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NCCMP PROJECT

ROLE OF INVESTMENT BANKERS IN INDIAN STOCK MARKET
An empirical study
By: Abhinav Aggarwal

Contents
Acknowledgement ........................................................................................................................................ 2 Introduction .................................................................................................................................................. 3 Evolution of investment banking in India ..................................................................................................... 5 Registration of investment bank ................................................................................................................... 6 Grant of certificate ........................................................................................................................................ 7 What is Investment Banking? ....................................................................................................................... 8 Provision of financial advice ..................................................................................................................... 8 Mergers and Acquisitions (or "M&A") .................................................................................................. 9 General financial advice .......................................................................................................................... 10 Capital raising.......................................................................................................................................... 10 Ways of Raising Capital ....................................................................................................................... 11 The Initial Public Offering and the Regulatory Framework ........................................................................ 12 The IPO Process....................................................................................................................................... 12 The Regulatory Framework for IPOs ....................................................................................................... 14 The Role of the Investment Banker in the IPO Process .......................................................................... 15 Competition in the Indian Investment Banking Industry ............................................................................ 19 Drivers of Competition............................................................................................................................ 19 Capabilities of an Ideal Investment Banker ............................................................................................ 20 List of some investment banks in India....................................................................................................... 21 Current and Expected Future Trends.......................................................................................................... 26 Bibliography ................................................................................................................................................ 27

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helpful advices played a vital role in completion of this project. I am also thankful to my Parents and Friends who showed me the right path and supported me all through the development of the project. I therefore will like to pay my special thanks to my institute and my faculty who gave me this great opportunity to complete this project. His excellent guidance.Acknowledgement A project report or a research cannot be completed without the assistance. Kumar Bijoy who advised me the area for project. I am thankful to my project guide Mr. Abhinav Aggarwal 2 . guidance and inspiration of knowledgeable people. This project has been proved rewarding in more than one way and I am thankful for this to all above mention and to all those who remained unmentioned here.

Investment banks work with companies. They can also trade securities for their own accounts.Introduction Investment banking is a specific division of banking related to the creation of capital for other companies. Most of the capabilities of an ideal investment banker are also lacking. The investment banking industry plays an important intermediation function in all market economies. the investment banking industry play an important intermediation function in all market economies. Investment banking in India is a relatively new phenomenon exhibiting low level of competition. and then use their brokerage arms to sell the securities to the investing public. institutional investors and wealthy individuals to raise capital and provide investment advice. reorganizations and broker trades for both institutions and private investors. There are presently few registered Licensed Dealing Members (LDMs) engaged in investment banking activities. Investment banks underwrite new debt and equity securities for all types of corporations. Originally. By bringing together entities in search of new capital and investors. Recommendations are thus made for Indian investment banks to improve on these capabilities in order increase the competition within the investment banking industry and subsequently attract more firms to go public. Just like most developing 3 . both retail and institutional. usually institutional investors. investment banks also aid in the sale of securities in some instances. investment banking meant the underwriting and distribution of securities. In addition to the services listed above. Today investment bankers also invest a lot of effort into helping companies design deals and the securities to finance them. governments. Investment banks also provide guidance to issuers regarding the issue and placement of stock. The investment banking industry is central to the market-based economy. they also help to facilitate mergers and acquisitions. competition within the India. Investment banking is the process of raising capital for businesses through public floatation and private placement of securities. Investment banking is the process of raising capital for businesses through public floatation and private placement of securities. An investment banking industry and capabilities of an ideal Investment Banker are also discussed. The regulatory framework for initial public offering.

