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Table of contents
1. 2. 3. 4. Analytics Risk management Credit Rating Commercial Banking a. Retail Banking b. Wholesale/ Corporate Banking Treasury Corporate Finance Financial Advisory Services Investment Banking Equity research Asset management/ mutual funds Project financing Real estate Securities sales & trading Private Equity Insurance
5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.
Description: The fundamental goal of Analytics is to help organizations by leveraging data in the most sophisticated manner to reach the right customer through the right channel, with the right product, at the right price, and at the right time. Analytics can progress along two lines: Using existing patterns/metrics/performance indicators or Industry generic metrics or Company specific metrics to analyze data Using Sophisticated statistical/data mining tools to derive new performance indicators i.e., Developing Statistical Models Data collection and analysis are viewed as a continuing and iterative process and ideally over time business decisions are refined based on feedback from earlier analysis and consequent decisions. It follows procedures including data extraction, loading and cleansing, data warehousing, data modeling, intelligence/ analytics, driving insight. As customers avail of a basket of services, from a basic checking account to more advanced loans and brokerage services, the channels and product offerings will have to be continuously evaluated to ensure that a service provider is able to reach the customer with a complete view of what the customers needs. In situations where personalized service is required on an individual customer basis, it becomes important to look at transaction level data, as compared to data summarized by just channels and/or products. This type of individualized attention is standard for clinical trials in the pharmaceutical sector, and is also relevant in areas such as Wealth Management.
Applications: 1. Consumer Finance Analytics finds extensive applications in consumer lending of all types, and these can be broadly viewed as a combination of marketing and risk management - both at the front end and the back end. To start off, a company is interested in attracting the right kind of customers for its products. A comprehensive profiling and segmentation exercise of its existing customers will help a company identify prospects for the right kind of product. Subsequent to profiling, Analytics can also help in: Identifying prospects most likely to respond to a company’s service offerings by applying customized Response Scorecards. Weeding out “risky” prospects by applying continually updated Acquisition Risk Scorecards. Determining magnitude of product offering by estimating the ability to manage the risk of each acquired customer.
Improving relationships with “bad” customers by building Delinquency Strategies that will identify who among the delinquent customers will most likely make their payments and return to a non-delinquent state. Minimizing loss due to involuntary attrition through effective collections strategies that identify customers who are most likely to pay some portion of their written off amount. Run complex market, credit and liquidity risk management calculations in real time Manage credit limits and collateral Controlling the costs of debt collection by identifying the optimal amount of collections debt to be sold to 3rd party collectors.
2. Retail Banking Every few years, the customer’s profiles are a result of continually changing lifestyles, behavior patterns, risk attitudes and financial aspirations. Banks carry extensive amounts of data in their systems from which profiles of each progressive stage of the customer’s evolution can be studied and analyzed. Predictions of customer service requirements across his/her lifecycle can be made by ensuring that the data hitherto silo-ed across various functions is brought together to Having established what product the customer is ready for, the next step is to identify the appropriate channel for reaching the customer. Adopting an analytics driven Channel Optimization Strategy will help in determining the appropriate mix of channels, whether they are ATMs, branches, private banking, tele-marketing, direct mailing, or the Internet. Similarly, a Channel-Product Mapping exercise will help in identifying the right channel to be used for each product offering.
3. Asset Management On the asset management side, customer data can be used to focus on two types of activities: •Revenue Generating Activities: 1. Customer profiling: to develop a view of the customer with respect to demographics, product usage patterns, risk assessment, etc. 2. Intermediary/Channel Optimization: for maximizing channel revenues by proper allocation of resources. 3. Product Development: to continually update product offerings that are aligned to dynamic customer usage patterns. •Cost cutting Activities: 1. Asset Allocation Tool Development: for investment advisors involved in selling financial planning and investment advisory services to prospective clients. 2. Performance Attribution: for analysis of portfolio performance/NAV vis-à-vis various benchmarks, for computations of portfolio sensitivity with respect to the market and/or benchmarks, etc.
4. Insurance The insurance industry is probably the one area which stands to leap forward the most from analytics, given that currently, there is a low level of data mining and process automation in use, as compared to the consumer banking industry. A data driven approach to decision making will help in a number of areas, including: •Insurance Scoring: Developing models to predict the likelihood of occurrence of claims using credit information along with the past history of claims filings. •Claims Analysis: Modeling for frequency and severity of claims leading to 1. Improved Pricing 2. Better Reserve Management •Underwriting Automation: Improving the efficiency of processes by automating decision making criteria. •Customer Acquisition & Servicing: Maximizing returns on marketing expenditures through 1. Targeted Acquisition Campaigns 2. Channel Effectiveness, including analysis of internet, sales force, etc. 3. Cross-Selling 4. Proactive Renewal Strategies •Capital Allocation / Management: Maximizing portfolio ROI across lines of businesses such as Casualty, Life, Property, Annuities, etc., by optimal allocation of capital. •New Product Development & Alignment: Designing and testing the efficacy of new products specifically created in response to emerging market trends. Profiling customer characteristics to better align existing products with the specific needs of the customers
Why and How to proceed? As the relationship between a customer and a banking/financial services provider changes with time, the opportunities to service those needs will continue to evolve. With the large amounts of data on the customer available to tap into, organizations that use analytics have the opportunity to distinguish themselves greatly from their competitors, and many companies have already seen tremendous improvements in revenue generation and cost cutting through analytics. Considering the wealth of applications of analytics techniques to reach the customer, the departmental silos of old should give way to a more customer centric view – all through maximizing the potential of customer data. Having identified a potential application of analytics, the testing and implementation process ensures that the best possible solution is continually implemented in a timely manner. To achieve this end, a key decision that an organization must take is the movement towards an analytics based philosophy where data is consistently analyzed to generate maximum revenue gains and cost benefits
A team of systems specialists and data analysts is required to develop and maintain efficient data marts and robust implementation & analysis systems. To conduct data analytics, teams of econometric & statistical modelers and business analysts that can effectively perform strategic analysis and build predictive models need to be developed. Job Requirements: The analytics job profile involves the use of a great deal of software and advanced mathematical tools. Hence people preferred for the particular job must possess either Masters/PhD in Econometrics / Industrial Engineering / Statistics or MBA / CA having experience in Quantitative analysis in areas like Portfolio Analysis, Risk Management, Financial Products Pricing, Market Research, Actuarial Analytics, Production Planning, Inventory and Logistics Management. Potential Recruiters: American Express HSBC Analytics Brainmatics Fractal GECIS Analytics ICICI One Source I Gate (loans and mortgage) Symphony (insurance, supply chain and financial services) Modalytics (banking and investments) MarketRx (medical and market analytics) (Gurgaon) Mumbai's Orion Pro (banking, treasury and credit cards) Inductis Adventity
The risk management professionals determine the different potential risks associated with the investments made by an enterprise. They constantly evaluate the market parameters, where the emphasis is given to the instances where the enterprise can lose money. The focus is to minimize the chances of loss on those occasions. Risk assessment helps the client in: Understanding risk factors, Providing comprehensive list of the existing risk-coverage , Recommending ways to cover the yet-to-be covered risk gaps. Financial risk management is the practice of enhancing firm’s value by using financial instruments ((Derivatives etc.) to manage exposure to risk. As a specialization of risk management, financial risk management focuses on when and how to hedge using financial instruments (Derivatives, diff risk models etc.) to manage costly exposures to risk. In the banking sector worldwide, Basel Accord are generally adopted by internationally active banks to tracking, reporting and exposing operational, credit and market risks. Credit Risk is the risk of loss due to a debtor's non-payment of a loan or other line of credit (either the principal or interest or both). Some companies run a credit risk department whose job is to assess the financial health of their customers, and extend credit accordingly. Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events Market risk is the risk that the value of an investment will decrease due to moves in market factors. The four standard market risk factors are: Equity risk, or the risk that stock prices will change. Interest rate risk, or the risk that interest rates will change. Currency risk, or the risk that foreign exchange rates will change. Commodity risk, or the risk that commodity prices (i.e. grains, metals, etc.) will change. Different financial instruments, mechanisms are used to mitigate such risks.In India banks are in process of implementation of Basel II guidelines. So there is huge requirement for Risk management professional s in this field. Organizationally, financial risk management is implemented in different ways. There may be, within the board of directors, a risk committee. Usually, there is some sort of risk oversight committee, comprising senior managers. In practice, various names are given to these two committees. A senior manager, called the head of risk management or chief risk officer (CRO), reports to the risk oversight committee. This head of risk management may oversee a single department called the risk management department. Professionals working within that department, called risk managers, are responsible for facilitating the taking of applicable financial risks—market risks, credit risks and operational risks—by other departments within the firm. Risk Management Adviser - Risk Analytics Group provides the quantitative analysis and modeling support for risk management. This group is working on areas such as analysis of
