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STRATEGIC

MANAGEMENT

[2009]

Sharma
Sharma

SUBMITTED BY:

SYNOPSIS OF INVESTMENT BANK

STRATEGIC MANAGEMENT [2009] Sharma SUBMITTED BY: SYNOPSIS OF INVESTMENT BANK SUBMITTED TO: Dr. Vidushi Daizy Choudhary

SUBMITTED TO: Dr. Vidushi

Daizy Choudhary (101)

Anuradha Gupta(106)

Vikas Kapil (107)

Vinay kumar aggarwal (115)

- PGDM III Sem

Motivation of Research

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

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INVESTMENT BANKING

Introduction

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

In addition to the services listed above, investment banks also aid in the sale of securities
In addition to the services listed above, investment banks also
aid in the sale of securities in some instances. They also help to
facilitate mergers and acquisitions, reorganizations and broker
trades for both institutions and private investors. They can also
trade securities for their own accounts
Introduction of the Industry
Investment
Banks help
companies
and
governments
issue
securities, help investors purchase securities, manage financial
assets, trade securities and provide financial advice. The top
investment banks
including Goldman
Sachs, JP
Morgan and Morgan Stanley are said to be in the bulge bracket.

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

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Industry coverage

Corporate Finance

In a corporate finance position you would work to help companies raise capital needed for new
In
a
corporate
finance position you
would work
to
help
companies
raise
capital
needed
for
new
projects
and
ongoing operations.
Capital Markets
This position can be either in Debt Capital Markets or Equity
Capital Markets (ECM).
Mergers and Acquisitions
Setting up deals where one company buys
another is an important source of fee
income for many investment banks.
Project Finance
Project finance involves
funding
infrastructure
and
oil
capital projects off of a company or government's main
balance sheet.
Structured Finance
Positions in structured finance involve the creation of
financing vehicles to redirect cash flows to investors (known
as asset-backed securities.
Derivatives
Equity and Fixed Income Research

Security analysts are usually assigned to an industry or region. You could be responsible for making buy or sell recommendations to investors about a stock or bond.

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Institutional Sales

In institutional sales you would be responsible for conveying information about particular securities to institutional investors.

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

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Evolution of investment banking in India

The origin of investment banking in India can be traced back to the 19 th century when European merchant banks set-up their agency houses in the country to assist in the setting of new projects. In the early 20 th century, large business houses followed suit by establishing managing agencies which acted as issue house for securities, promoters for new projects and also provided finance to Greenfield ventures. The peculiar feature of these agencies was that their services were restricted only to the companies of the group to which they belonged. A few small brokers also started rendering Merchant banking services, but theirs was limited due to their small capital base.

Evolution of investment banking in India The origin of investment banking in India can be traced

In 1967, ANZ Grindlays bank set - up a separate merchant banking division to handle new capital issues. It was soon followed by Citibank, which started rendering these services. The foreign banks monopolized merchant banking services in the country. The banking committee, in its report in 1972, took note of this with concern and recommended setting up of merchant banking institutions by commercial banks and financial intuitions. State bank of India ventured into this business by starting a merchant banking bureau in 1972. In 1972, ICICI became the first financial institution to offer merchant banking services. JM finance was set-up by Mr. Nimesh Kampani as an exclusive merchant bank in 1973. The growth of the industry was very slow during this period. By 1980, the number of merchant banks rose to 33 and was set-up by commercial banks, financial institutions and private sector. The capital market witnessed some buoyancy in the late eighties. The advent of economic reforms in 1991 resulted in sudden spurt in both the primary and secondary market. Several new players entered into the field. The securities scam in may, 1992 was a major set back to the industry. Several leading merchant bankers, both in public and private sector were found to be involved in various irregularities. Some of the prominent public sector players involved in the scam were Can bank financial services, SBI capital markets, Andhra bank financial services, etc. leading private sector players involved in the scam included Fairgrowth financial services and Champaklal investments and finance (CIFCO).

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The market turned bullish again in the end of 1993 after the tainted shares problem was substantially resolved. There was a phenomenal surge of activity in the primary market. The registration norms with the SEBI were quite liberal. The low entry barriers coupled with lucrative opportunities lured many new entrants into this industry. Most of the new entrants were undercapitalized with little or no expertise in merchant banking. These players could hardly afford to be discerning and started offering their services to all and sundry clients. The market was soon flooded with poor quality paper issued by companies of dubious credentials. The huge losses suffered by investors in these securities resulted in total loss of confidence in the market. Most of the subsequent issues started failing and companies started deferring their plans to access primary markets. Lack of business resulted in a major shake out in the industry. Most of the small firms exited from the business. Many foreign investment banks started entering Indian markets. These firms had a huge capital base, global distribution capacity and expertise. However, they were new to Indian markets and lacked local penetration. Many of the top rung Indian merchant banks, who had string domestic base, started entering into joint ventures with the foreign banks. This energy resulted in synergies as their individual strength complemented each other.

The market turned bullish again in the end of 1993 after the tainted shares problem was

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SCOPE

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

Growth of Primary market: Entry of Foreign Investors:
Growth of Primary market:
Entry of Foreign Investors:

If the primary market grows and number of issues increases, the scope of investment banking will be enhanced.

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

Changing policy of Financial Institutions:

Now the lending policies of financial institutions are based on project orientation, so the investment banker services will be needed by corporate enterprise to provide expert guidance.

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Development of debt markets:

If the debt market is enhanced, there will be tremendous scope for investment bankers. Now NSE and OTCEI are planned to raise their fund through debt instruments.