this has been a growing industry. It is very crucial then for such a company to select an ideal Investment Bank to guide its efforts in raising long-term capital. Financing of a company‟s investments is seen as part of its financial planning process. companies will increasingly migrate from bank finance to capital market financing for their long term capital needs. investment banking in India is a relatively new phenomenon. Financial planners need to evaluate every aspect of this decision process in order to come up with the best source and approach to raising longterm funds. plagued with various problems in accessing long-term funds. This implies that there are approximately 1. With a less efficient financial market like India‟s. The decision variables in this direction will depend on established standards the company can rely on in order to identify the most qualified Investment Banker (Manaster and Carter. 4 . the growth has been uneven. The India Stock Exchange (GSE) for instance started with 3 Licensed Dealing Members (LDMs) in 1990. 1990). Unfortunately. An important consideration in taking this decision includes the selection of an Investment Banker to help the business in raising the needed funds. In many cases such as Ashanti Goldfields Company. if the experience of other counties is indicative of what is likely to happen. the Initial Public Offerings (IPOs) involved offloading of shares held by the government with relatively little capital going to the company‟s involved for real investment. it has 14 LDMs. 4 corporate bonds and 14 LDMs. However. any company intending to raise capital find itself in a precarious position. By any standard. India Commercial Bank and SSB Bank. Currently.countries.9 listed companies per LDM. The Exchange has 26 listings of equities. Only a handful of firms have had a significant impact on the market. then it is likely that in the future.

The securities scam in May. leading private sector players involved in the scam included Fair growth financial services and Champaklal investments and finance (CIFCO). the number of merchant banks rose to 33 and was set-up by commercial banks. 1992 was a major setback to the industry. The low entry barriers coupled with lucrative opportunities lured many new entrants 5 . By 1980. The market turned bullish again in the end of 1993 after the tainted shares problem was substantially resolved. In 1967. Several leading merchant bankers. State bank of India ventured into this business by starting a merchant banking bureau in 1972. The advent of economic reforms in 1991 resulted in sudden spurt in both the primary and secondary market.In 1972. which started rendering these services.up a separate merchant banking division to handle new capital issues. The capital market witnessed some buoyancy in the late eighties. There was a phenomenal surge of activity in the primary market.Evolution of investment banking in India The origin of investment banking in India can be traced back to the 19th century when European merchant banks set-up their agency houses in the country to assist in the setting of new projects. SBI capital markets. took note of this with concern and recommended setting up of merchant banking institutions by commercial banks and financial intuitions. promoters for new projects and also provided finance to Greenfield ventures. It was soon followed by Citibank. Andhra bank financial services. The growth of the industry was very slow during this period. Nimesh Kampani as an exclusive merchant bank in 1973. but theirs was limited due to their small capital base. financial institutions and private sector. JM finance was set-up by Mr. In the early 20th century. in its report in 1972. The banking committee. ANZ Grindlays bank set . A few small brokers also started rendering Merchant banking services. Several new players entered into the field. The peculiar feature of these agencies was that their services were restricted only to the companies of the group to which they belonged. The registration norms with the SEBI were quite liberal. large business houses followed suit by establishing managing agencies which acted as issue house for securities. Some of the prominent public sector players involved in the scam were can bank financial services. both in public and private sector were found to be involved in various irregularities. etc. The foreign banks monopolized merchant banking services in the country. ICICI became the first financial institution to offer merchant banking services.

2. Category IV . determining the financial structure. advisors and consultants to an issue.Investment bankers can act only as adviser or consultant to an issue. consultants. underwriters and portfolio Managers. Most of the new entrants were undercapitalized with little or no expertise in merchant banking. They fall under four Registration categories 1. Many of the top rung Indian merchant banks. To carry on 6 . These firms had a huge capital base. The market was soon flooded with poor quality paper issued by companies of dubious credentials. the preparation of prospectus and other information relating to the issue. refund of the subscription and also act as advisors.Investment bankers can carry on any activity related to issue management. However. This energy resulted in synergies as their individual strength complemented each other. Thus. 3. Most of the small firms exited from the business. however. final allotment of securities. consultants. only category I Investment bankers could act as lead managers to an issue. Many foreign investment banks started entering Indian markets. Most of the subsequent issues started failing and companies started deferring their plans to access primary markets. These players could hardly afford to be discerning and started offering their services to all and sundry clients.Investment bankers can act as advisors. who had string domestic base. 4. Registration of investment bank Compulsory Registration: Investment bankers require compulsory registration with the SEBI to carry out their activities. managers. tie up of financiers. Category III – Investment bankers can act as underwriters. global distribution capacity and expertise. underwriters or portfolio Managers.into this industry. comanagers. they were new to Indian markets and lacked local penetration. Category I . Lack of business resulted in a major shake out in the industry. that is. started entering into joint ventures with the foreign banks. The huge losses suffered by investors in these securities resulted in total loss of confidence in the market. 1997. With effect from December 9. only Category I Investment bankers are registered by the SEBI. Category II .