default rates, loss rates, risk based pricing, economic capital allocation and portfolio modeling Potential Recruiters: American Express Citigroup HSBC Analytics Aptivaa Risk Consulting JP Morgan- Credit Analysis Unit ICICI Bank
Credit risk is the risk of loss due to a debtor's non-payment of a loan or other line of credit (either the principal or interest (coupon) or both). There are 4 broad categories of credit risk: 1) Faced by lenders to consumers 2) Faced by lenders to business 3) Faced by business (e.g. credit sales) 4) Faced by individuals (e.g. as depositors or investors) A credit rating agency (CRA) is a company that assigns credit ratings for issuers of certain types of debt obligations. In most cases, these issuers are companies, cities, non-profit organizations, or national governments issuing debt-like securities that can be traded on a secondary market. A credit rating measures credit worthiness, the ability to pay back a loan, and affects the interest rate applied to loans. (A company that issues credit scores for individual credit-worthiness is generally called a credit bureau or consumer credit reporting agency.) Credit ratings are used by investors, issuers, investment banks, broker-dealers, and by governments. For investors, credit rating agencies increase the range of investment alternatives and provide independent, easy-to-use measurements of relative credit risk; this generally increases the efficiency of the market, lowering costs for both borrowers and lenders. This in turn increases the total supply of risk capital in the economy, leading to stronger growth. It also opens the capital markets to categories of borrower who might otherwise be shut out altogether: small governments, startup companies, hospitals and universities. The biggest credit rating agencies in India are ICRA, CRISIL, SMERA and CARE. In addition this, most banks and many corporations have their own credit rating department. Potential Recruiters: ICRA CRISIL Fitch CARE Employment Opportunities: We have used CRISIL as a benchmark for understanding the kind of job openings available in this line of work. Our assumption is that most rating agencies have profiles similar to those mentioned below:
Commercial banks are in the business of providing banking services to individuals, small businesses and large organizations. While the banking sector has been consolidating, it is worth noting that far more people are employed in the commercial banking sector than any other part of the financial services industry. Jobs in banking can be exciting and offer excellent opportunities to learn about business interact with people and build up a clientele. Today's commercial banks are more diverse than ever. You'll find a tremendous range of opportunities in commercial banking, starting at the branch level where you might start out as a teller to a wide variety of other services such as leasing, credit card banking, international finance and trade credit. If you are well-prepared and enthusiastic about entering the field, you are likely to find a wide variety of opportunities open to you. Commercial banks vs. Investment banks A commercial bank may legally take deposits for checking and savings accounts from consumers. The typical commercial banking process is fairly straightforward. You deposit money into your bank, and the bank loans that money to consumers and companies in need of capital (cash). You borrow to buy a house, finance a car, or finance an addition to your home. Companies borrow to finance the growth of their company or meet immediate cash needs. Companies that borrow from commercial banks can range in size from the dry cleaner on the corner to a multinational conglomerate. The commercial bank generates a profit by paying depositors a lower interest rate than the bank charges on loans. An investment bank operates differently. An investment bank does not have an inventory of cash deposits to lend as a commercial bank does. In essence, an investment bank acts as an intermediary, and matches sellers of stocks and bonds with buyers of stocks and bonds. Note, however, that companies use investment banks toward the same end as they use commercial banks. If a company needs capital, it may get a loan from a bank, or it may ask an investment bank to sell equity or debt (stocks or bonds). Because commercial banks already have funds available from their depositors and an investment bank typically does not, an Ibank must spend considerable time finding investors in order to obtain capital for its client. (Note that as investment banks are increasingly seeking to become "one-stop" financing sources, many I-banks have set aside billions of dollars of their own capital that they can use to loan to clients directly.) A commercial bank can be a retail bank, or a wholesale bank, or both.
Retail banking is typically mass-market banking where individual customers use local branches of larger commercial banks. The products/ services offered include: 1. Deposit Accounts: Savings accounts, Current Accounts, debit cards etc. 2. Loan Based: Personal loans, credit cards, consumer loans, car loans, home loans etc. 3. Mortgages Retail banking involves job profiles for students from both finance & marketing background. But recently, given the competitive nature of the market with the entry of a large number of public sectors, private sector and foreign banks competing with each other for business; marketing has become an important function within a bank for retail business. The career profiles are more centric towards Marketing of Financial Services. A typical organization of retail department in bank including various associated products & services can be shown as:
Head of Retail Banking
Product Head – Investment & Services
Product Manager – Mutual Funds
Product Head – Deposits Products
(PM) – Retail Savings & Deposits (PM) – Private Banking (HNI)
Product Head – Loan Products
(PM) – Car Loans
(PM) – Bancassurance
(PM) – Consumer Financ
(PM) – Forex Services
(PM) – Internet Banking
(PM) – Credit Cards
(PM) – RBI GOI Bonds
(PM) – Salary Accounts
(PM) – Personal Loans
Zonal or Regional Product Managers / Sales Managers for respective product categories
Branch Level Relationship Managers / Sales Managers / (Officers) 11
Typically, marketing / finance graduates from premier management institutions find openings in any one of the following broad areas in banking & financial services companies: 1. Product management 2. Relationship management 3. Sales & Distribution 4. Customer Service (branch level & call centre, closely linked with operations function) Job Profiles/ Responsibilities: 1. Product management: Corresponding responsibilities might include: a. Budgets: Manage allocated budgets for that product b. Market Research c. Product Innovations d. MIS – Keep track of stock and sales figures at the branch and regional level Relationship management: Involves Maintaining relationships with business entities, Handling DSAs or DSTs and business leads generated from other channels, Customer Interaction. Various types of relationship manegement are: a. Relationship Manager – Investment & Services : Offering I&S services to individual, HNI or institutional / corporate customers of banks. Products include mutual funds, RBI bonds, Insurance, etc. b. Relationship Manager – Personal Banking (Retail) : Retail means individual customers of the bank. They manage customers for services like savings accounts, deposits, debit cards, cross sales of loan products, etc. c. Relationship Manager – Private Banking : With the exclusive mandate to manage HNI / Premium individual accounts of the branch / region. Relationship managers typically have sales targets and enhancement of relationship value (ERV) targets. They are also involved in servicing the customers. Their personal attributes include: a pleasant personality, good communication skills, reasonably good aptitude for sales and excellent product knowledge.
Sales & Distribution: This function is similar to sales as one sees it in FMCG or consumer durables companies. In fact, at times banks also recruit marketers / sales managers from such companies to take care of product management or distribution functions. Banks use agents, brokers or Direct Marketing Associates / Direct Sales Associates (DMAs/DSAs) to increase sales. These are typically individuals or partnership firms who recruit sales executives to move in the field and generate sales. Sales & Distribution can involve any of the following: 1 2 3 Generate sales through customers walking into the branch, through CSE’s as discussed earlier. Generate sales through sales executives on bank’s payroll. Generate sales through DME’s as discussed above. Currently RBI does not permit sales of deposit products through DME’s, but credit cards and loan
products are freely sold through these agents. The job of the sales manager is to appoint, train and supervise these DSA’s. Sales & Distribution at the branch level is headed by the branch manager himself. At times, relationship manager of the respective product category may also look after this function. 4. Customer Service: At the central office level, customer service function may be closely involved with Customer Relationship Management (CRM) initiatives. Banks like ICICI Bank and HDFC Bank have typically have lakhs of customers holding millions of accounts with them. Managing such a huge number of relationships is certainly a challenge. Banks use concepts like datamining and advanced MR and statistical techniques to focus service and cross-sales initiatives on an identifiable set of customers. Branch Manager: will primarily be responsible for balance sheet growth, revenue generation, customer acquisition, customer retention, and cost efficiency through processes, managing the branch team Business Development Manager: In some banks, this designation is same as Product Manager & involves the task of developing the business further.
