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Topic

:
”An Overview ofPresentation
Investment Bankingon
in
Financial Markets &
Bangladesh”
8/20/2016
Institutions

Submitted To:
Dr. H. M. Mosarof Hossain
Professor
Dept. of Finance
University of DhakaSubmitted By:

Name ID No.
H. A. Mamun 31033
S. M. 31014
Nuruzzaman
Rocky Mahmud 31032
Tarik Hassan 31016
Sany 31043
Investment Banking in Bangladesh

Investment
Banking:
Investment Banking is an American
synonym of merchant banking. It is a
financial institution that assists
corporations and governments in
raising capital by underwriting and/or
acting as the client's agent in the issuance of securities. An
investment bank may also assist companies involved in
mergers and acquisitions, and provide supplementary services
such as market making, trading of derivatives, fixed income
instruments, foreign exchange, commodities, and securities. It
also provides advisory services on corporate matters to the
firms they lend to.

Many large investment banks are affiliated with or subsidiaries
of larger banking institutions, and many have become
household names, the largest being in the world is Goldman
Sachs, Morgan Stanley, JPMorgan Chase, Bank of America
Merrill Lynch and Deutsche Bank. Broadly speaking, investment
banks assist in large, complicated financial transactions. This
may include advice as to how much a company is worth and
how best to structure a deal if the investment banker’s client is
considering an acquisition, merger or sale. It may also include
the issuing of securities as a means of raising money for the
client groups, and creating the documentation for the Securities
and Exchange
Commission
necessary for a
company to go
public.

An Investment
Bank could be
best defined as
a financial
institution

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Investment Banking in Bangladesh

conducting money market activities and lending, underwriting
and financial advice, and investment services whose
organization is characterized by a high proportion of
professional staff able to approach problems in an innovative
manner and to make and implement decisions rapidly. An
Investment bank differs from a regular investment bank as it
generally deals in the commercial banking requirements of
international finance as well as stock underwriting and long-
term corporate loans. An Investment bank isn't used by the
general public. Most Investment banks deal with large
corporations as well as with other Investment banks, large
financial institutions and, sometimes, various governments
around the world.

Investment Banking History in
Bangladesh:
In the Bangladesh context, financial institutions that carry out
some distinct activities are being addressed as merchant
banks. The core functions of merchant banks in Bangladesh
include issue management, underwriting and Portfolio
management services. The securities and exchange
commission, based on SRO No 59 of 24 April 1996, and a
decision taken by it on 17 August 1997, invited letters of intent
from 14 institutions for registration of merchant banks. Prior to
this decision, 7 institutions submitted such letters of intent and
SEC gave registration to a total of 19. Presently, a total of 55
merchant banks are operating in the country, and their
aggregate paid-up capital amounts to about Tk 3440.35 crore.
Among them 53 are full-fledged merchant banks. Merchant
banks in Bangladesh are actively governed by the Bangladesh
Securities and Exchange Commission (BSEC) and submissively
by the Bangladesh Bank.

A number of commercial banks also carry out investment
banking functions in Bangladesh under the rules, “Securities &
Exchange Commission (Merchant Banker & Portfolio Manager)
Rules, 1996”. The Bangladesh Securities and Exchange
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Commission (BSEC) has set the minimum paid-up capital
requirement for full-fledged merchant banks to Tk 25 crore.
Through the Merchant Bankers and Portfolio Manager Rules
1996, Securities and Exchange Commission specified the
minimum paid-up capital requirement for different merchant
banking activities. For issue management the minimum paid-up
capital would be Tk 2.5 crore, for under-writing issues and
portfolio management, the minimum paid-up capital would be
Tk 12.50 crore. The BSEC has a code of conduct for issue
managers, underwriters and portfolio managers and is
empowered to suspend or cancel the certificate of registration
for its violation

Investment Banking Arena in the
Country:
Issue Management function of merchant Banking helps capital
market to increase the supply of securities and companies to
raise money from the market in order to expand their
operations. A Issue Manager provides assistance a Private
Limited Company intended to be converted into Public Limited
Company by way of obtaining necessary permission from the
relevant authorities, preparing prospectus for public issue of
shares and debentures, supporting itself in the collection of
application money, inspection of applications, arranging for
lottery relating to allotment and so forth.