Category I : Rs. 20. (e) They fulfill the capital adequacy requirement of a minimum net worth of Rs. 2. 4. 00. Net worth requirement for Registration is as follow: 1. 5. they have to obtain separate certificate of registration from the SEBI.activities as portfolio managers. 5Crore (f) Partners.00. 50. equipment and manpower to effectively discharge their activities (c) They should have employed at least two persons with experience to conduct Investment banking business (d) Any person directly or indirectly connected with the applicant. which has an adverse effect on their business 7 . an Investment banker who has been granted registration by the RBI to act as Primary Dealer may carry on such activity subject to the condition that it would not accept / hold public deposit. 000 Category III :Rs. 000 Category IV : Nil Grant of certificate The SEBI grants a certificate of registration on consideration of all matters that are relevant to the activities related to the Investment banker: (a) Investment bankers should also be a body corporate other than a nonbanking financial company.000 Category II : Rs. (b) They are expected to have the necessary infrastructure like adequate office space.00. 3. directors and principal offices should not be involved in any litigation connected with the securities market. 00. However.

selling a division. law or business management and or their registration is in the interest of the investors and (h) The applicant is a fit and proper person. Principal clients are companies. or privatizing. particularly publicly listed companies. Provision of financial advice As noted above. government-held businesses or industries. Nonetheless. too. The provisions of the SEBI criteria for Fit and proper person regulations discussed below would be applicable to the applicants. an investment banker needs to have an understanding of all these things because they. and the actions prescribed are corporate actions (taking over another company. returning cash to shareholders by paying them a special dividend. for example by selling off. these services are usually directed at executing government policy. etc. investment banking advice relates to corporate actions rather than product or organizational matters. and governments. Capital raising.). ensuring that the share price fully reflects the value of the business). market analysis or management of organization. What is Investment Banking? Investment Banking falls under two broad headings:   The provision of financial advice. these services are primarily directed towards raising shareholder value (that is. 8 . will have an impact on shareholder value. For governments. For companies.(g) Have recognized professional qualification in finance. such as product improvement.

who can then familiarize themselves with the principal players. or customers. Investment Banking divisions tend to be divided into industry sector teams.Mergers and Acquisitions (or "M&A") The majority of financial advice relates to M&A. There are also many possible financial reasons for making an acquisition.or in the buyer's shares . acquire suppliers.the market likes predictable profit streams. to advise on valuation. The client company seeks to expand by acquiring another business.e. and will value these more highly Shifting the business towards sectors more favorably viewed by the market. further down the chain) Protecting a position (for example by preventing a competitor from acquiring the business in question). economics and dynamics of the sector. The Investment Bankers' roles in these transactions involve:  using their knowledge of the industry sector. to help with the identification of potential targets which meet commercial criteria such as those referred to above using their knowledge of the investment market.so that  9 . further up the chain. form of consideration (should the sellers be paid in cash .which is likely to involve the buyer borrowing the money . In practice therefore. There are many possible commercial reasons for this. again. and therefore the share price increasing in size followed and more widely invested in. such as:       raising profitability. likely to have a positive effect on the share price financing growth improving quality of profits . such as:      increasing the range of products increasing the business' geographical footprint complementing existing products integrating vertically (i.

timing . or debt. Investors may be either institutional (pension funds and the like) or “retail” (individuals). or does it have too much cash on its balance sheet. from whom. that capital comes from external sources. who advise on shareholder aspects (how are the buyer's shareholders likely to view the acquisition?) and how the market as a whole is likely to receive the transaction. how much. or a blend of the two?). just sitting there not earning interest.in what form. Capital raising If a company is to grow. and public relations consultants. it has to invest and. accountants. when the company issues more shares to investors. either from banks or . who buy them for cash. This can be in the form of either "equity". who prepare the documentation for the acquisition and help with the "due diligence" to be performed on the business being acquired. such as funding structure (perhaps the company is too indebted. tactics and structure coordinating the work of the other advisers involved in the transaction lawyers. 10 . General financial advice Investment Banking also involves providing general financial advice on a range of issues. often.Investment Banks advise on the raising of capital . timing. and should issue shares to raise more money. the seller ends up with a stake in the buyer. who ensure that the transaction has a favorable press. who advise on the financial reporting aspects of the transaction. and tax consequences. so that the issuer knows for sure how much cash it is going to raise and can plan accordingly).directly from investors. brokers. so that it should consider paying a large dividend to its shareholders or buying back some of its own shares?).more usually nowadays .and may also charge a fee for arranging the financing or for "underwriting" (guaranteeing to take up any securities that are unsold in the market.