Future options after entering Retail Banking: Retail bankers who yearn for higher risk and challenges (and higher rewards with success) may become investment bankers with experience. A number of former bank officers enter the securities industry and become brokers, traders, and salesmen owing to their exposure in the financial market.
Wholesale banking refers to dealing with large customers often multinational companies, governments or government enterprises. Wholesale banking is the term used for transactions between banks and large customers (corporate and government) involving large sums. It includes the transactions which the banks conduct with each other via interbank markets separate from customers. Wholesale banks do not extend home mortgage credit, consumer loans to retail customers or loans to small businesses or small firms. The following features distinguish wholesale banking from retail banking: Retail banks deal with a large number of small value transactions whereas wholesale banks deal with a small number of large value transactions. Wholesale banks do not involve themselves in the payments mechanism to any great extent so that cash holdings are minimal. The extent of their dealing in inter-bank market. The high proportions of assets and liabilities are in foreign currency in wholesale banking as opposed to retail banking.
Usually separate subsidiaries of the same bank deal in retail banking and wholesale banking at the same time. So wholesale banking characterizes the type of the transaction rather than type of financial institution. The practices basic to wholesale banking are: Interbank markets in domestic and foreign currencies. Issue of certificates of deposit in domestic and foreign currencies. Lending by means of term loans.
Banks in order to have clarity of functioning have further divided corporate banking into the following: Global Clients Local Clients Small & Medium Enterprises
Companies are slotted into one of these categories based on criteria set within the bank. This criteria varies from bank to bank. The work in all three categories is very similar. Before sanctioning any sort of loan or financial assistance to its clients, the banks first need to analyze the client in terms of his financial position and his credit worthiness. For this
purpose a document is prepared in a pre set format which contains the requisite information regarding the potential client. This document is scrutinized by the approving authority which usually consists of the region or country heads. Once the limits are sanctioned the client is notified of the same. The client is then permitted to use loan facility as and when he wishes to, provided it is within the limit. This entire process involves immense client interaction. For the corporate no matter which product or facility he uses he wishes to have a one point contact within the bank. This one point contact is the relationship manager. The relationship manager heads a team. Clients of the bank are mapped to various relationship mangers. They have targets in terms of income. This they need to achieve by dealing with the clients mapped to them. Profiles on offer: Business Development Manager – This profile is applicable to both assets and liabilities division. Their responsibilities entail scouting for new customers for the bank Relationship Manager – Applicable to both assets and liabilities divisions again. They are the one point contact for the customers to solve any banking related issues. Also, in case there is some specific requirement, he/she is the intermediary between the product specialist and the customer Investment advisory services: Customers with excess of funds in their account might approach a bank to utilize the funds in a better way. The job of a Investment Advisor, on the basis of the risk profile of the customer, suggest a variety of investment products such as mutual funds (Debt/Equity based)
Matching & Liquidity in wholesale banking The basis of operations of wholesale banking is the principle of matching. From outside it seems that as wholesale banks have less number of customers, they are able to manage their liquidity by matching the maturity dates and currency denominations of their assets and liabilities. But wholesale banks do not completely match their assets with their liabilities and therefore they do engage in maturity transformation by borrowing for a shorter period than that for which loans are made. Wholesale banks maintain their liquidity position by: Using the interbank market – this market involves banks lending and borrowing from each other. If a wholesale bank has got a surplus fund, it will lend the excess to another bank. Similarly if a wholesale bank is short of fund, it will borrow the money from another bank. Interbank transactions can be from 15 days to 3 months. Sale of asset based securities (ABS) - An ABS is a tradable financial instrument, which is backed by a pool of loans. The sale removes assets from the balance sheet of the bank and provides the fund for alternative use.
Potential Recruiters: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. ICICI Bank Barclays Bank (retail banking) HDFC Bank Yes Bank (wholesale/corporate banking) Standard Chartered Bank (wholesale/corporate banking) ABN-AMRO Bank Axis Bank BNP Paribas Deutsche Bank UBS ING Vysya Kotak Mahindra Bank IDBI Bank Capital One Morgan Stanley Rabo Bank Calyon Bank Citibank
Treasury management in Banks In commercial banks, treasury refers to the fund and the revenues at the disposal of the bank and day-to-day management of the same. The treasury unit acts as the custodian of the cash and other liquid assets. The art of managing, within the acceptable level of risk, the consolidated fund of bank optimally and profitably is called treasury management in banks. Apart from doing the above-mentioned activities, the treasury of a bank deals with currency trading, interest rate swaps, and currency forwards and swaps, G-Sec trading and other products related to it. Also it is the duty of the Treasury department of a bank to satisfy the ALM constraints as put by the Risk department. In India, all banks are having active treasuries dealing in different products. Treasury management in Corporate Corporate manage their treasuries by commercial papers. There has been an increased focus on governance and increasingly adventurous activity in the capital markets. Depending upon the corporate, the treasury department does one or two special roles that have been listed in the various roles of banks. E.g. a treasury department in a software company will be looking at managing currency risk and may be at times placing excess cash to get some returns. In case of a FMCG company, the treasury will be dealing more into the swaps of their loans etc. from fixed to floating and vice-versa. Also all treasuries in the multinational companies ensure that the company is adequately funded in terms of cash and ensure that the payments are coming and going as per the normal cycle. Following are the divisions across all the banks in India: Asset Liability Management Desk (ALM) Interest Trading Desk Institutional Bonds Desk Derivatives Sales desk Derivatives Structuring desk Foreign Exchange Floors (trading) Option Traders Credit & Market Risk Desk Treasury Sales Team
Following is what each division does and their requirements in terms of qualifications of people. Asset Liability Management Desk (ALM): This profile is concerned with the Cash Management and the B/S of the bank
Interest Trading Desk The people here trade in Government securities, Treasury Bills, Gilts and some Corporate bonds. Knowledge of the Bond market and Macroeconomics essential
Institutional Bonds Desk Trading in corporate bonds
Derivatives Sales desk This is typical sale of financial product profile which requires expert understanding of derivatives market. These people get the highest bonuses out of all treasury people.
A Derivatives Structuring desk This too requires an understanding of the derivative market
Foreign Exchange Floors (trading) These people work as Relationship Managers for their clients for whom they exchange Foreign Currency.
Option & Futures Traders This profile is also about trading in Options and Futures, so a thorough understanding of this market is essential.
Credit & Market Risk Desk These people should also know Excel very well. They are into Risk management and work in close relation with other treasury desks.
Treasury Sales Team This team is into sales of Treasury products. It requires lot of running around work and a good understanding of the financial scenario.
Job Profiles that are offered in treasury 1. Asset Liability Management 2. Dealer – Forex, G-Sec, Call Money, Swaps (IRS & CCS) 3. Research Analyst Generally, the fresh MBA graduates start in the 1st or 3rd category wherein they try to predict the next day’s prices by analyzing the yield curves, predicting MIBOR & LIBOR and other types of projections. The job profile of the person in the 1st category is to keep a track of the inflow and outflow of the cash so that the bank is adequately funded.