Corporate restructuring: Due to liberalization and globalization Companies are facing lot of competition. In order to
Corporate restructuring:
Due to liberalization and globalization Companies are facing lot of
competition. In order to compete, they have to go for
restructuring, merger, acquisitions or disinvestments. They may
offer good opportunities to merchant bankers
The scope could be extended to:
1.
Advising the company on designing of its Capital Structure.
2.
Advising the company on the instrument to be offered to the
public.
3.
Pricing of the instrument.
4.
Advising the company on Legal/ regulatory matters and
interaction with SEBI/ROC/ Stock Exchanges and other
regulatory authorities.
5.
Assisting the company in marketing the issue.
6.
In channelizing the financial surplus of the general public into
productive investment avenues.
7.
To coordinate the activities of various intermediaries to the
share issue such as the registrar, bankers, advertising agency,
printers, underwriters, brokers etc.
8.
To ensure the compliance with rules and regulations governing
the securities market
THE
FACTORS
ON
WHICH
GROWTH
OF
INVESTMENT
BANKING DEPENDS:
  • 1. Planning and industrial policy of the country i.e. India in this

case

  • 2. Prevailing Economic condition of the country

  • 3. Regulatory system of the market and economy prevailing in

India

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

ENVIRONMENTAL SCANNING

1) Financial Institutions are more influenced by Political Stability & Political Political correctness. 2) Threats of
1)
Financial Institutions are
more influenced by
Political Stability &
Political
Political
correctness.
2)
Threats of Internal
Rebellion.
1)
Dollar $ Appreciation.
2)
Frequent Fluctuation in
Economic
Economic
Market.
3)
Emergent market
1)
Education:- Financial
Social
Knowledge
Social
2)
Working Age Population

‘PEST ANALYSIS’ OF INDIAN INVESTMENT BANKING INDUSTRY

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

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SWOT ANALYSIS

Strengths: -

a) Breadth of Financial Services Offerings: investment banking provides various types of services such as trading,
a)
Breadth of Financial Services Offerings: investment
banking provides various types of services such as trading,
private equity, venture capital, M&A, joint venture, and project
finance etc.
b)
Proficient Employees: the major strength of any sector is its
employees. In investment banking all the workings are done by
professionals because it requires deft and proficient personnel.
c)Technological Advancement: Due to technical advancement,
working efficiency has been increased and works are done
quickly and easily.
d)
Advance Infrastructure: The country is equipped with all
the
latest
and
advances
amenities
such
as
better
telecommunication, transportation, potable water, internet, land
etc.
Weaknesses:
a)
Unawareness of Investors: the major weakness is the
unawareness of its services among investors, due to which after
40 years of odyssey it could not reach to the level where It
should have been.
b)
Excessive Dependence on Trading Sectors: As per the

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

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Opportunities: -

a)

Growing demand for Investment Banking: The knowledge

of investment banking is increasing among investors and they are diversifying their investment into many sectors besides trading. It can be seen by looking at the number of mergers and acquisitions, various projects in the countries and the level of Sensex in the country.

b) c) Financially Attractive Country: India is a Threats: - a) b)
b)
c)
Financially
Attractive
Country:
India
is
a
Threats: -
a)
b)

Removal of International Trade Barrier: 1991 reform

policy and recent amendments in international trade have widened the area and scope of investment banking in India.

financially

attractive country. Recent experience of ‘Recession’ shows that, India is among the few countries (China, Brazil and India) who not only survived in this difficult era but shows the path to developed countries to overcome this calamity.

Increasing competition: competition in investment banking

is increasing day by day. New players are foraying to the market due to this market share of each existing company is getting affected and profit as well.

Decentralized management: each branch manager in a

company is given the authority of taking decisions in their respective branches. The decisions made by different managers are diverse and any wrong decision may lead to heavy losses to the company.

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RESEARCH METHODOLOGY

Problem Definition:

Strategy Implications in Investment Banking

Type of Research: DESCRIPTIVE RESEARCH   Surveys & fact-finding enquiries Try to discover causes QUALITATIVE
Type of Research:
DESCRIPTIVE RESEARCH
Surveys & fact-finding enquiries
Try to discover causes
QUALITATIVE RESEARCH
Involves quality or kind
Helps in having insight into problems or cases
Nature of Data Collected:
Only PRIMARY DATA is used. Primary data are those which are
collected
fresh and
for
the first
time
and thus happen
to
be
original character.
Data Collection Method:
For the collection of primary data a set of logically sequenced
Questionnaire Method was adopted seeing the objective of the
research.
Sampling Technique
Cluster Sampling: if the total area of interest happens to be a
big one, a convenient way in which a sample can be taken is to
divide the areas into a number of smaller non-overlapping areas.

Sample Size: 10

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Functional Areas of Investment Banking

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

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16

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BCG Matrix:

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

The Financial Areas of Trading & Advisory Services falls in the category of Stars Private Equity
The Financial Areas of Trading &
Advisory Services falls in the
category of Stars
Private Equity
&
Project
Finance comes in this Segment of
the BCG matrix.
?

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

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Following is the list of those Investment Banks which providing services to Respondents: a) Kotak Securities
Following is the list of those Investment Banks which providing services to Respondents: a) Kotak Securities
Following is the list of those Investment Banks which
providing services to Respondents:
a)
Kotak Securities
b)
Reliance Money
c)
ICICI Bank
d)
ICICI Securities
e)
SBI Capital &
f)
HSBC

are

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