A renounceable rights offering gives the shareholder the option to exercise his right to purchase the new shares at the issue price. A non-renounceable rights offering obligates the shareholder to exercise his rights at the issue price. Rights Offerings: Most company regulations or charters allow shareholders to have a pre-emptive right in additional stock issues. anytime the company wants to raise additional equity capital. it may decide to sell new shares or stock through a rights offering or a public offering. This usually affects managerial staff in order to reduce the prevalence of the principalagency problem. new stocks are sold to one or a few investors. Thus. 2. 4.Ways of Raising Capital There are several ways of raising equity capital: These are discussed below: 1. the regulations or charter allows employees to purchase the shares of the company usually at predetermined prices based on the financial performance of the entity. 11 . it must make a formal offer to existing shareholders before it can seek the interest of potential outside investors. Private Placements: This method of selling securities is generally used by companies who are interested in reducing their floatation costs and are interested in a specific group of investors. it is called a rights offering. Where it sells additional stock issues to existing shareholders. This offer may be renounceable or non-renounceable. 3. generally institutional investors who invest in large blocks of shares. Employees Purchase Plans and Employee Share/Stock Ownership Plan: In most organizations. Under private placements. Public Offerings: Where the corporate charter or regulations are silent on pre-emptive rights of existing shareholders.

A combination of the approaches used will yield the best description of this process. the regulatory framework within which the activity is organized and the role of the investment banker. divides the process into two distinct stages: Stage-one decisions are internal to the company while stagetwo involves the company and an investment bank or investment banks. 2. IPO decisions usually start with the company making decisions in the following areas: 1. Competitive bids versus a Negotiated deal: Should the company offer a block of securities for sale to the highest bidder? Or should it negotiate a deal with an investment banker? Competitive bids normally are used by large well-known firms whiles negotiated deals 12 . which may include various combinations of securities usually called exotic securities. Amount to be raised: The decision variable here is the amount of new capital needed by the firm. 2002) give a summary of the process by focusing on decisions concerning pre-registration statements to the trading of the securities on stock exchanges. Brealey and Myers. bonds or other innovative types. The IPO Process Many writers in corporate finance have given different descriptions of the initial public offering process. 3. Some writers (Weston and Copeland. 1989. The choice of security and the method of selling will normally fall within the regulatory framework of the securities industry.The Initial Public Offering and the Regulatory Framework At this stage we will focus on the Initial Public Offering (IPO) process.  Phase-I IPO Decisions: At Phase-I. Grinblatt and Titman. the firm would have to choose from basic forms such as shares. Type of Securities to use: This stage of the process will consider the best security to use. This study describes the process under sections Phase-I and Phase-II IPO decisions. 1994. Brigham et al (1999).

after taking an inventory of all the relevant information. Reputable investment banks target more established firms whiles other investment banks are good at speculative issues or new firms going public. This depends on a plethora of issues. The important issues considered here include. usually resolved through the research or experience of the investment banker. The intensity of the problem faced by the issuing firm may stem from the fact that there is no model to rely on in selecting an investment banker to make the IPO successful (Manaster and Carter. the securities industry laws (SIL) however allow applications to be filed with the GSE before it is filed with the SEC.  Phase-II IPO Decisions: At Phase-II. decisions include the input of the firm‟s selected investment banker. Re-evaluating the initial decisions: At this stage. public sale of the security can never begin. The main aim of the reevaluation processes is to fine-tune the internal decisions of the company under Phase-I. 1990). 3. it has to file an application with the Securities and Exchange Commission (SEC) and the stock exchange if it wants the shares to be publicly traded.are used by small firms not known to the investment banking community. the capacity of the market to accommodate the issue. Pricing of the Security: Another important decision at this phase is the pricing of the security. These decision processes are organized under pre-underwriting conferences as espoused by Weston and Copeland (1989). the firm and its investment banker will have to re-evaluate regarding issues such as size of the issue and type of securities to use etc. 4. This is to ensure the success of the issue. Without the examination and approval by these regulatory bodies. The pricing of the issue has been identified as one of the 13 . Filing of Registration: The investment banker. Selection of an Investment Banker: the firm must decide on the investment banker to use in raising the needed capital. Components of Phase-II decisions generally include the following: 1. as it tends to have other implications on the success of the IPO process. This stage is very important to the firm. In India. the reputation of the investment banker etc. 2. the risk profile of the issuer.

