INVESTMENT BANKING IN INDIA

K.Sampath kumar (13025)

PGDM (2017-19)
 Contents of Investment Banking
• Concept of Investment Banks

• Objectives

• Importance of Investment Banking

• Structure of Investment Banking

• Functions of Investment Banking

• Role of Investment Banking

• Investment Banking in India

• Top ten Investment bankers in India

 Concept of Investment Banks
• In the U.S., the Glass–Steagall Act, initially created in the wake of the Stock
Market Crash of 1929, prohibited banks from both accepting deposits and
underwriting securities, and led to segregation of investment banks from
commercial banks. Glass–Steagall was effectively repealed for many large
financial institutions by the Gramm–Leach–Bliley Act in 1999.
• In a very broad perspective, Investment Banking as the term suggests, is
concerned with the primary function of assisting capital market in the movement
of financial resources from those who have them (investors) to those who want
them (issuers).
• The Dictionary of Banking and Finance defines ‘investment bank’ as a term
used in the US to mean ‘ a bank which deals with the underwriting of new issues
and advises corporations on their financial affairs.
 OBJECTIVE

The main objective of the project is to :

• Study the overall view of the Indian Investment Banks.

• Study the Regulatory Requirement for Registration of Investment Banks.

• Know the Revenue (Brokerage / Commission) Generation Pattern of the

Investment Banks.

• Know the Pre-Issue & Post Issue Management of IPO & Process.
 Importance of Investment Banking
o Helps the corporations in raising capital. It facilitates the trading of securities
thereby, increasing the liquidity of the securities.

o It provides investment opportunities to the individuals or entities.

o Most of the corporations get advisory services from the investment banks
regarding the mergers, acquisitions and divestiture.
 Structure of Investment Banking
• Investment banks are organized into 3 categories.
• Front Office
• Helping customers raise funds in the capital markets and advise on mergers and acquisitions
• professional management of various securities and other assets
• Buying and selling financial products with the goal of making money on each trade
• Creating and marketing financial products
• Researching industries, companies, and products

• Middle Office
• Analyzing credit and market risk for the bank
• Making sure operations are complying with regulations
• Responsible for capital management and risk monitoring

• Back Office
• Making sure the bank runs smoothly by submitting trades, maintaining databases, and transacting required
money transfers
• The information technology department
 Functions of Investment Banking
Mergers and Acquisitions
o Advisory services

Corporate financing
o Equity & Debt

Underwriting

Equity and fixed income research

Sales and trading

 Role of Investment Bank
o The major work of investment banks includes a lot of consulting. For instance,
they offer advices on mergers and acquisitions to companies. The other arena
where they give advice are tracking the market and determining when should a
company come out with a public offering and what is the best possible way to
manage the public assets of businesses. The role that an investment bank plays
sometimes gets overlapped with that of a private brokerage house. The usual
advice of buying and selling is also given by investment banks.
o There is no demarcating line between the investment banking and other forms
of banking in India. This has been observed majorly of late. All banks
nowadays want to provide their customers the best of services and create a
niche for themselves and that is why apart from investment banks, all other
banks too are aiming at making it big.
 Role of Investment Bank
o At the macro level, investment banking is related with the primary function of
assisting the capital market in its function of capital intermediation, i.e., the
movement of financial resources from those who have them (the investors), to
those who need to make use of them for producing GDP (the issuers). Over the
decades, investment banks have always suited the needs of the finance community
and thus become one of the most vibrant and exciting segment of financial services.
o Globally investment banks handle significant fund-based business of their own in
the capital market along with their non-fund service portfolio which is offered to
the clients. All these activities are broadly segmented across three platforms -
equity market activity, debt market activity and merger and acquisitions (M&A)
activity. In addition, given the structure of the market, there is also a segmentation
based on whether a particular investment bank belongs to a banking parent or is a
stand-alone pure investment bank.
 Role of Investment Bank

• Investment bank is a financial institution and investment banking plays a very

important role in the economy. Investment banking helps the corporations in
raising capital. It facilitates the trading of securities thereby, increasing the
liquidity of the securities. It provides investment opportunities to the
individuals or entities. Most of the corporations get advisory services from the
investment banks regarding the mergers, acquisitions and divestiture. In
addition, because of the importance of the roles of investment banking, the
commercial banks do not perform these roles.
 Investment Banking in India
• Grindlays bank began Investment Banking (Merchant Banking) in India in 1967
with RBI issuing the second license to Citi in 1970.

• These two banks primarily provided services which included loan syndication,
equity raising and other advisory services.

• In 1972, a Banking Commission report asserted the need for Merchant Banking
services in India by public sector banks.

• The commission recommended the same structure as American investment

banks (Glass-Steagall Act).

• Merchant banks were meant to manage investments and provide advisory

services.
 Investment Banking in India
• SBI was the first Indian public sector bank to set up its merchant banking
division in 1972.

• This was followed by Bank of India, Central Bank of India, Bank of Baroda
and many more.

• SBI Caps and IDBI Caps are two prime examples of merchant banks in India
today.

• Currently, there are 136 merchant banks registered with SEBI.

• Lastly, without holding a certificate of registration granted by the Securities

and Exchange Board of India, no person can act as a merchant banker.
 Top 10 Investment Bankers in India
• Vendus Capital

• Bajaj Capital

• Cholamandalam Investment & Finance Company

• ICICI Securities Ltd IDFC

• Kotak Mahindra Capital Company

• SBI Capital Markets

• TATA Investment Corporation Ltd

• Yes Bank

• UTI Securities Ltd

 Global Investment Bankers
• Bank of America (Bank of America Merrill Lynch)
• Barclays (Barclays Capital)
• BNP Paribas (BNP Paribas CIB)
• Citigroup (Citi Institutional Clients Group)
• Credit Suisse Deutsche Bank Goldman Sachs
• HSBC
• JPMorgan Chase (J.P. Morgan Investment Bank)
• Morgan Stanley Nomura Holdings
• UBS (UBS Investment Bank)
• Royal Bank of Canada (RBC Capital Markets)
• Royal Bank of Scotland
• Wells Fargo (Wells Fargo Securities)