STRATEGIC

MANAGEMENT

[2009]
SYNOPSIS OF INVESTMENT
BANK

SUBMITTED TO: Dr. Vidushi

Sharma

SUBMITTED BY:

Daizy Choudhary (101)

Anuradha Gupta(106)
Vikas Kapil (107)
Vinay kumar aggarwal (115)

- PGDM III Sem

Motivation of Research
To know the strategic gap in the field of investment banking
Giving our contribution towards the growth and
development of investment banking
Understanding the current and potential client for the
investment bank their need and wants
Analysis of future growth and prospects of investment
banking
Finding out the major player of investment banking and the
leaders
To in-depth study of investment banking and corporate
finance
Molding our career in the field of investment banking like
financial analyst and associate
Understanding the required qualification in the field of
investment banking
To learn how the investment banks underwrite new debt
and equity securities for corporations and also how they
provide guidance to issuers regarding the issue and
placement of stock.
Understanding help to facilitate mergers and
acquisitions, reorganizations and broker trades for both
institutions and private investors.
Understanding that what type of strategy used by these
organization.

2
INVESTMENT BANKING
Introduction
Investment banking is a specific division of banking related to the
creation of capital for other companies. Investment banks
underwrite new debt and equity securities for all types of
corporations. Investment banks also provide guidance to issuers
regarding the issue and placement of stock.

In addition to the services listed above, investment banks also

aid in the sale of securities in some instances. They also help to
facilitate mergers and acquisitions, reorganizations and broker
trades for both institutions and private investors. They can also
trade securities for their own accounts

Introduction of the Industry

Investment Banks help companies and governments issue
securities, help investors purchase securities, manage financial
assets, trade securities and provide financial advice. The top
investment banks including Goldman Sachs, JP
Morgan and Morgan Stanley are said to be in the bulge bracket.

Other investment banks are regionally oriented or situated in the

middle market (e.g. Piper Jaffray). Others are small, specialized
firms called boutiques which might be oriented toward an
industry vertical, bond-trading, M&A advisory, technical analysis
or program trading. Firms have lots of different areas and groups
within them. In most firms, there is sales and trading which
works with owners of securities, investment banking which works
with issuers of securities (firms and governments) and capital
markets which goes in between the other two.

3
Industry coverage
Corporate Finance

In a corporate finance position you would work to help

companies raise capital needed for new projects and
ongoing operations.

Capital Markets

This position can be either in Debt Capital Markets or Equity

Capital Markets (ECM).

Mergers and Acquisitions

Setting up deals where one company buys

another is an important source of fee
income for many investment banks.

Project Finance

Project finance involves funding infrastructure and oil

capital projects off of a company or government's main
balance sheet.

Structured Finance

Positions in structured finance involve the creation of

financing vehicles to redirect cash flows to investors (known
as asset-backed securities.

Derivatives

Equity and Fixed Income Research

Security analysts are usually assigned to an industry or

region. You could be responsible for making buy or sell
recommendations to investors about a stock or bond.

4
 Institutional Sales

In institutional sales you would be responsible for conveying

information about particular securities to institutional
investors.

List of major investment bank

Investment banks in the world Investment bank in India
Barclays Capital ICICI Securities
Blackstone Group Ambit Corp Finance
CIBC SBI Capital Markets
Citigroup Kotak Mahindra
Credit Suisse Enam
Deutsche Bank Merrill Lynch
Evercore Partners HSBC (Blr)
Goldman Sachs Deutsche Bank (Delhi, Bangalore ,
Mumbai )
HSBC Morgan Stanley (Mumbai))
JP Morgan ANZ
Lazard Lehman Bros
Moelis & Co Goldman Sache
Morgan Stanley UBS(Hyd & Mumbai)
Nikko Securities JP Morgan (Mumbai & Bangalore
Bank of America Reliance Money
Merrill lynch

5
Evolution of investment banking in India

The origin of investment banking in India can be traced back to

the 19th century when European merchant banks set-up their
agency houses in the country to assist in the setting of new
projects. In the early 20th century, large business houses followed
suit by establishing managing agencies which acted as issue
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 private sector. The capital market witnessed
some buoyancy in the late eighties. The advent of economic
reforms in 1991 resulted in sudden spurt in both the primary and
secondary market. Several new players entered into the field.
The securities scam in may, 1992 was a major set back to the
industry. Several leading merchant bankers, both in public and
private sector were found to be involved in various irregularities.
Some of the prominent public sector players involved in the scam
were Can bank financial services, SBI capital markets, Andhra
bank financial services, etc. leading private sector players
involved in the scam included Fairgrowth financial services and
Champaklal investments and finance (CIFCO).

6
The market turned bullish again in the end of 1993 after the
tainted shares problem was substantially resolved. There was a
phenomenal surge of activity in the primary market. The
registration norms with the SEBI were quite liberal. The low entry
barriers coupled with lucrative opportunities lured many new
entrants into this industry. Most of the new entrants were
undercapitalized with little or no expertise in merchant banking.
These players could hardly afford to be discerning and started
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.

7
SCOPE

Scope for growth of Investment Banking in India as planning and

industrial policy of the country envisaged the setting of up of new
industries and technology, greater financial sophistication and
financial services are required. There is a well proven link
between economic growth and financial technology. Economic
development requires specialist financial skills: savings banks to
marshal individual savings; finance companies for consumer
lending and mortgage finance; insurance companies for life and
property cover; agricultural banks for rural development; and a
range of specialized government or government sponsored
institutions. As new units have been set up and business is
expanding, they require additional financial services. A public
equity or debt issue is the logical source of fund in this situation
and investment banks can tap this opportunity of growth. The
areas of great scope could be,

Growth of Primary market:

If the primary market grows and number of issues increases, the

scope of investment banking will be enhanced.