Potential Recruiters: 1. 2. 3. 4. 5. 6. 7. 8. 9. ICICI Bank Axis Bank HDFC Bank Some FMCG/Group companies may offer this profile Standard Chartered ABN Amro BNP Paribas Kotak Mahindra Bank Avendus Advisors
Is it better to spend the last of the money for movie, party or food? Is it better to spend more money on a trip with friends to shimla or save money to buy a gift for your girlfriend? These are just some of the challenging decisions that we face in day to day life, but if they’re challenges you’d enjoy meeting, then corporate finance is the area that you want to be in. In this career, you’ll have to make risky financial decisions, and convince others that you’re right. Value based investment or expenditure is the essence of the Financial Management. Every suitable financial concept must be analyzed and applied from the viewpoint of each stake holder before final decisions are taken. Knowledge of new financial concepts including derivatives, portfolio management etc., is of great importance in order to enable Financial Managers and Senior Executives to arrive at better alternative investment decisions. Analysis of financial portions of economics will also enable them to draft legislation or improve existing legislation to protect the interest of stake holders and to curb the speculations and malpractices. Corporate finance job in simple terms aims to understand and analyze financial statements with a view to taking corporate finance decisions. What does a career in this sector entail? The area entails several jobs some of which are:-
1. Providing new services and products by different banks
This may involve providing short-term loans for providing working capital requirements, term loans, bridge loans, overdrafts and many products that are offered by different banks to meet the corporate financing needs.
2. Funding of companies operations and source of funds
For ongoing operations the company has to raise loans to finance its working capital or meet them put of its ongoing operations. Thus, the source of funds has to be decided to meet these financing needs of the company and then best available source has to be chosen so as to get the best deal for the company keeping in mind the need of the company na the purpose for which funds are being raised
3. Minimizing risks
The company has certain financial risks present in its operations. These have to be mitigated using the different products available in the market. With new and and a wide array of complex products available in the market the job of corporate finance analyst is becoming more and more challenging to mitigate the company’s financial risks associated with its operations.
4. Trade Finance
Trade finance primarily consists of short term finance of Bill Discounting and Inter Corporate Deposits. These products provide high liquidity on account of shorter maturities. The trade finance activities of the company provide working capital for companies to meet the seasonal demands. The portfolio may be spread over a wide range of industries comprising of textiles, sugar, food processing, light engineering, pharmaceuticals etc.
5. Advising on business plans or developing business plans for companies venturing into
new areas, products or markets Each business plan should be tailored to the particular circumstances of the business concerned and often may be targeted at potential investors. As a management tool, the business plan should be a living document used first and foremost by management. However, it may also serve a specific additional purpose - it is one of the key means by which any finance provider will make a decision about lending funds and in these circumstances it should aim to convince potential investors of the company's ability to exploit its potential.
6. Due Diligence
Strategic transactions must be carried out with informed decision-making rather than guesswork. Due diligence helps protect corporates from nasty surprises when involved in: Business acquisition or sale Financing proposals Public or private placements The due diligence is required by investors, lenders, businesses involved in a purchase or sale and intermediaries such as investment bankers. Due diligence helps in providing information and insight on Operations of a buyers Risks of a transaction Value at which a transaction should be undertaken Warranties and indemnities that should be obtained from the vendor
7. Mergers and acquisition
Specialist corporate finance teams focus on adding value to the corporates at each stage in the process of acquiring a business. They help in devising an acquisition strategy, finding the right target, negotiating the deal, investigating to reduce risk and completing the deal. They also develop the post acquisition strategy to ensure the success of the merger or acquisition deal.
8. Advising on Selling a Business
This is similar to the mergers and acquisition role described above just that focus is on adding value at each stage in the process of selling a business. So, here the focus is on preparing for sale, marketing to identify the best purchasers, negotiating and
closing the deal for the business that is willing to move out so as it gets the best deal and value out of it.
Determining a company’s worth is more important than ever before. Whenever a company is planning to purchase, merge with, or sell an enterprise, transfer intangible assets, enter into a licensing agreement, address estate, gift, or other taxation concerns, or comply with corporate finance and risk management requirements the valuation becomes important to evaluate each of the proposals in proper light. These valuations are not generally done by corporate finance departments of the companies but by the third parties so as to provide an unbiased estimate of the company valuation. Careers for fresh MBAs Large corporates have corporate finance departments of their own to mange their funds on a day to day basis and to decide the on the financing needs of the company like raising of loans for working capital, getting the best interest rate deal for the company, managing risks as to companies operations and the flow of money etc. Apart from this the consultants and banks recruit corporate finance specialists/advisors who advise different corporates (i.e. the clients of these consultants/banks) on meeting their financing needs and offering products to them so as to best meet their need. The importance of the area can be judged by the fact that this subject is covered in almost all the B-schools of this country. Some of the topics which one should be aware of are: Basics of commercial accounting and balance sheets Discounted Cash flow technique and internal rate of return Budget o Performance budgeting o Zero-base Budgeting o Cost benefit analysis CAPM model, Valuation of bonds and securities, capital budgeting decisions etc. Portfolio Management Derivatives instruments and other financial products in the market International Financial management The key qualities An excellent problem solver A clear communicator who loves working with numbers Professional in use of spreadsheets and other number crunching software Enjoying making short- and long-term moneymaking goals and Choosing the best way to raise funds for growth
Financial advisory services
The financial advisory services offered by companies may me classified into these broad heads where MBA students are generally recruited. The service offerings may vary from company to company. Due diligence services Investment banking Valuation and strategy Business recovery services- like business improvement, liquidation and solvency, performance monitoring etc Tax services Restructuring services Fraud and forensic investigation services Helping corporates list overseas Post deal services Project finance and privatization Takeover support
A financial institution is one which is offering professional advice to companies and also preparing documentation for submission to the regulator, the exchange, shareholders, investors, and the general public for the purpose of public offering of stocks, stock listing, corporate financial restructuring, preparation of a company rehabilitation plan, etc.Financial advisors may help their clients invest for both long and short term goals. It is the financial advisor's duty to determine the clients' goals and risk tolerance and then to recommend appropriate investments Generally all banks and consultancy companies have a financial advisory cell.
Sector Outline and Nature of Services provided: Investment banking is, arguably, the most glamorous field in financial services. However, the luxurious lifestyles, multi-million dollar deals, the jet-set life and the pulse throbbing excitement are just a polished veneer of what is otherwise a demanding, stressful, and at times, grueling career option. An investment banking career makes even the toughest bschool education seem like vacation. However for the focused, sharp and dynamic business executive, a career in I Banking can be a life-long adventure. The Investment Banking industry is concentrated in the major financial centers of the world, viz. London, New York and Tokyo. Although most I Banking firms have offices in countries throughout the world, these offices serve only the local market requirements. Most international transactions and deals are routed through and processed in the major financial centers. Investment banking is not one specific service or function. Investment Banks serve clients with complex financial needs. It is a bouquet of a range of activities, which include underwriting, selling, and trading securities (stocks bonds and derivatives); providing financial advisory services, such as mergers and acquisition advice; and managing assets. An Investment Bank usually provides the following services to its clients: Corporate Finance and advisory work, which is normally in connection with new issues of securities for raising finance, take-overs, mergers and acquisitions; Banking, for governments, institutions and companies; Treasury dealing for corporate clients in currencies, with financial engineering services to protect them from interest and exchange rate fluctuations; Investment management, for corporate pension funds, charities, private clients, either via direct investment for the more wealthy or via unit and investment trusts. In the larger firms, the value of funds under management runs into many billions of dollars; Securities trading, in equities, bonds or derivatives and offering broking and distribution facilities. Thus it can be seen that Investment Banks offer various consultancy, investment and financial services to their clients. These functions are very different from those done by commercial banks, which are mainly into acceptance of deposits, lending, trade finance, etc. The client profile of Investment Banks is also different and is made up of big corporate groups, governments, NGOs and wealthy individuals or family trusts. Due to the niche character of their services, Investment banks are small in employee strength when compared to commercial banks. Investment bankers prepare idea pitches that they bring to meetings with their clients, with the expectation that their effort will be rewarded with a mandate when the client is ready to undertake a transaction. Once mandated, an investment bank is responsible for preparing all materials necessary for the transaction as well as the execution of the deal, which may
involve subscribing investors to a security issuance, coordinating with bidders, or negotiating with a merger target.