The other important function of Merchant Bank is underwriting
operation. It is an arrangement whereby the underwriter
undertakes to subscribe the unsubscribed portion of
shares/debentures offered by any Public Limited Company. This
encourages the prospective issuers to offer shares/debentures
to the public for subscription and they can raise fund from the
public for implementation of their industrial undertakings.
Underwriters take on the risk of distributing the securities. If
they fail to find enough investors, they will have to hold some
securities themselves. Underwriters make their income from
the price difference between the price they pay the issuer and
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what they collect from investors or from broker-dealers who buy
portions of the offering also they enjoys the underwriting
commission from the issuer.

A prime function of Merchant Banks is providing portfolio
management services. Management of a portfolio is the
process of selecting asset classes and their weights in the
portfolio, maintaining diversification, executing trades, keeping
records, researching, borrowing for leveraging return etc. This
process is quite dynamic and requires instant adjustments
when the market patterns shift to new directions. Most
importantly, to complete the process sufficient involvement of
people with many different skills (i.e. researching, record
keeping etc.) must be ensured. There is at least two keys
aspects of successful portfolio management: experience of
portfolio managers, execution efficiency.

Merchant Banks carry out other important services like
Corporate Advisory that refers to the activity of advising
organizations, including corporations, institutions and
government bodies,
on mergers and
acquisitions and
other transactions
that involve a
change in
ownership of a
company or
business.

In Bangladesh a
Merchant bank is said to be a full-fledged merchant bank that
performs all the aforementioned activities covering Issue
Management, Underwriting, and Portfolio Management and
providing Corporate Advisory Services.
AAA Finance & Investment Limited is one of the full-fledged
merchant Banks of Bangladesh that delivers a whole range of
Investment Banking services including traditional merchant
banking activities such as Issue Management, Corporate

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Advisory, Corporate Finance, Underwriting and Portfolio
Management since 1991.

One of the major investment banks in Bangladesh, the
Investment Corporation of Bangladesh (ICB), plays a leading
role in developing the capital market in the country. Major
functions of ICB include Merchant Banking operations and
operations of unit funds and mutual funds. It has an Investors'
Account Scheme, which provides small investors with credit
facilities for buying and selling shares listed with the Dhaka and
Chittagong stock exchanges. It also helps investors achieve
reasonable returns on investment in sound shares and provides
institutional support to small investors for purchase and sale of
shares. Under the scheme, small investors are to hold accounts
with ICB for loans for purchase of securities.

Investment Banking Nature:
Investment banking is skill based activities and involves serving
every financial need of every client. It requires focused skill-
base to provide for the requirements of the client. Bangladesh
bank has made the quality of man-power as one of the criteria
for registration as Investment banker. These skills should not be
concentrated in issue management and underwriting alone,
which may have an adverse impact on business. Investment
bankers can turn to any of the activities mentioned above
depending upon resources, such as capital, foreign tie-ups for
overseas activities and skills. The depth and sophistication in
Investment banking business are improving since the avenues
for participating in capital market activities have widened from
issue management and underwriting to private placement,
bought out deals (BODS), buy-back of shares, mergers and
takeovers. The services of Investment bank cover project
counseling, pre investment activities, feasibility studies, project
reports, design of capital structure, issue management,
underwriting, loan syndication, mobilization of funds from Non-
Resident Bangladeshi’s, foreign currency finance, mergers,

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amalgamation, takeover, venture capital, buy back and public
deposits. A Category-1 Investment banker can undertake issue
management only. Separate registration is not necessary to
carry on the activity as underwriter.

Functions of Investment
Banking:
Investment banks are considered as the original banking
institutes that came into being during the Middle Ages. With the
evolution of economic terms and practices, Investment banking
services were differentiated from those of an ordinary bank.
Today, Investment banks are regarded as the banks of
corporate house and organizations.
Ordinary banks provide services to common people as well as
organizations, but Investment banking serve a number of needs
and requirements of organizations and businesses. The fact
that Investment banks are the wholesale banks specifies the
use of these banks for some important purposes.

