Académique Documents
Professionnel Documents
Culture Documents
Analysis on Investment
Banking
Department of Commerce,
Declaration
I, Ashley Geo Thodukayil (132603009), Department of Commerce,
Manipal University, declare that the Project Report entitled
Strategic Analysis on Investment Banking, being
submitted to the Department of Commerce, Manipal University, in
partial fulfillment of the requirements for the award of degree o
BBM (Professional), is my original work and the same is/was not
earlier submitted to any other Degree, Diploma, Fellowship or any
other similar title or prizes.
Signature:
Index
1
Executive Summary
Objectives
Research Methodology
4
5
Data Collection
Introduction
Definition
Registration Charges
Code of Conduct
10
11
Functions of IB
12
Organization Structure
13
14
15
SWOT Analysis
16
17
Conclusion
Executive Summary
The project on Strategic Analysis of Investment Banking has
been undertaken with a view to study the overall investment
Objectives
The main objectives of the project are to:
Research Methodology
Data Collection
The objective of this exercise is to get the overview of the
Investment Banking Structures in India. I have collected the data
from following data sources.
Data related to Registration, Functions, Code of Conducts of
Investment Banks taken from the SEBI Website and Investment
Banking book of R Machiraju.
Introduction
Investment banks play a significant role in the financial services
sector. However, Investment banking, as advisory financial
services, emerged rather late. Formal Investment banking service
in India originated with the setting up of the Investment banking
But the scope of such services was neither defined nor was a set
of rules and regulations governing them in place. The formation of
SEBI in 1992 was a landmark in the evolution of Investment
banking as a professional service in the country. Investment
banking organizations have to be mandatorily registered with
SEBI. While Investment bankers are currently providing a variety
of services, registration with SEBI is required for (i) Capital issues
related activities : both pre-issued and post-issue, (ii) mergers and
acquisitions, and (iii) Portfolio Management.
Definition
An Investment banker is any 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 / advisors or rendering corporate advisory
service in relation to such issue management.
Compulsory Registration:
Investment bankers require compulsory registration with
the SEBI to carry out their activities. They fall under four
Registration categories
Category I Investment bankers can carry on any
activity related to issue management, that is , the
preparation of prospectus and other information relating
to the issue, determining the financial structure, tie up of
financiers, final allotment of securities, refund of the
subscription and also act as advisors, consultants,
managers, underwriters or portfolio Managers.
Category II Investment bankers can act as advisors,
consultants , co-managers, underwriters and portfolio
Mangers.
Category III Investment bankers can act as
underwriters, advisors and consultants to an issue.
Registration Charges
2.
3.
Renewal fee of Rs. 5 lakhs every three years from the fourth
year from the
Code of Conduct
1.
2.
3.
4.
5.
7.
8.
9.
10. Not make any statement, either oral or written, which would
misrepresent the services that the Investment banker is
to
the
clients
and
any
business
remaining
internal
control
procedures
and
financial
and
excellence
and
standards,
integrity,
that
good
corporate
policies
and
corporate
does
supervise
diligently
persons
employed
or
price
sensitive
information
in
respect
of
institutions.
Corporate Counseling:
Corporate counseling covers the entire field of Investment
banking activities viz. project counseling, capital restructuring,
public issue management, loan syndication, working capital, fixed
deposit, lease financing acceptance credit, etc.
Organizational Structure
Front Office
-
Investment Banking
Sales & Trading
Research
Custodian
Investment Mgmt
Middle Office
- Risk
- Finance
- Compliance
Back Office
- Operations
- Technology
markets
and
advise
on
mergers
and
acquisitions.
Ranging
from
derivatives
to
specific
industries,
Middle office
Risk management involves analyzing the market and credit risk
that traders are taking onto the balance sheet in conducting their
daily trades, and setting limits on the amount of capital that they
are able to trade in order to prevent 'bad' trades having a
detrimental effect to a desk overall. Another key Middle Office role
is to ensure that the above mentioned economic risks are
captured accurately (as per agreement of commercial terms with
the counterparty), correctly (as per standardized booking models
in the most appropriate systems) and on time (typically within 30
minutes of trade execution). In recent years the risk of errors has
become known as "operational risk" and the assurance Middle
Offices provide now includes measures to address this risk. When
this assurance is not in place, market and credit risk analysis can
be unreliable and open to deliberate manipulation.
Finance areas are responsible for an investment bank's capital
management and risk monitoring. By tracking and analyzing the
capital flows of the firm, the Finance division is the principal
adviser to senior management on essential areas such as
controlling the firm's global risk exposure and the profitability and
structure of the firm's various businesses. In the United States
and United Kingdom, a Financial Controller is a senior position,
often reporting to the Chief Financial Officer. Corporate strategy
often falls under the finance division as well.