Sales and Trading is often the most profitable area of an investment bank, responsible for the majority of revenue of most investment banks. In the process of market making, traders will buy and sell financial products with the goal of making an incremental amount of money on each trade. Sales is the term for the investment banks sales force, whose primary job is to call on institutional and high-net-worth investors to suggest trading ideas and take orders. Sales desks then communicate their clients' orders to the appropriate trading desks, who can price and execute trades, or structure new products that fit a specific need Research is the division which reviews companies and writes reports about their prospects, often with "buy" or "sell" ratings. While the research division generates no revenue, its resources are used to assist traders in trading, the sales force in suggesting ideas to customers, and investment bankers by covering their clients. In recent years the relationship between investment banking and research has become highly regulated, reducing its importance to the investment bank Structuring has been a relatively recent division as derivatives have come into play, with highly technical and numerate employees working on creating complex structured products which typically offer much greater margins and returns than underlying cash securities 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. In recent years the risk of errors has become known as "operational risk" and investment banks provide measures to address this risk
Career Opportunities: Major Investment banks recruit graduates from top B-Schools for their top entry level positions. Recruits have to master technical skills for transaction processing as well as market skills for acquiring and retaining clients. Although, there are many areas of specializations within Investment banks, the entry level recruits in the core I-banking business are basically placed in any one of the following broad areas. Advisory (M & A and Industry Teams): As an analyst in Mergers & Acquisitions (M&A), the primary focus will be working on M&A transactions within a specific country. However, there is plenty of scope to work across sectors and analysts gain a broad base of exposure. On a deal team, an analyst will work alongside colleagues with local market knowledge and expertise in executing M&A transactions in that country.
An analyst in an industry team such as Natural Resources clients for example, will leverage his industry expertise and help market the Banks M&A, Debt and Equity products to companies in the mining, oil and gas and chemical sectors. If, for example, a buy-side marketing effort is successful, an analyst will help manage the transaction process, working on the transaction itself and co-ordinating the efforts of each of the various teams involved. Debt Capital Markets: An analyst will play a central role in the Debt Capital Markets (DCM) team of an Investment Bank. The DCM team will rely on his analytical and time-management skills and expect him to take rapid ownership of key components of the interaction with clients. He will be actively involved in all aspects of new business solicitation, developing new ideas and pricing new issue opportunities. He will need to develop his key skills quickly. He will also work closely with the bank and bond Syndicate teams, help focus the respective sales forces on the transaction and assist them in answering credit related questions. Analysts coordinate the documentation process with lawyers and the internal Transaction & Execution group, as well as due diligence sessions with Management. Equity Capital Markets: In raising equity for a new company for example, an analyst starts by writing recommendations on the nature and structure of the transaction. The next part is to work with management to prepare the company’s marketing materials, then organise the offering process with lawyers and accountants and start assessing the level of demand from targeted investors. It involves constant communication with M&A and Equity Sales, Trading and Research to understand the company’s strategy and valuation, and investor views on the story, and communication with syndicate banks to organise the marketing of the offering. While working on an equity derivatives trade an analyst is a key liaison with the client, understanding their needs and assisting in cultivating the client relationship on an ongoing basis. By understanding the client’s objectives, he can then advise them on a wide range of derivatives solutions, using the Banks trading and research capabilities to provide them with the optimal solution to their needs.
List of Investment Banks Recruiting in Indian B-Schools: The following are some Investment banks that generally come to Indian B-Schools to recruit executives for their top notch entry level positions: Banque Nationale de Paris Barclays Capital Citigroup Credit Suisse First Boston DBS Bank, Singapore Deutsche Bank DSP Merrill Lynch Goldman Sachs HSBC ICICI Bank JM Morgan Stanley JP Morgan Kotak Group Lehman Brothers Merrill Lynch SBI Capital Markets UBS Investment Bank
Securities research is a discipline within the financial services industry. Securities research professionals are known most generally as "analysts," "research analysts," or "securities analysts;" all the foregoing terms are synonymous. Securities analysts are commonly divided between the two basic kinds of securities: equity analysts (researching stocks and their issuers) and fixed income analysts (researching bond issuers). However, there are some analysts who cover all of the securities of a particular issuer, stocks and bonds alike. Equity Research Analysts are usually further subdivided by industry specialization -- among the industries with the most analyst coverage are biotechnology, financial services, energy, and computer hardware, software and services, automobiles, mining, retail etc. In the broadest terms, equity research analysts seek to develop, and thereafter communicate to investors, insights regarding the value, risk, and volatility of a covered security, and thus assist investors to decide whether to buy, hold, sell, sell short, or simply avoid the security in question or derivative securities. To gather the information required to do so, securities analysts review periodic financial disclosures (such as made by United States-listed issuers to the S.E.C., i.e. Annual Reports, Quarterly Reports etc) of the issuer and other relevant companies, read industry news and use trading history and industry information databases, interview managers and customers of the issuer, and (sometimes) perform their own primary research. Career Path Entrance into the profession, which is generally very well paid and prestigious, is highly competitive. Those who enter the profession at the junior level typically have an undergraduate degree from a leading college or university and one to a few years of experience in some other discipline of finance or (lacking such experience) an MBA or other relevant advanced degree. Those who enter the field in a junior capacity can progress to a senior capacity in a fairly brief period of time (two to four years) if they prove themselves talented; often such advancement is greatly aided by earning a Chartered Financial Analyst charter (which requires passage of three, successively more difficult examinations over a period of not less than nineteen months). Many securities analysts have directly entered the profession at a more senior level; such persons typically have an MBA or other relevant advanced degree and a number of years of progressively responsible experience either in another finance profession, or in the industry which they will be covering as an analyst. The main responsibilities of the Analyst can be summarized are as follows: Gathering and analysing data from a variety of sources, including company reports, the internet, online databases and JPMorgan proprietary content. Building, maintaining and analysing financial models of companies and industries; generating regular and one off reports, graphs and datasets from these models, using standard JPMorgan model formats.
Writing content (text, tables and charts) for company and industry reports and presentation to be used internally and published externally by colleagues in other parts of global research. Maintaining regular contact with colleagues in the global sectors, taking part in conference calls and responding to project requests (often client-generated).
Potential Recruiters: Goldman Sachs JPMC BRICS Securities India Infoline Motilal Oswal And other Indian I-banks and brokerage houses
Asset management/ Mutual Funds/ Money Management
What does a career in this sector entail? Asset management is the business of making money with money. Asset managers manage money - other people's money, and gobs of it. Generally, they convert that money into assets - stocks, bonds, derivatives, and other types of investments - and try to make that money make more money as fast as possible. Mutual funds, for instance, hire asset managers; so do corporations with lots of money sitting around, banks, and high-net-worth individuals. Asset managers have one simple goal: to invest other people's money wisely and profitably. Asset managers use a combination of investment theory, quantitative tools, market experience, research, and plain dumb luck to pick investments for their portfolios, ranging from high-risk stocks to commercial real estate to cash accounts. The profession requires excellent quantitative and analytical skills, organizational skills - and nerve - to make split-second decisions with millions of rupees riding on the line. Careers for fresh MBAs As per our information, mutual funds typically recruit MBAs from premier campuses for marketing and sales functions. (MOFS) For example, HSBC AMC visited MDI last year for this kind of profile. The very concept of a mutual fund is investors giving their money to professional & experienced fund managers to invest. So in our information, mutual funds recruit people for analyst / fund manager profiles from brokerage research houses, FIIs, bank treasuries and other such organisations. So those looking at a longer term career with mutual funds or pensions funds should target such recruitments.