1989. which usually covers the description of the issue. The Regulatory Framework for IPOs The securities industry is under the watchful eyes of the SEC. it may have to form an underwriting syndicate. Where it is unable to underwrite the issue. The managing investment bank through the selling group agreement. is able to control the selling group. 5. Important requirement in India for a company going public is the appointment of an investment banker to guide it through the process. 6. The date on which the selling of the issue will begin is made public before or during the publicity campaign in order to avoid unfavorable events or circumstances. Grinblatt and Titman. 1999. Differences may be found in the regulatory framework within which it is organised. concession. Forming of the Selling Group: The selling group is formed to facilitate the distribution of the issue for a commission. 4. handling of purchased securities and duration of the selling group. This is usually preceded by a series of publicity campaigns. Forming the Underwriting Syndicate: In underwriting of security issues. This piece of legislation empowers the SEC to oversee all matters relating to the issue securities within the broad framework of existing laws. Offering and Sale: The last important step in this process is the formal sale of the securities after the approval by the regulatory authorities. This will ensure the diversification of underwriting risk to the managing investment banker and permits economy of selling effort and expense and encourages nationwide distribution. as amended by Act590). The process in India is very much the same as what pertains in other economies.sources of controversy between the issuer and the investment banker (Weston and Copeland. This regulatory body derives its powers from the Securities Industry Law (PNDCL 333. the managing/selected investment banker may or may not be in the position to underwrite the whole issue. Its authority also extends to the supervision of the activities of major players in the industry including investment banks. Brigham et al. 14 . 2002).

The memberships regulations are clear the basic requirements to satisfy if an individual or corporate body desires to become a member of the exchange. However. the Companies Code. The GSE also relies heavily on other legislative instruments such as LI 1509 (Regulations Membership) and Listing Regulations (LI 1510) to effectively regulate transactions on the exchange. how does a company come up with the right investment banker to manage its IPO? Despite the numerous efforts made by academics to investigate into issues concerning the market for IPOs. which guide numerous activities of registered corporate entities. the listing regulations provide the fundamental requirements a corporate entity must satisfy if it desires to list its securities on the exchange. Distribution and. is another important source of regulation that affects the market for equity and debt capital. It contains various provisions. However by examining critically the roles and responsibilities of investment banks in the IPO process. Weston and Copeland (1989) identified three main functions or roles investment banks play in the IPO process and these include:    Underwriting. However. 1963 (Act 179).Another recognized authority in this market is the GSE through its regulations aimed atsafeguarding the interest of investors. Further to the above. The Role of the Investment Banker in the IPO Process It is clear from the above discussion that. in the absence of a model to guide issuers of securities in selecting investment banks. The success of the IPO will to a large extent depend on the capabilities of the investment banker selected (Ellis. 1989). not much has been done on the capabilities of investment banks. we can glean some qualities or capabilities an investment banker must possess in order to survive in its market. It is also considered as a selfregulatoryorganisation since its rules and regulations guide its members with regards to transactions conducted on and off the exchange. Advice and Counsel 15 . It however derives its source of existence from the provisions in the Stock Exchange Act and PNDC Law 333. the activities or roles of the investment banker in the IPO process cannot be discounted.