Entry of Foreign Investors:

Now India capital market directly taps foreign capital through

euro issues. FDI is increased in capital market. So investment
bankers are required to advice them for their investment in India.
The increasing number of joint ventures also requires expert
services of investment Bankers. If more and more NRIs
participate in capital market, there will be great demand for
investment banker services.

Changing policy of Financial Institutions:

Now the lending policies of financial institutions are based on

project orientation, so the investment banker services will be
needed by corporate enterprise to provide expert guidance.

8
Development of debt markets:

If the debt market is enhanced, there will be tremendous scope

for investment bankers. Now NSE and OTCEI are planned to raise
their fund through debt instruments.

Corporate restructuring:

Due to liberalization and globalization Companies are facing lot of

competition. In order to compete, they have to go for
restructuring, merger, acquisitions or disinvestments. They may
offer good opportunities to merchant bankers

The scope could be extended to:

1. Advising the company on designing of its Capital Structure.

2. Advising the company on the instrument to be offered to the
public.
3. Pricing of the instrument.
4. Advising the company on Legal/ regulatory matters and
interaction with SEBI/ROC/ Stock Exchanges and other
regulatory authorities.
5. Assisting the company in marketing the issue.
6. In channelizing the financial surplus of the general public into
productive investment avenues.
7. To coordinate the activities of various intermediaries to the
share issue such as the registrar, bankers, advertising agency,
printers, underwriters, brokers etc.
8. To ensure the compliance with rules and regulations governing
the securities market

THE FACTORS ON WHICH GROWTH OF INVESTMENT

BANKING DEPENDS:

1. Planning and industrial policy of the country i.e. India in this

case
2. Prevailing Economic condition of the country
3. Regulatory system of the market and economy prevailing in
India

9
4. Confidence of the people, traders, buyers, marketers, business
houses, financial institutions etc
5. The economic environment of the outside world.
6. Competition among the existing players and the upcoming
entrant

ENVIRONMENTAL SCANNING
PEST ANALYSIS OF INDIAN INVESTMENT BANKING
INDUSTRY

1) Financial Institutions are

more influenced by
Political Stability &
Political correctness.
2) Threats of Internal
Rebellion.

1) Dollar $ Appreciation.
2) Frequent Fluctuation in
Economic Market.
3) Emergent market

1) Education:- Financial
Social Knowledge
2) Working Age Population

10
 1) Internet Backbone for
Technological knowledgeable Investors.
2) Booming Software Industry
for the ease of the Investor.

11
 SWOT ANALYSIS

Strengths: -

a) Breadth of Financial Services Offerings: investment

banking provides various types of services such as trading,
private equity, venture capital, M&A, joint venture, and project
finance etc.

b) Proficient Employees: the major strength of any sector is its

employees. In investment banking all the workings are done by
professionals because it requires deft and proficient personnel.

c)Technological Advancement: Due to technical advancement,

working efficiency has been increased and works are done
quickly and easily.

d) Advance Infrastructure: The country is equipped with all

the latest and advances amenities such as better
telecommunication, transportation, potable water, internet, land
etc.

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.

b) Excessive Dependence on Trading Sectors: As per the

data collected by the team and experiences shared by Sr.
managers, it is quite apparent that investors are more dependent
on the trading sector for their investments rather than any other
field.

12
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) who
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.

13
RESEARCH METHODOLOGY

Problem Definition:

Strategy Implications in Investment Banking

Type of Research:

DESCRIPTIVE RESEARCH
Surveys & fact-finding enquiries
Try to discover causes

QUALITATIVE RESEARCH

Involves quality or kind

Helps in having insight into problems or cases

Nature of Data Collected:

Only PRIMARY DATA is used. Primary data are those which are
collected fresh and for the first time and thus happen to be
original character.

Data Collection Method:

For the collection of primary data a set of logically sequenced

Questionnaire Method was adopted seeing the objective of the
research.

Sampling Technique

Cluster Sampling: if the total area of interest happens to be a

big one, a convenient way in which a sample can be taken is to
divide the areas into a number of smaller non-overlapping areas.

Sample Size: 10

14
 Functional Areas of Investment Banking

Investment
Banking

Trading Private Equity/ Advisory Project

Venture Capital Services FinancefFinanceFin

Acceptanc
e of
Responde
nts
Res Res Resp. Resp. Resp. Resp. Resp. Resp. Resp. Resp.
p. 1 p. 2 3 4 5 6 7 8 9 10
Tradin
g
Private
Equity
Adviso
Investm ry
ent Servic
Banking es
Project
Financ
e

15
16
BCG Matrix:

It Involves people those who are dealing with the Different Financial
Areas.

The Financial Areas of Trading &

Advisory Services falls in the
category of Stars

Private Equity & Project

Finance comes in this Segment of
the BCG matrix.

17
 Awareness Total
among
Responden
ts
Res Res Res Res
Res Res Res Res Resp. Resp. p. p. p. p.
p. 1 p. 2 p. 3 p. 4 5 6 7 8 9 10
Tradin 9
g
Private 7
Equity
Adviso 8
Investm ry
ent Servic
Banking es
Project 7
Financ
e

18
Following is the list of those Investment Banks which are
providing services to Respondents:

a) Kotak Securities
b) Reliance Money
c) ICICI Bank
d) ICICI Securities
e) SBI Capital &
f) HSBC

19