AMCs HSBC AMC Kotak Mahindra Mutual Fund Standard Chartered AMC ABN AMRO AMC Principal AMC Birla SunLife AMC DSP Merrill Lynch FM Fidelity Fund Management
Companies not exactly AMCs, but which do not fall under any other category 1 Temasek Holdings (Can be said to be a conglomerate – but with a focus on investments) (areas - investments, fin & acc, eq research, treasury, HR) 2 JP Morgan Chase (Financial Conglomerate) 3 Citigroup (Financial Conglomerate) 4 Stern Stewart & Co (Financial Consultants) 5 Metdist (Trading Company under Citibank UK) (seems to be one of those shady companies that FMS has cracked!) Hedge Funds Gartmore (IIM Cal) General Atlantic Partners (IIM Cal) Other Important related Companies 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. Anand Rathi Securities Motilal Securities Kotak Securities Avendus Advisors (I-Bank which has visited FMS, Bajaj last year!) Indiabulls Sharekhan Darashaw DSP ML GMI and DSP ML GPC HSBC Securities & Capital Markets JM Morgan Stanley Rabo India Finance Rabo Bank Temasek Holdings (cracked by FMS) ICICI Ventures ICICI Securities Sun Equity (IIMC) Lazard India (Investment Bank) Ambit Corporate Finance Pte.Ltd. (Investment Bank) Kotak Mahindra Capital Company Limited (Investment Bank) JP Morgan (Securities Trading) AIG India (Insurance) CitiFinancial Consumer Finance India Ltd ( Banking, retail loans) ING Vysya Investment Banking (Investment Bank)
Project finance is the financing of long-term infrastructure, industrial projects and public services based upon a complex financial structure where project debt and equity used to finance the project are paid back from the cash flow generated by the project rather than the general assets or creditworthiness of the project owners. The financing is typically secured by the project assets, including the revenue-producing contracts. A Project is a scheme of finite set of tasks to be done in a specified period for deriving expected benefits under certain assumed conditions. An industrial project is a scheduled set of activities aimed towards the certain criterion of a particular asset as per planned specifications, to generate wealth as estimated for the coming years. However, a project is not strictly a private effort or event. It is not something that can be done in isolation of the environment or society. It’s a two way process, a give and take affair, in as much as it draws on resources like technology, machines, finance, material from the environment, converts raw material into some product or service relevant to the society and returns it for appropriate price to the society. When we consider project finance, there are different types of projects that would need finance, which are as follows: • Modernization project • Expansion project • Diversification project • New/ Greenfield Project • Research & Development project • Backward–forward integration project • Captive Project • Ancillary Project Characteristics of Infrastructure Project Financing: • Long Gestation Period • Uncertain Cash Flow • Negative Cash Flows in initial years • Cash Flow financing not necessarily asset based • Large and lumpy investments • Absence of full recourse financing • Lenders have to rely on: o Long term contracts underlying project structure o Government support for the project including guarantees
INFRASTRUCTURE FINANCE Infrastructure may be defined as “services and facilities that support day to day economic activity”. Infrastructure includes roads, electricity, telephone service, and public transportation. Infrastructure has traditionally been provided and maintained by the government. However, most nations are currently experimenting with privatization of some elements of the infrastructure as governments seek to cut their expenditures. The Expert Group constituted by Government of India has identified six sectors under infrastructure for commercialization. These are: Power, Telecom, Roads, Ports, Industrial parks, and urban infrastructure. In India there is an immense need of Infrastructure projects to take care of the basic facilities needed for economic development. The country is advancing with a number of projects in sectors like telecom, transportation, construction, power, ports, urban infrastructure, as well as other basic facilities like schools and hospitals. The projects in these sectors are usually of a long duration and require humungous investments. The size and duration of finance requirement usually make it difficult to be procured by other normal financing companies or banks. The expansion of infrastructure in the future cannot continue as it has been in the past, based solely on public sector (government) due to a number of risks involved in it.. It was imperative to bring in the private sector as a supplementary source as existing public sector systems were unlikely to mobilize the resources needed. The Public – Private Participation (PPP) model can be seen to be used extensively these days. The infrastructure requirements of the Asian region are very large and also increasing rapidly because of high growth. Typical job role of MBA Finance Students would involve: - Knowledge of any particular sector (from the above mentioned sectors) (Very Important) - Knowledge of Financial Valuations/ Corporate Finance - Portfolio Management - Credit Analysis Potential Recruiters: IDFC SBI Caps L&T IL&FS
Introduction As Indian is being slated to grow to become the third largest economy in the world, it is fast emerging as one of most profitable investment locations among the emerging markets. Capital markets have been the traditional investment avenues of both individual and institutional investors. A relatively new channel of earning lucrative returns and diversifying risk is Investments in Real Estate. In the form of property developments in Commercial, Residential, or Retail property markets, investments in real estate have are forming an increasing part of the portfolios of investors. What does a career in this sector entail? Real estate service firms in India provide, broadly, five kinds of services: 1. Research and Consultancy: Example a MNC entering India may appoint a Global Real Estate Service to advise on the location for their manufacturing facility taking into consideration issues such as availability of state government incentives, cost of real estate availability of manpower, quality of labour, educational facilities for children of expatriate managers, etc. 2. Valuations and due diligence: In an era of mergers and acquisitions, a substantial part of the assets of the taken over firm are its real estate assets. The acquiring firm might want to revalue and do a due diligence on the real estate that is has to pay for as a part of takeover. 3. Agency: Agency is a term for property broking and would involve: user representation (tenant/purchaser), landlord representation (developer/individual landlord). Typically, it is known as project marketing. Though majority of the agency's service is used by corporates, individuals are also turning to professional firms for this service. 4. Project Management
Interior or (Fitout) Building (Exterior)
If a client has acquired some space which it wants to convert into a running facility, the project manager designs the facility, appoints the architects and contractors in consultation with the client, supervises the work and does quantity surveying. The project manager's job involves completing the project in time, within budgets and delivering the quality the clients wants. 5. Facilities Management: Traditionally known as property management, this service entails maintenance of the premises, provision of key services such as photocopying facilities, cafeteria, car parking etc. Basically, providing everything that is needed to run the facility and enhance the value of the premises along its life cycle. A fresh executive joining a global real
estate service provider firm would typically be provided with an initial orientation and then learns on the job in a designated department which can be an agency or research or project management. In a service business, and specifically real estate, one cannot exclude the two activities of getting new business and servicing the business. Careers for fresh MBAs With their growth, these international property consultancies have started recruiting MBAs from campuses or professionals from the services industry and have given them specialized training. As they grow, these firms will need to recruit more and more professionals and, unlike in the US or Europe, there are no specialized, recognized or accredited courses on real estate in India. Some institutes are seriously looking at introducing the subject in their curriculums. Also, some of the business schools plan to introduce electives in real estate during the second year, as the number of international property consultants visiting their campuses is increasing. Some of the topics which one should be aware of are
Legislation affecting real estate Housing finance sector General real estate scenario Real estate financing Quantity surveying Land economy Property management Valuation
The key qualities The five key qualities that a global real estate service provider firm would look for in a prospective employee are:
Good communication skills, both written and conversational Interest in real estate Good number crunching skills Service industry orientation Integrity and ethics
If you fit the bill, there is excellent opportunity for MBAs in this sunrise industry.
Companies: After economic liberalization, the real estate services sector has seen the entry of global real estate service providers. Some of the examples can be: 1. Chesterton Meghraj
Chesterton Meghraj is India's leading international property consultant. Established in 1995, the company brought together the property expertise of the Chesterton International Group and the financial asset management experience of the Meghraj organization. The company has total staff strength of nearly 400. The company boasts of many big clients. http://www.bangaloreit.com/html/aboutbng/meghrajfrm.html 2. Colliers Jardine 3. CB Richard Ellis (CBRE) CB Richard Ellis was the first independent international real estate consultancy to set up offices in the Indian Sub-continent. Since its inception in New Delhi in 1994, the Indian operations have grown to a network of offices in all major metropolitan cities, providing services in the core areas of Strategic Consulting, Valuations/ Appraisals, Agency Services, Asset Services and Project Management. Today, with over 550 professionals, CB Richard Ellis South Asia is the leading reaal estate consultant in the Indian subcontinent. http://www.cbreindia.com 4. Knight Frank Knight Frank is a 105 years old property consultancy headquartered in London, with 136 offices worldwide. 5. Cushman & Wakefield 6. Le Salle Partners 7. Jones Lang Wootton Jones Lang LaSalle is a leading global provider of integrated real estate and money management services. They serve clients locally, regionally and globally from offices in more than 100 markets on five continents. They have approximately 17,300 employees (± 8,100 professional employees and ± 9,200 directly reimbursable property maintenance employees). http://www.joneslanglasalle.co.in
8. ICICI PROPERTY SERVICES GROUP ICICI Property Services are the Real estate Consulting arm of ICICI Bank HFC. It has headquarters in Mumbai, offices spread over 40 cities, and about 225 markets across India. The following services are offered by the PSG group are Agency Transactions, Research and consulting and valuation, Real estate Investments, Rent Securitization and Joint Venture Securitization. The remuneration in global real estate service firms is as good as and even betters those firms in other service industries because of incentives apart from the salary. The MNCs are coming to India as India is an untapped market and has few players in this field. Moreover, global companies are setting up operations in India and real estate is a profitable business.