It was hundreds of years ago that the Jews introduced the
concept of Investment banking in Italy. The two important
functions they would perform included providing credit and
underwriting. They provided credit to the farmers in the
beginning of the crop growing season so that the latter could
grow crops. Underwriting was done in the form of crop
insurance that guaranteed the delivery of crops to the buyer.
The modern day Investment banking services include these
two, along with many other major functions.
Stock underwriting is counted among the most important
functions of Investment banking. Utilizing this facility, big
enterprises hire the Investment banking services to raise
capital from the stock market. An Investment bank would
decide the amount and price of the stock, along with the time
at which the stock would be issued.

Major Functions of Investment Banking now a days:

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Investment
Banking

Asset
Corporate Financial
Manageme
Finance Advisory
nt

Private Portfolio
Merger & Business Fesibility
Placement Manageme
Acquisition Valuation Study
& IPO nt

Fund Corporate Strategic
Corporate Underwriti
Manageme Restructuri Business
Bonds ng
nt ng Planning

How to Perform an Investment
Bank:
1. Investigation
A company that desires to raise money will approach an
investment banking firm for its assistance. From that point on,
that investment banking firm is known as the manager or lead
investment bank in the process. The manager will provide two
investigations, or type of analyses, for its client:

a. Legal Analysis:
Since a security is being sold, the security must first be
created. Most of us think of a bond or a common stock is
being merely a certificate. In reality, the certificates are
evidence of a legal document that defines the rights of the
security holder and the rights of the company. A bond
contract, for example, may easily be 100 pages or longer.
The investment bank's staff attorneys will construct the bond
or stock agreement and submit it to the Bangladesh
Securities Exchange Commission (BSEC) for its approval. The
BSEC will ensure that all relevant financial details are being

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disclosed to prospective investors and will authorize the
issue for sale.

b. Market Analysis:
The investment banker will then determine the fair price to
be placed on the securities. In the case of bonds, the
investment banker will recommend an interest rate that
must be paid in order to achieve an acceptable trade-off: a
rate high enough to attract investors and low enough to be in
the company's best interest. In the case of common stock,
the investment banker will recommend the maximum price
that will allow the shares to sell relatively quickly.
The manager will begin preparing a prospectus (i.e., a
financial disclosure brochure used to help sell the issue). A
tombstone announcement will be prepared also to help
advertise the upcoming sale.

2. Stock Underwriting:
This is one of the most common functions of an Investment
bank. When owners of a large company want to raise capital
through investors from the stock markets, they can acquire the
services of an Investment bank to take care of the job. The
bank will determine the amount of stocks that are to be issued
as well as their price, and when to issue the new stock. The
Investment bank will file all of the necessary paperwork with
the proper market division and may also market the stock. If
there's a large stock offering, a few Investment banks might
work on the project together. However, one of the banks will
typically act as the head underwriter on the job.

3. Issue Management:
In the function of issue management, an Investment Bank will
help the capital market to increase the supply of securities. The
bank will help a private limited company to convert into a
public limited company. The bank will do this by dealing with
the proper authorities and by preparing a prospectus for the
public issue of debentures and shares. The bank will help
collect the application money, scrutinize the applications, as
well as arrange for the allotment of the debentures and shares.

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Issue management, through which an Investment bank assists
the capital market to raise the number of securities, is another
important function of these banks. Some of the other
Investment banking functions includes credit syndication,
working capital financing, foreign currency financing, leases
financing and so on. It is clear that corporations and enterprises
in an economy need these services to survive.

The capital issue are managed are category-1 Investment
banker and constitutes the most important aspects of their
services. The public issue of corporate securities involves
marketing of capital issues of new and existing companies,
additional issues of existing companies including rights issue
and dilution of shares by letter of offer,. The public issues are
managed by the involvement of various agencies i.e.
underwriters, brokers, bankers, advertising agency, printers,
auditors, legal advisers, registrar to the issue and Investment
bankers providing specialized services to make the issue of the
success. However Investment banker is the agency at the apex
level than that plan, coordinate and control the entire issue
activity and direct different agencies to contribute to the
successful marketing of securities. The procedure of the
managing a public issue by an Investment banker is divided
into two phases:

 Pre IPO capital raising for existing or other than existing
shareholders
 Capital Raising from Initial Public Offering (IPO)

Pre IPO capital raising:
Required documents for Pre-Issue Capital Management:
In Bangladesh, for pre issue capital raising performed by the
“Securities & Exchange Commission (Issue of Capital) Rules,
2001”. According to the rules the following documents are
required:

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Required Timeframe for Raising of Capital by BSEC:

Lock-In Period for raised capital:

Capital Raising from Initial Public Offering (IPO):

In Bangladesh, for raising fund from IPO is performed by the
“Securities & Exchange Commission (Public Issue) Rules, 2015”.