because of their expertise in doing this relative to the issuing firm assuming this responsibility when issuing securities. Where the investment banker is not able to sell the minimum quantity agreed upon. Under this underwriting agreement. the best efforts agreement absolves the investment banker from any risks in the issue. the whole issue is cancelled and reissued when the market is ready to accommodate the issue. and they are the firm commitment and best efforts underwriting agreements. the most important factors include. Its ability to make valuable inputs in this direction may largely depend on its experience in origination and selling of securities. Advice and Counsel: This involves the investment banker making valuable inputs into decisions concerning its client ability to succeed in the capital market with an IPO. On the other hand. Ellis (1989) identified two categories of factors critical to evaluating and choosing an investment bank. Distribution: Another related function to the one described above is the ability of the issuing firm to reach as many investors as possible with its security. Understand our company 2. Make useful recommendations to our company The least important are: 16 .Underwriting: This is the insurance function of bearing the risk of adverse price fluctuations during the period in which a new issue of securities is being distributed. According to Weston and Copeland (1989). Earn credibility with our senior management 3. In his assessment. investment banks play a very crucial role here. In addition. 1. There are two fundamental ways of doing this. the investment banker undertakes to help sell at least a minimum amount of the issue with any unsold amounts returned to the issuing firm. The firm commitment agreement obligates the investment banker to assume all the risks inherent in the issue.

In his study. Understanding the client company‟s needs for service and its financial goals and policies. especially when the investment banking industry in US has over the years survived. Expertise in Eurobond market 2. it is made an integral part of implementing the financial strategy. 3 of the 4 different industries he studied ranked this variable as the most important of all in dealing with an investment banker. Credibility with the client corporation‟s senior management-earned over several years. Having special expertise in a specific service. 6. Expertise in equity underwriting Ellis (1989) again identified six (6) reasons why investment banks gain importance with their corporate clients. 17 . These are: 1.1. which tends to impact on choice of an investment banker by senior management who are interested in strategic issues of the organizations they are responsible for. Recommending a specific transaction. 2. 4. Making useful recommendations to the company over a period of time. Innovating with new financing techniques. Thus if an investment banker‟s capabilities fit well with financial strategies of the organization. 3. Credibility with Senior Management His postulation on the role of an investment banker goes beyond the IPO process to include other activities or capabilities of the investment banker. 5. by maintaining a relationship with their clients. Understand Client Company Another reason he finds important to corporate executives is the investment banker‟s knowledge of their companies and their operations. More conservative corporate executives rated this as a critical success factor in dealing with investment banks.

In this lighten investment banker that is able to consistently make valuable inputs into the financial decisions of a client strengthens the relationship between itself and its client. This has eventually changed the structure of the investment banking industry where size used to be a competitive factor.base beyond their domestic financial markets. point out that investment banks have been motivated in various ways to develop capabilities in these areas to expand their client. This is because it reinforces the reliability and consistency of the investment bank‟s capabilities to its corporate clients.Making Useful Recommendations A more IPO related factor is the ability of the investment banker to make valuable recommendations to the issuing firm over time. Corporate entities are „shopping‟ for specific capital market capabilities of investment banks. though not really taken to be very important then are now making very important inputs into the choice of firms by corporate clients. The era where one investment banker was at the center of a corporate entity‟s financial strategy is over. recommending specific transactions and innovating with new financing techniques are all additives to the more generic functions described above. this has been one of the criteria for ranking the performance of investment banks. These capabilities. Grinblatt and Titman (2002). Expertise in Equity Underwriting Another important IPO related capability is the ability of the investment banker to underwrite securities. 18 . Having Expertise in a Specific Service The competitive wave sweeping the US investment banking industry has caused most investment banks to concentrate on their capabilities where they can gain a competitive advantage. Supplementing Capabilities Other capabilities such as Euro market capabilities. In the absence of any model to determine the overall capabilities of an investment banker.

Although. The GSE also gives a discount to the issuing firm depending on how long it takes for the firm to graduate to any of the official lists of the Exchange (APDF. Drivers of Competition Two main change factors have been identified to bring about competition within the industry in the not too distant future: African Project Development Facility The African Project Development Facility (APDF) in collaboration with the India Stock Exchange is looking for ways to encourage small and medium scale enterprises (SMEs) to access equity capital by encouraging them to go public. Reduced Cost of Floatation The implication of the above is that neither the issuing firm nor the investment banker will have to experience any cash drain in order to undertake an IPO exercise. to a large extent the industry is not very competitive. The arrangement also involves the GSE stream lining thelisting procedure to make provision for provisional listing of securities for 6 months. Under this scheme. there is fierce competition among these four investment banks.Competition in the Indian Investment Banking Ind ustry There are presently only 4 representing 29% active investment banks out of the 14 legally recognized investment banks in India. APDF will finance up to about 30% of cost of going public whiles the companyfinances the remainder. The impact on competition is estimated to be positive because other 19 . 2002). Merbank Brokerage Limited (MBL) and Consolidated Discount House Securities (CDH). Databank Limited (DBL). The four are NTHC.