Securities sales and trading
Introduction Securities sales and trading is an extension of the investment banking industry. An investment bank relies on its sales department to sell bonds or shares of stock in companies it underwrites. Most investors, whether they are individuals with a few hundred dollars to invest or large institutions with millions, use securities sales representatives when buying or selling stocks, bonds, shares in mutual funds, insurance annuities, or other financial products. Securities sales representatives often are called stock brokers, registered representatives, or account executives.
What does a career in this sector entail? It could primarily involve two kinds of functions: 1. Institutional Sales The company here is an active underwriter and dealer in fixed income securities, including corporate bonds, government bonds, and money market instruments. An individual doing a job here would be required to do Analytics to maintain profitable trading. 2. Personal Investment Sales/ Full Service Brokerage The Company could also provide access to a variety of investment products through a full service brokerage capability to high net worth individuals seeking superior investment performance. People who invest in securities must use licensed brokerage or financial firms that advise them and handle the actual trading and investing for them.
3. Consulting for Securities Investments In this function an individual is required to offer investment advice to institutional investors or high net worth individuals. They may explain stock market terms and trading practices, offer financial counseling or advice on the purchase or sale of particular securities, and design an individual client’s financial portfolio, which could include securities, life insurance, corporate and municipal bonds, mutual funds, certificates of deposit, annuities, and other investments.
Securities sales and trading are high profile, high-pressure roles in the investment banking industry. Unlike other I-banking careers, such as corporate finance, public finance, and M&A, where the emphasis is on the team, securities salespeople and traders are independent, working on commission to bring to market the financial products that others create. The most important part of a sales representative’s job is finding clients and building a customer base. Thus, beginning securities and commodities sales agents spend much of their time searching for customers. They also may meet clients through business and social contacts. A fresh MBA’s job role could be: Associate Relationship Manager - Acquiring new clients and advising HNI’s on their long term and short term investments and maintaining relationships with them Equity analyst Equity Dealer - Will be responsible for acquiring clients and managing their portfolio by assessing their needs and advising them on their Investments, based on the research reports generated by the research department Commodity dealer - Will be responsible for managing the portfolio of clients interested in investing in commodities by assessing their needs and advising them on their Investments, based on the research reports generated by the research department
For instance, a fresh MBA finance graduate would be required to analyze fundamentals of a particular commodity by researching which includes valuation on the basis of supply and demand, and the research would be as in depth as to keep track of the wholesale market for commodities. Careers for fresh MBAs With a growth in this sector, these companies are seriously looking at fresh MBA’s for mostly analytical work. However, for Sales function they require experienced people from related fields. Desired Knowledge The Candidate should have good knowledge of Finance. Also professional qualification in Securities trading would be helpful. NCFM certification in this regard may do the needful.
Some Important Companies DSP Merrill Lynch Indirect Sales: http://www.dspml.com/gmi-sales.html DSPML has an unparalleled distribution network comprising approximately 4,500 distributors National & Regional Alliance Partners spread across India. Being one of the leading
underwriters of both debt and equity, we are poised to offer top-grade primary products to our distribution channel. Over the years, we have emerged as a leading distributor of mutual fund products. We are in a position to provide one of the widest ranges of quality products and services to our sub-brokers: Mutual Funds Bonds Fixed Deposits Equity IPO
Karvy Consultants KARVY, is a premier integrated financial services provider, and ranked among the top five in the country in all its business segments, services over 16 million individual investors in various capacities, and provides investor services to over 300 corporates, comprising the who is who of Corporate India. KARVY covers the entire spectrum of financial services such as Stock broking, Depository Participants, Distribution of financial products - mutual funds, bonds, fixed deposit, equities, Insurance Broking, Commodities Broking, Personal Finance Advisory Services, Merchant Banking & Corporate Finance, placement of equity, IPOs, among others. Karvy has a professional management team and ranks among the best in technology, operations and research of various industrial segments. This company does not come to campuses. Kotak Mahindra Kotak Securities Ltd is also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) providing dual benefit services wherein the investors can use the brokerage services of the company for executing the transactions and the depository services for settling them.
HSBC India HSBC Securities Services is a part of the Corporate, Investment Banking and Markets business of the HSBC Group, offering a wide range of support services to corporate and institutional clients including.
SBI Caps SBI Capital Markets Limited is a member of the National Stock Exchange of India Ltd. in the Capital Markets as well as the Wholesale Debt Market segment and is also a member of The Stock Exchange, Mumbai in the Capital Markets segment.
The Broking Group has been set up to cater to the secondary market needs of Financial Institutions, Foreign Institutional Investors, Mutual Funds, Banks, Corporate's, High Net Worth Individuals, Non resident Investors and retail investors. Services Currently Offered:Institutions Only 1) 2) Equity Broking Debt Broking
Services envisaged in future:1) Derivatives Broking 2) E-Broking 3) Equity /Debt for HNI, Corporate's, Retail
Private Equity Industry Structure The private equity industry is generally composed of four major types of investors: Venture Capital Leveraged Buyout Mezzanine, and Secondaries / Funds of Funds investors.
Venture Capital A venture capital fund invests in early stage companies in need of capital for growth. Such an equity investment is often structured as a preferred stock security. It is rare for a venture capitalist to structure an investment in an early stage company as a straight debt instrument, as the startup with unproven products and cash flow constraints would be unable to make the interest payments. Venture capitalists will usually take a minority, non-controlling stake in the company and may often syndicate the risk of the investment among a number of firms. Venture capital investments typically proceed according to a number of different stages. A pure startup company will obtain its initial financing through a “seed round.” This round may be far less than $1 million in size, and may not even be sourced from a venture capitalist but rather from an angel investor. An angel investor is a wealthy individual, acting alone or in a group, that makes small investments of his or her own personal capital in early stage companies. If the seed round is successful, the company will often require several rounds of venture financing before the investors are able to exit their investment through an initial public offering (IPO) or, more commonly, a sale to a strategic investor. Leveraged Buyout A company entering into an LBO is typically a mature but underperforming entity with a proven product and stable cash flows. Often, an LBO candidate is a subsidiary of a larger company that has been underperforming or has become nonessential to the parent company’s operations. An LBO fund is unlikely to undertake a transaction with a high growth technology company due to its unpredictable cash flows. Cash flow is essential to make interest payments on debt. Unlike a venture capitalist, an LBO investor will typically take a control position in the company, investing equity and structuring a combination of loans from various lending sources. In analyzing a transaction, the LBO investor will typically value a business based on a certain multiple of its EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization). The debt used in the transaction will be raised from the public and/or private markets through the issuance of high yield bonds and the commitments of commercial banks and other institutional lenders. The percentage of equity used in a transaction will vary depending on the investment climate and the projected cash flow of the company compared to its debt payments. Once the transaction has closed, the LBO firm will seek to improve the company’s internal processes and structure so as to maximize its free
cash flow available for interest payments and investments in growth projects. Once value has been created, typical exits include IPO, sale to a strategic buyer or sale to another LBO fund. Mezzanine A mezzanine investor is somewhat different from other direct private equity financiers due to its preference for investments in debt-like securities. A mezzanine investor receives securities which have greater seniority than equity in a company’s capital structure, typically at the subordinated debt level. Such securities may feature an accumulating or current pay dividend and will often include equity warrants. Due to its lower risk tolerance and investment in less risky securities, the mezzanine investor typically receives a lower return than other private equity investors. These funds’ ability to generate returns are somewhat dependent on the IPO market since mezzanine financing is typically used to bridge the financing gap from the time a firm decides to issue public securities to when it is actually able to execute the sale of these securities. Recently, mezzanine funds have gained popularity and multi-billion funds have been raised. Secondaries / Fund of Funds A secondaries fund is different from other private equity vehicles in that it does not invest directly in operating companies. Rather, it purchases interests in existing private equity funds, often at deep discounts, from limited partners who choose to monetize their investment before the typical 10-year period of a partnership has been completed. Similarly, a fund of funds investor is an asset manager that allocates capital among a number of private equity funds, including both venture and LBO funds. Through this approach, the fund of funds manager offers diversification and expertise to certain types of limited partners, such as small endowments and foundations that do not have the staff to manage the investment process effectively. Roles within PE Firms For a candidate, this list is a starting point in understanding the organizational structure of private equity firms. Titles and responsibilities vary significantly based on firm size, investment focus, and geographic location, among other factors.