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According to this rule, an investment bank make an
arrangement to fulfill all the requirements and give the due
diligence for the public offer as follows:

(1) Application for consent under these Rules may be
made on any of the following methods:-
(a) fixed price method, when offered at par value;
or
(b) Book-building method, when offered above par
value.

(2) General requirements:
An issuer may make an application for public offer of its
securities, if –
a) it offers an amount of at least equivalent to 10% of
its paid-up capital (including intended offer) or Tk.
15 crore at par value, whichever is higher;
b) it has minimum existing paid up capital of Tk. 15
crore;
c) it has not made any material change including
raising of paid-up capital after the date of audited
financial statements as included in the prospectus;
d) the issue manager is in no way connected with the
issuer not does hold any of its securities;
e) it has prepared its financial statements in
accordance with the requirements of the Securities
and Exchange Rules, 1987, the provisions of IFRS /IAS
as adopted in Bangladesh and audited the same as
per Bangladesh Standards on Auditing (BSA) as well
as the Companies Act, 1994 and other applicable
legal requirements;
f) it has got cost audit by professional accountants as
per the Companies Act, 1994, if applicable;
g) it has got its latest financial statements audited by
the panel auditors as declared by the Commission
from time to time;
h) it has been regular in holding annual general
meeting (AGM);
i) it has complied with the provisions of Corporate
Governance Guidelines as published by the
Commission from time to time;
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j) it has complied with all the requirements of these
Rules in preparing prospectus;
k) it has no accumulated retained loss at the time of
application;
l) it has complied with the provisions of guidelines
regarding valuation of assets, if any, as published by
the Commission from time to time; and
m) The issuer or any of its directors is not a bank
defaulter.

Preparation to be taken to manage pre-IPO activities are
as follows:

1. Taking preparation documentation and legal compliance
as per BSEC guide lines;
2. Finalizing the appointments of the following agencies:
-Co-manager/Advisers to the issue;
-Underwriters to the issue;
-Brokers to the issue;
-Bankers to the issue and refund Banker;
-Advertising agency;
-Printers and Registrar to the issue;

3. Advise the company to appoint auditors, legal advisers
and broad base Board of Directors;
4. Drafting of prospectus
5. Obtaining approvals of draft prospectus from the
company’s legal advisers, underwriting financial
institutions/Banks
6. Obtaining consent from parties and agencies acting for the
issue to be enclosed with the prospectus.
7. Approval of prospectus from Bangladesh Securities and
Exchange Commission;
8. Making an application for enlistment with Stock Exchanges
along with copy of the prospectus
9. Filing of the prospectus with Registrar of Joint Stock
Companies;
10.Publicity of the issue with advertisement and conferences;
11.Open subscription list.

Steps involved in post-issue management are:-

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1. To verify and confirm that the issue is subscribed to the
extent of 70% including devolvement from underwriters in
case of under subscription;
2. To supervise and co-ordinate the allotment procedure of
registrar to the issue as per prescribed Stock Exchange
guidelines;
3. To ensure issue of refund order, allotment letters /
certificates within the prescribed time limit of 15 working
days after the closure of subscription list;
4. To report periodically to BSEC about the progress in the
matters related to allotment and refunds;
5. To ensure the listing of securities at Stock Exchanges;
6. To attend the investors grievances regarding the public
issue

Fees for public offer and listing of securities:-

Type of fees Fixed Price Book Building
Method Method
Issue 1% on the public 2.00% on the public
Management offer amount or offer amount
fee Tk. 03.00 million (including premium)
whichever is or Tk. 05.00 million
lower. whichever is higher.
Underwriting Maximum 1% on Maximum 1% on
fee 35% of the public 35% of the public
offer amount. offer amount
(Including premium).
Application Tk. 50,000.00 Tk. 50,000.00
fee for the (nonrefundable) (nonrefundable)
Commission
Consent fee 0.40% on the 0.40% on the public
for the public offer offer amount
Commission amount. (including premium).