Compliance areas are responsible for an investment bank's daily
operations' compliance with government regulations and internal
regulations. Often also considered a back-office division.
Back office
Operations
involve
data-checking
trades
that
have
been
campus recruitments
jobs, an MBA is a must. Investment banks rely heavily on
right academic credentials. Typically, for most of the important
investment banks find it important to recruit people with the
and the skill requirements have multiplied. Consequently,
background. Today, the business has become very complicated
banking, not much importance was attached to academic
Academic Background: In the early days of investment
Technical Skill
Marketing Skills
Inter-Personal Skills
Networking Skills
Other Skills
Communicat
ion Skills
Academic Background
Conceptual Soundness
Product Specialization
Legal Knowledge
Knowledge of Capital Markets and Functioning
Knowledge of Regulatory Bodies involved in the Various
Operations
Knowledge of International Business Scenario and
Economic Trends
Knowledge of Software Tools, Developments in the Field
of Information Technology
Technical Skill
factors
render
decision-making
difficult.
Financial
of
International
Business
Scenario
and
Marketing,
brokerage,
research
and
capital
securities
trader
has
changed
into
tech-savvy
frameworks
can
be
solved
with
minimum
effort
using
technology.
Communication Skills
Ability
to
Cater
to
the
Audience
According
to
its
vary
extensively,
and
hence,
the
requisite
important
feature.
It
comes
in
use
while
handling
Other Skills
Marketing Skills-
Skills-Inter-personal
skills
are
basically
Approaching
through
proper
channels
that
would
lend
house for securities, promoters for new projects and also provided
finance to Greenfield ventures. The peculiar feature of these
agencies was that their services were restricted only to the
companies of the group to which they belonged. A few small
brokers also started rendering Merchant banking services, but
theirs was limited due to their small capital base.
In 1967, ANZ Grindlays bank set - up a separate merchant
banking division to handle new capital issues. It was soon
followed by Citibank, which started rendering these services. The
foreign banks monopolized merchant banking services in the
country. The banking committee, in its report in 1972, took note
of this with concern and recommended setting up of merchant
banking institutions by commercial banks and financial intuitions.
State bank of India ventured into this business by starting a
merchant banking bureau in 1972. In 1972, ICICI became the first
financial institution to offer merchant banking services. JM finance
was set-up by Mr. Nimesh Kampani as an exclusive merchant
bank in 1973. The growth of the industry was very slow during
this period. By 1980, the number of merchant banks rose to 33
and was set-up by commercial banks, financial institutions and
offering their services to all and sundry clients. The market was
soon flooded with poor quality paper issued by companies of
dubious credentials. The huge losses suffered by investors in
these securities resulted in total loss of confidence in the market.
Most of the subsequent issues started failing and companies
started deferring their plans to access primary markets. Lack of
business resulted in a major shake out in the industry. Most of the
small firms exited from the business. Many foreign investment
banks started entering Indian markets. These firms had a huge
capital base, global distribution capacity and expertise. However,
they were new to Indian markets and lacked local penetration.
Many of the top rung Indian merchant banks, who had string
domestic base, started entering into joint ventures with the
foreign banks. This energy resulted in synergies as their individual
strength complemented each other.
SWOT ANALYSIS
Strengths:
a) Breadth of Financial Services Offerings: investment
banking provides various types of services such as trading,
Weaknesses:
a) Unawareness of Investors: the major weakness is the
unawareness of its services among investors, due to which after
40 years of odyssey it could not reach to the level where It should
have been.
Opportunities:
a) Growing demand for Investment Banking: The knowledge
of investment banking is increasing among investors and they are
diversifying their investment into many sectors besides trading. It
can be seen by looking at the number of mergers and
acquisitions, various projects in the countries and the level of
Sensex in the country.
b) Removal of International Trade Barrier: 1991 reform policy
and recent amendments in international trade have widened the
area and scope of investment banking in India.
c) Financially Attractive Country: India is a financially
attractive country. Recent experience of Recession shows that,
India is among the few countries (China, Brazil and India) that not
only survived in this difficult era but shows the path to developed
countries to overcome this calamity.
Threats:
a) Increasing competition: competition in investment banking
is increasing day by day. New players are foraying to the market
due to this market share of each existing company is getting
affected and profit as well.
b) Decentralized management: each branch manager in a
company is given the authority of taking decisions in their
respective branches. The decisions made by different managers
are diverse and any wrong decision may lead to heavy losses to
the company.
Rank
Company
Fees ($m)
1.
6,398.67
2.
5,693.77
3.
Goldman Sachs
5,556.45
4.
Morgan Stanley
5,310.17
5.
Citigroup
4,489.64
6.
Deutsche Bank
4,263.81
7.
Credit Suisse
3,768.46
8.
Barclays
3,706.22
9.
Wells Fargo
2,367.32
10.
UBS
2,219.69
Conclusion