The term Merchant Banking has its origin in the trading methods of countries in the late eighteenth and early nineteenth century when trade-taking place was financed by bill of exchange drawn by merchanting houses

One of the most critical factors for the success of the issue is the timing of the issue. A bad market condition can result in under subscription of a public issue even from an excellent company with a track record and whose shares have been rightly priced. Too many issues hitting the market at the same time can also affect the success of the public issue. The merchant bankers as part of their marketing efforts have to decide the timing of the issue keeping in view the various factors.

The guidelines for capital issues issued by Securities Exchange Board of India in June 1992 have opened the capital market to free pricing of issues. Pricing of issues is done by companies themselves in consultation with the merchant bankers. If the premium is too low the issue gets oversubscribed and if the premium is too high it is bound to be undersubscribed and fail. The merchant banker while deciding the premium has to take the following two factors into account:

b) Quantitative factors