The Associate Role Since most MBA students will be seeking a position as an Associate, most of this note is focused on describing an Associate’s tasks, what the Associate title means, how this role is changing, how an Associate develops a career, and the challenges for MBA students seeking an Associate position. Tasks and Activities: A successful Associate candidate must have a diverse skill set, as he or she will be called upon to participate in all phases of deal making and possibly in operations and fundraising. The three main abilities required are: technical skills to understand the industries in which the firm invests, analytical skills to assess investment opportunities, and interpersonal skills needed to build a strong network which will be a major resource throughout his/her career. Technical skills – firms tend to target their investments in specific sectors or domains. Much of the Associate’s job is focused on gaining expertise in a firm’s specific domain (if he/she does not have previous experience in this sector). Analytical Skills – These skills are largely acquired through work experience in finance, consulting or similar positions as well as an MBA education. The Associate must be able to understand business models in detail, produce relevant research on market trends, competitor products and customer profiles, and also be able to support an investment thesis for the specific industry sector or market. This involves due diligence such as visiting the company, speaking with customers, suppliers and competitors, and modeling the financials to determine the company’s valuation. Interpersonal Skills – These skills will obviously be important for general success within a firm, but interpersonal skills are essential for establishing the network of contacts that will support the Associate throughout his/her career. Networking activities should seek to build two types of contacts: o Contacts that will provide deal flow – these will include other investors, service providers such as lawyers and bankers, trade groups, and entrepreneurs. o Contacts that have access to individuals with managerial capabilities – these will include entrepreneurs, industry executives and possibly management consultants.
Associates must have the ability to process various kinds of data, interpret the data effectively and reach a conclusion. The Associate must absorb a lot of information, determine trends and key issues, and then tactfully raise and address these points with investment decision makers in the firm. Associates should expect to be judged on how well they are able to assess the key factors of a deal, whether they make the right recommendation about the deal and how fast they reach a decision. Beyond execution, relationship building is extremely important for Associates and is essential to their long term career success.
The following exhibit details the responsibilities of an associate:
Potential Recruiters: Chrysalis Capital ICICI Ventures Avigo Corp. Dubai Indocean Chase Capital Sabre Capital DLJ Alliance Walden International SUN Group
Introduction In India, the concept of insurance was never a given a serious thought, as compared to other countries. People still are under insured, life insurance premia to Gross Domestic Product (GDP) ratio is a mere 1.4% as compared to a healthier rate of 8% amongst other developing countries. The reason being lack of awareness and opportunities combined with poor state of services provided. Presently in India, the insurance sector is nationalised, services are rendered by Life Insurance Corporation of India (LIC) and General Insurance Company (GIC) alongwith its 4 subsidiaries. While LIC provides life insurance, GIC is concerned with non life insurance like motor, marine, fire, health and personal accident insurance. LIC employs people in various departments - publicity and public relation department, development department, personnel department, accounts department, actuarial department, secretrarial department, legal department, investment department, inspection department, mortagages department, vigilance department, foreign department, corporate planning department, building department etc. Of late, parliament's nod for the Insurance Regulatory and Development Authority (IRDA) bill has changed the whole scenario. With the passage of the bill, entry of private indian as well as foreign companies, alongwith existing players, in the insurance sector will add variety and quality to the present insurance services. The other positive impact would be on creation of new employment opportunities. Till now employment in the insurance sector was considered akin to any government job, but now with private participation, it will assume significant importance and probably become an exciting career option. Career Prospects for MBAs Apart from career opportunities available with LIC and GIC, employment avenues are also open in corporate sector, stock broking firms, finance companies, shipping companies etc. ACTUARIAL: An actuary holds one of the most important positions in an insurance business. He is involved in solving wide range of financial problems related with insurance investments, financial planning and management. Graduates in maths or satistics are suited for this kind of a job because the work is based on mathematical and statistical skills. In the coming times it will definitely make one of the highly paid career option in the insurance sector. UNDERWRITING: The life and non-life insurance segments require professional underwriters. Underwriters assess the risk in the business and takes care of risk management. Normally foreign insurers prefer people with medical or life science background for this job and the same is likely to happen here MARKETING AND DISTRIBUTION: Marketing insurance product is not easy at all. It is like marketing any other financial product, which requires a push. Marketing therefore would
require specialization. Degree holders from reputed institutes and those with experience in marketing and finance fields can anticipate bright opportunuties in the insurance sector. Even the role of agents will witness a radical change, they will moreover serve as financial consultants, who will offer a complete range of insurance solutions. OPERATIONS: The insurance sector will be requiring Infotech professionals for elaborate databases, network solutions and for in house packages etc. Like other sectors, demand for database and software professionals is expected to grow in the insurance sector as well. INVESTMENT: Like banks and mutual funds, investment professionals will be required in insurance sector as well. Professionals with degree in finance from reputed institutes as well as experienced professionals from banks and mutual funds will have promising career options to look forward to. MORE ON THE ACTURIAL JOB: Actuaries are the forecasters for the insurance industry. Actuaries research, assemble, and analyze data to estimate probabilities of death, sickness, injury, disability, retirement income level, property loss, or return on investments. They estimate how much an insurance company will have to pay out in claims, answer questions about future risk, make pricing decisions, and formulate investment strategies. Some actuaries design insurance, financial, and pension plans and ensure that these plans are maintained on a sound financial basis. Most choose a specialty: life, health, or property and casualty insurance, or pension plans. Actuaries in executive positions help determine company policy. An actuary may be needed to explain complex technical matters to other company executives, government officials, shareholders, policyholders, and the public in general. They may be called upon to testify before public agencies on proposed legislation affecting their businesses or explain changes in contract provisions to customers. They also may help their employers develop plans to enter new lines of business. A growing number of actuaries work in the financial services industry, where they manage credit, prepayment, and other risks, and help price corporate securities offerings. A consulting actuary offers advice to clients—insurance companies, corporations, hospitals, labor unions, the government—for a fee. Consulting actuaries provide advice to various clients on a fee basis. Some consultants design pension and welfare plans, calculate future benefits, and determine the amount of employer contributions. Others provide advice to health care plans or financial services firms. Consultants may be called as expert witnesses in court regarding the value of potential lifetime earnings lost by a person who has been disabled or killed in an accident, the current value of future pension benefits in divorce cases, or the calculation of insurance rates.
The key qualifications/skills for the Actuarial job: The key qualities that a global real estate service provider firm would look for in a prospective employee are:
Strong background in mathematics - working knowledge of calculus, probability, and statistics Courses in economics, accounting, computer science, and insurance Individuals who are well rounded, with courses in liberal arts and business, but also have a strong technical training are preferred by employers. Good communication and interpersonal skills Well informed about general economic and social trends and legislation, as well as developments in health, business, finance, and economics that may affect insurance or investment practices.
Types of employers Banking (Commercial) Communication Services (Broadcasting & Telecommunications) Consulting Services (Management) Financial Services (Securities, Commodity Contracts, & Other Financial Investments) Insurance Carriers & Related Activities Transportation Equipment Utilities. Potential Recruiters: Royal Sundaram AON Global Services Cholamandalam ICICI Lombard General Insurance Company Ltd. ICICI Prudential Life Tata AIG SBI Life Bajaj Allianz
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