Preparing the necessary application for a successful issue
management the close liaison and coordination with the various
constituents of the public issue is an essential condition that
warrants full cooperation of all the parties affecting the cost
and prospects of the issue. Investment banks, acting as

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‘Manager’ to the issue has to settle the fee for
Advocate/solicitors’ advice, accountants certification, broker’s
and banks charges, underwriters’ commission, printers’ charges
and advertising and publicity expenses and coordinates with
syndicated Investment bankers and principal brokers, stock
exchanges, etc. The responsibility for all this rests upon the
Investment banker. If proper coordination is not done, the
success of the issue may be rendered unassured.

4. Portfolio Services:
Another important function of an Investment bank is to supply a
variety of portfolio management services to their customers.
Most Investment banks can also provide various other services
to their clients. These often include actions such as project
counseling, mergers and acquisitions, and pre-investment
studies. Some of the other functions may be asset
securitization, factoring, and Capital restructuring.

Providing long-term loans is another important function of
Investment banks. Ordinary banks issue loan to small
businesses and individuals, but they are not capable of
handling the long-term loan needs of big enterprises. An
Investment bank performs this task and arrange for loans that
help an enterprise to start a big project. Investment banks
differentiate themselves from other banks by investing their
own capital in the companies of their clients. Apart from
enterprises and multinational corporations, these banks also
provide loans to government bodies.
Portfolio services too are among the important Investment
banking services. These services are fee based and are
provided to the corporations regarding business mergers and
acquisitions, project counseling and study of an investment
vehicle. Corporations, in order to understand the pros and cons
and profits and losses associated with these situations, prefer
to take advantage of the knowledge and experience of the
Investment banks.

5. Loan syndication:

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Credit syndication also known as credit procurement and
project finance services. The main task involved in credit
syndication is to raise to BDT and foreign currency loans with
the banks and financial institutions both in Bangladesh and
abroad. It also arranges the bridge finance and the resources
for cost escalations or cost Overruns.

Broadly, the credit syndications include the following acts;
a) Estimating the total costs;
b) Drawing a financing plan for the total project cost-
conforming to the requirements of the promoters and their
collaborators. Financial institutions and banks,
government agencies and underwriters;
c) Preparing loan application for financial assistance from
term lenders/financial institutions/banks and monitoring
their progress including the pre-sanction negotiations;
d) Selecting the institutions and banks for participation in
financing;
e) Follow-up of the term loan application with the financial
institutions and banks and obtaining the satisfaction for
their respective share of participation;
f) Arranging bridge finance;
g) Assisting in completion of formalities for drawl of term
finance sanctioned by institution expediting legal
documentation formalities drawing up inter-se agreements
etc. prescribed by the participating financial institutions
and banks;
h) Assessing the working capital requirements;

6. Corporate counseling:
Corporate counseling denotes the advice provided by the
Investment Banking to the corporate unit to ensure better
corporate performance in terms of image building among
investors, steady growth through good working and
appreciation in market value of its equity shares. The scope of
corporate counseling, capital restructuring and, portfolio
management and the full range of financial engineering
includes venture capital, public issue management, and loan
syndication, working capital, fixed deposit, lease financing,
acceptance credit, etc. However counseling is limited to only

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opinions and suggestions and any detailed analysis would form
part of a specific service.

The scope of corporate counseling is restricted to the
explanations of concepts, procedures and laws to be observed
by the client company. Requirement of any action to be taken
or compliance of statutory formalities to be made for
implementation of those suggestions would mean the demand
for a specific type of service other than corporate counseling
being offered by the Investment bankers. An academic analysis
of corporate counseling present a different picture than that
transpires from the literature of the Investment bankers Firstly
corporate counseling is the beginning of the Investment
banking service which every clients whether new or existing
has got to avail a different matter whether an Investment bank
charges its client separately for rendering the corporate
counseling service or includes the element of fee in the other
heads of services but for the angle of priority. Corporate
counseling is first in line of the services which an Investment
banker offers and then other services.