IPOs have been identified as very costly for the issuing firms. This move. Pre-Financing of IPOs In India. Pricing of Services The ideal investment banker should be able to deliver its services at a lower cost in order to woo capable businesses interested in going public. It also gives it a competitive advantage when the investment banker is bidding for IPO projects. One peculiar problem preventing SMEs in India from going public is the cost involved in going public. This has been one of 20 . all things being equal. This generates income for it as well as help in the distribution of new issues. Capabilities of an Ideal Investment Banker These capabilities can be identified in the services mostly offered by the investment banks. In order for an investment banker to woo clients. They include the following: Investment Management/Fund Management The ideal investment bank in India should possess strong skills in investmentmana gement.inactive investment banks will be forced to build capabilities to be able to compete with the four active investment banks in the market. it should be capable of pre-financing the IPO in order to gain a competitive advantage in its market. will change the face of competition in the industry. In depth Knowledge of Corporate Finance Issues It must have a team of professionals who are well versed in the issues of corporate finance to enable it make valuable inputs into the financial decisions of their clients.

List of some investment banks in India 1. Thus it is cheaper for the issuing firm to outsource the registrar services to the investment banker rather than employ another investment banker to undertake this function. although may not seem necessary to the performance of the investment banking function. controlled finance. It presently concentrates on sectors where Indian firms have strategic expansion advantage namely Healthcare. An advantage of these supplementary services is the future cash streams in fees charged to the issuing firms. Pharmaceuticals. This primarily involves supporting transactions in the security on the secondary market. manufacturing. Avendus Capital An investment bank providing mergers and acquisitions. calculated advisory facilities and Private Equity Syndication to its customers ranging from investors to corporates. etc. only NTHC and MBL have built capabilities over the years to perform this function. IT Services. The bank has a powerful research competence which it utilizes to close business deals in hostile circumstances. 21 .the strategies adopted by NTHC Ltd. over the years in order to gain dominance in the IPO market. Consumer goods. Performing Ancillary Services Other augmenting capabilities include the ability to support the trading of these curities floated. Registrar and Custodial services are the key to the competitive strategies of an investment banker. fixed returns. These activities. Out of four active investment banks. This is bundled together with other services when investment banks are pricing their fees. could create competitive advantage for the investment banker possessing them.

UK and has an authoritative place in the core divisions of its functional areas such as consultant services. It is certified under the Category I of Merchant Bankers by SEBI. Bajaj Capital The Bajaj Capital Group is one of the renowned Investment consultant and Financial Planning firms in India. Cholamandalam Investment & Finance Company A combined fiscal service provider of three firms namely Cholamandalam DBS Finance Limited (CDFL). Bajaj Capital provides custom-made Fiscal Planning facilities and investment consultation to the investors. corporates. Bajaj provides an extensive range of investment schemes such as general insurance. Cholamandalam DBS operates in 16 international markets. fiscal good distribution. ICICI Securities Ltd India's biggest equity house. organizational investors. customers and comprehensive banking activities across Middle East and Asia. Equity Capital Markets Advisory Services. to both public and private institutions. ICICI Securities Ltd provides back-to-back banking solutions through its extensive distribution network to cater to the varied needs of its retail and corporate clients.2.Being one of the biggest distributors of economic goods. IDFC Initiated in 1997 in Chennai. IDFC undertook the responsibility of providing financial support to 332projects accruing a profit of upto Rs 2. DBS Cholamandalam Distribution Limited and DBS Cholamandalam Securities Limited. etc. high income patrons and NonResident Indians (NRIs). corporates. 400 22 . 20. mutual funds. DBS provides an extensive range of facilities to small and medium sized enterprise. 3. 5. The firm is listed under the Monetary Authority of Singapore (MAS) and Financial Services Authority. life insurance. etc. 4.

