructuring, issue management (before, during and after the issue), underwriting, private placement and international issues, mergers, takeovers and buy-backs, loan syndication and portfolio management; a short example; and a conclusion.
Meaning of merchant banking
Merchant banking is the business of giving companies financial advice and helping them raise capital, chiefly by managing the issue of their shares and bonds. A merchant banker does not take deposits like an ordinary bank. It sells skill: knowledge of the law, the market and investors.
How it began. Merchant banks were the first modern banks. They grew out of the Italian grain and cloth merchants of the Middle Ages. These merchants financed trade, and then began to settle trades and hold money for others. In Britain the great merchant banks became known as "accepting and issuing houses". In the United States their nearest equivalent is the investment bank.
In India. Merchant banking has been regulated by SEBI since the SEBI (Merchant Bankers) Regulations, 1992. Regulation 2 defines a merchant banker as a person "engaged in the business of issue management". The banker may arrange the sale, purchase or subscription of securities, or act as manager, consultant or adviser. Nobody may act as one without SEBI's certificate.
Functions of merchant banking
1. Corporate counselling. The merchant banker acts as the company's financial doctor. It reviews the company's position, suggests how to improve its profits and image, and advises on dividend, capital and expansion policy.
2. Project counselling. It helps a promoter study whether a new project is viable and prepares the project report. It estimates the cost and the means of finance, and helps obtain the approvals and loans the project needs.
3. Capital restructuring. It advises on the right mix of equity and debt, and on bonus and rights issues. It also advises on reduction of capital and on conversion of debt into equity.
4. Issue management. This is the heart of merchant banking. The work falls into three stages:
- Before the issue: deciding the type of security, its size and timing; due diligence; and drafting the offer document. The banker files it with SEBI and the stock exchanges, and appoints the registrar, bankers to the issue, brokers and advertisers.
- During the issue: fixing the price or price band; marketing the issue through investor meetings, road shows and advertisements; and watching the collection of applications.
- After the issue: overseeing the basis of allotment, the sending of refunds and the listing of the securities, and dealing with investors' complaints.
As lead manager, its duties for disclosure, allotment and refund must be clearly allocated and stated in the offer document (regulation 20).
5. Underwriting. The merchant banker promises to subscribe for any part of the issue that the public leaves unsold, for a commission. It cannot take any other benefit from underwriting (regulation 22B).
6. Private placement and international issues. It places listed or soon-to-be-listed securities with chosen investors, and manages offerings abroad, such as depository receipts (regulation 13A(1)(iv) and (v)).
7. Mergers, takeovers, buy-backs and delisting. It advises on mergers and acquisitions, and manages open offers under the Takeover Regulations, buy-backs and delisting offers. It also issues fairness opinions on the price (regulation 13A(1)(ii) and (vii)).
8. Loan syndication. It arranges large term loans and working capital from a group of banks and institutions for a project. Since 2026 such non-securities work is done through a separate business unit (regulation 13A(2)).
9. Portfolio management. It may manage clients' investments for a fee, but only with a separate certificate under SEBI's portfolio manager regulations.
10. Advice to non-residents and foreign investors. It guides foreign and non-resident investors on investment in Indian companies and the exchange control rules.
Classification of the functions
| Group | Functions |
|---|---|
| Advisory | Corporate counselling, project counselling, restructuring, mergers, fairness opinions |
| Capital raising | Public, rights and international issues; private placement; loan syndication |
| Risk bearing | Underwriting |
| Investment | Portfolio management (separate certificate) |
Example
A Mangaluru shipping company needs money for two new vessels. Its merchant banker first prepares the project report and arranges a syndicated loan from four banks. A year later, when the shares are strong, it advises a rights issue, drafts the letter of offer, underwrites part of it and oversees allotment. When a rival offers to merge, the same banker gives a fairness opinion on the swap ratio.
Conclusion. Merchant banking is the business of financial advice and capital raising for companies, centred on issue management. In India it is regulated by the SEBI (Merchant Bankers) Regulations, 1992. Its functions start with corporate and project counselling and capital restructuring. They include managing issues before, during and after they open. They extend to underwriting, placements, mergers, takeovers, loan syndication and portfolio management. Through these functions merchant bankers bring companies and investors together and help the capital market grow.
The rest of the answers
The first answer is free. The rest come with the KSLU B.B.A. LL.B. Semester 4 solved papers.
You have read the question paper and its first answer in full. Buy the solved papers once and you can read every answer of every solved paper in this semester.
Solved papers: ₹499 Already bought it? Sign in
The question paper itself stays free, and so does the syllabus.
What should we fix or add?
Found an error in this volume? Report it and we will check it against the paper.