Secondly the scope of the corporate counseling is very vast. Its
coverage ranges from the managerial economies, investments
and financial management to Corporate Laws and the related
legal aspects of the organizational goals, locations factors,
organizational size and operational scale, choice of product and
market survey, forecasting of product, cost reduction and cost
analysis, allocation of resources, investment decisions, capital
management and expenditure control, pricing methods and
marketing strategy, etc. As financial and investment experts, a
Investment banker has to guide the corporate clients in areas
covering financial reporting, project measurements, working
capital management, financial requirements and the sources of
finance, evaluating financial alternatives, rate of returns and
cost of capital besides basic corporate changes of financial
rearrangement, Reorganization, mergers and acquisitions, etc.
are the areas to be covered.

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Corporate laws should basically cover the legal aspects
including the various legal formalities involved in areas of
corporate finance being raised from the financial institutions,
banks and the general public in the form of loan, new issues of
equity or debentures respectively

7. Merger and Acquisition:
The phrase mergers and acquisitions (abbreviated M&A) refers
to the aspect of corporate strategy, corporate finance and
management dealing with the buying, selling and combining of
different companies that can aid, finance, or help a growing
company in a given industry grow rapidly without having to
create another business entity. Investment banking helps to
negotiate companies in this case.

8. Selling:
Each of the investment banks will likely have its own sales
force. However, additional brokerage firms may be invited to
help sell the issue in return for a commission on the sale. These
firms may easily number in the dozens for a large issue.
Collectively, these brokerage firms are known as the selling
group.

Investment Banking In
Bangladesh: Rules & Regulations:
The Bangladesh Securities & Exchange Commission (BSEC)
granted authority to 17 non-bank financial institutions in 1997
to conduct merchant banking business in Bangladesh under the
Securities and Exchange (Merchant Bankers and Portfolio
Manager) Regulations 1996,

Under the BSEC Investment banker licensing rules, an
Investment bank working only as issue manager has to submit
at least a documented proposal for an initial public offer of a
company, while an Investment bank licensed to act only as
portfolio manager has to form at least five new portfolios of its
clients besides its own, and an Investment bank working as a
full-fledged merchant bank has to manage one IPO, to be under
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writer of two issues and form five new portfolios of its clients
besides its own in a calendar year. A full-fledged Investment
bank has to perform at least two operations among the three
including managing portfolio in a calendar year.

The Merchant Banker deals with the following regulations:
 Securities & Exchange Ordinance, 1996;
 Securities & Exchange Rules, 1987;
 Margin Rules, 1999;
 Securities and Exchange Commission (Issue of Capital)
Rules, 2001;
 Bangladesh Securities and Exchange Commission (Public
Issue) Rules, 2015;
 Securities and Exchange Commission (Rights Issue) Rules,
2006;
 Securities and Exchange Commission (Private Placement
of Debt Securities) Rules, 2012;
 Bangladesh Securities and Exchange Commission
(Alternative Investment) Rules, 2015;

Advantages of Investment
Banking:
 Investment banks perform functions that cannot be
carried out by businesses on their own.
 Investment banks have access to traders, financial
institutions, and markets that companies or individuals
could not possibly reach.
 By using their skills and contacts, merchant banks can get
the best possible deals for their clients.

Disadvantage of Investment
Banking:
Investment t banks are really only for large corporate
customers, or extremely wealthy smaller businesses
owned by individual clients

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Not all deals carried out by Investment banks meet with
unqualified success

Importance of Investment Banking
in Bangladesh:
Important reasons for the growth of Investment banks has been
development activities throughout the country, exerting excess
demand on the sources of fund for ever expanding industries
and trade, thus leaving a widening gap unabridged between
the supply and demand of invisible funds. All financial
institutions had experienced constrain of resources to meet
ever increasing demands for demands for funds frame
corporate sector enterprises. In such circumstances corporate
sector had the only alternative to avail of the capital market
service for meeting their long term financial requirement
through capital issue of equity shares and debentures. Growing
demand for funds put pressure on capital market that enthused
commercial banks, share brokers and financial consultancy
firms to enter into the field of Investment banking and share
the growing capital market. As a result all the commercial
banks in nationalized and public sector as well as in private
sector have opened their Investment banking windows and
competing in this field.