23 . Tata Investment Corporation Limited (TICL) A non-banking financial company (NBFC). 6. The firm started it operations in 1986 and is an entirely owned subordinate of the State Bank of India.84%stakes in equity segment of SBICAPS 8. SBI Capital Markets SBICAPS is India's foremost investment bank and project consultant. The chief source of return for the firm entails income on investment trading and income accrued on dividend. transportation.million. healthcare. aiding local firms in capital enlistment endeavors for last many years. The investment bank has an impressive track record of controlling various sectors and has played a major role in the government‟s milestone disinvestments. Kotak Mahindra Capital Company Initiator and leader in equity capital markets. tourism and others. 7. Asian Development Bank (ADB) possesses 13. Kotak Investment Banking has undertaken the developmental work of most ground breaking advances in the Indian capital markets comprising the launch of book building and Qualified Institutional Placements (QIPs) in India. agro related business. TICL is listed with the Reserve Bank of India under the group of 'Investment Company'. The firm's commercial activities constitute mainly of endowing in long-standing investments in equity of the firms in various sectors. The sectors under IDFC's financial assistance are infrastructure.

JP Morgan J. UBS's international business institutes are assets and wealth management.P. 14% in Europe. It is a division of JPMorgan Chase & Co. 10. the total share fund of UTISEL is now controlled by superintendent of particular enterprise of UTI. 11. 33% in Switzerland and 12% in Asia Pacific. 24 . It is among the world's biggest individual wealth administrator besides being the second largest in Europe both in terms of market funding and productivity. UTI Securities Ltd Endorsed as a self-regulating professional body in 1994.9. UBS AG UBS AG is an expanded international fiscal service provider with its main office in Zurich and Basel located in Switzerland. and investment banking. (NYSE: JPM) with assets worth USD 2. The firm has its branches spread across 50 nations with around 40% staff performing business in American nations. The firm has been assisting its patrons in commercial and business ventures. The firm has been offering all sorts of investment associated activities which incorporates investment banking and corporate consultation facilities. Morgan is a path breaker in providing financial services and solution to its patrons in more than100 nations across the world assisted by one of the most wide-ranging international product proposals.5 trillion. is one of the renowned investment banks of India. UTI Securities Ltd. besides administering their wealth for more than 2 centuries. After the termination of Unit Trust of India (UTI) Act.

shareholders. pension funds. Goldman Sach facilitate industrial expansion of Indian firms by investing in people.. It subsidiary Morgan Stanley Advantage Services assists Morgan Stanley's Institutional Services operations ranging from fiscal structuring to research activity.12. etc. It is world's foremost global fiscal service supplier with total assets worth Euro 2. retail investors. operational banking. Deutsche Bank takes pride of being the international leader in commercial banking and securities. high income individuals. Goldman Sach Responsible for providing fund ideas and fiscal help to its clients. 25 . portfolio assessment to IT expansion etc. The banking firm administers business risks of the firms and gives helpful suggestion in buying and selling businesses. wealth management. Deutsche Bank With its headquarters in Frankfurt in Germany. institutions. non-profit firms. communities. Morgan Stanley MSIM offers personalized wealth management facilities and goods to administration. The bank is registered in the renowned exchange markets namely New York stock exchanges (NYSE) and Frankfurt (FWB). 14.2 trillion assisted by the workforce of 80. In India the firm operates many local mutual fund schemes under Morgan Stanley Mutual Fund brand for retail investors. companies and our communities present across the world.000 employees across the globe. It also assists the state and national level government in sponsoring their functions through loans and equity shares 13. etc. asset management and retail banking.

about 500 investment Banks with teams of 5-50 people and nearly 1000 mom and pop Investment Banks. Ambit Corp provide excellent financial solutions to its clients. Ambit Corp Finance Leaders in our investment banking. Statistics estimate that every alternate day a new Investment Bank comes up in the country.15. 26 . Current and Expected Future Trends Investment Banking Revenue at present is just over 4 percent of corporate banking revenue pool which is expected to rise over ten-fold by 2020. In India. The firm‟s specialty lies in offering holistic services to our Investment Banking customers in context of Equity Financial Markets. there are about 15 Multinational Investment Banks. Mergers and Acquisitions. 15-20 large homegrown Investment Banks. and Alternate Fund.

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