Need for Investment banking is felt in the wake of huge public
saving lying untapped. Investment banker can play highly
significant role in mobilizing funds of savers to invisible
channels assuring promising returns on investment and thus
can assist in meeting the widening demand for invisible funds
for economic activity. With growth of Investment banking
profession corporate enterprises in both private sectors would
be able to raise required amount of funds annually from the
capital market to meet the growing requirement for funds for
establishing new enterprises, undertaking expansion,
modernization and diversification of the existing enterprises.
This reinforces the need for a vigorous role to be played by
Investment banking.

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In view of multitude of enactment, rules and regulation,
gridlines and offshoot press release instructions brought out the
government from time to time imposing statutory obligations
upon the corporate sector to comply with those entire
requirement prescribed there in the need of a skilled agency
existed which could provide counseling in these matters in a
package form. An Investment banker with their skills updated
information and knowledge provide this service to the
corporate units and advise them on such requirement to be
complied with for raising funds from the capital market under
different enactment Viz. Company’s act, income tax act, foreign
exchange regulation act, securities contracts corporate laws
and regulations. Investment bank advice the investors of the
incentives available in the form of tax relief, other statutory
relaxation, good return on investment and capital appreciation
in such investment to motivate them to invest their savings
securities of the corporate sector. Thus Investment banks help
industries and trade to rise and the investors to invest their
saved money in sound and healthy concern with confidence,
safety and expectation for higher yields. Finance is the
backbone of business activities.
Investment banker make available finance for business
enterprises acting as intermediaries between them raising
demand for funds and the supplies of funds besides rendering
various other services. The following are some of the reasons
why specialist Investment bank has a crucial role to play in
Bangladesh.
I. Growing complexity in rules and procedures of the
government;
II. Growing industrialization and increase of technologically
advanced industries;
III. Need for encouragement of small and medium
industrialists, who require specialist services;
IV. Need to develop backward areas and states which
require different criteria;
V. Exploring the possibility of joint ventures abroad and
foreign market;

Promoting the role of new issue market in mobilizing saving
from where Investment banks function as an independent wing

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Investment Banking in Bangladesh

or as subsidiary of various private/central governments/ state
government financial institution. Most of the financial institution
in Bangladesh is in public sector and therefore such setup plays
a role on the lines of governmental priorities and policies.

Potentiality of Investment
Banking:

Traditional many investment banks participate in trade
financing activities. Pure investment banks raise funds for
businesses and some governments by registering and issuing
debt or equity and selling it on a market. Generally, investment
banks only participated in underwriting and selling securities in
large blocks. Investment banks facilitate mergers and
acquisitions through share sales and provide research and
financial consulting to companies. Habitually, investment banks
did not deal with the general public.
The current offerings of investment banks and merchant banks
varies by the institution offering the services, but there are a
few characteristics that most companies that offer both
investment and merchant banking share.
Still the investors involved in capital market are absorbing the
facilities and services being provided by investment banks.
As a general rule, investment banks focus on initial public
offerings (IPOs) and large public and private share offerings.
While investment banks tend to focus on larger companies,
merchant banks offer their services to companies that are too
big for venture capital firms to serve properly, but are still too
small to make a compelling public share offering on a large
exchange. In order to bridge the gap between venture capital
and a public offering, larger merchant banks tend to privately
place equity with other financial institutions, often taking on
large portions of ownership in companies that are believed to
have strong growth potential.

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Investment Banking in Bangladesh

Different Investment banks are playing some important roles in
Bangladesh capital market to channelize the financial surplus of
the society into productive firms by issue management and
underwriting and again it is providing huge liquidity in the
market through loans and own investment. Through issue
management and underwriting, they are motivating
corporations to come to public market which are providing new
supply of securities to the capital market to meet the demand.
On the other hand they are providing adequate loans to the
investors at reasonable interests which are increasing the
market liquidity and contributing to the investors’ portfolio to
maximize the value. They are offering helpful and investment
friendly services at reasonable fees and charges and also
providing market related information and research reports to
the investors which are helpful to analyze the market and take
quick decisions regarding buying and selling securities. They
also offering Pre-IPO placement shares at reasonable price
which investors, both applied for and not applied for placement
shares, very likely think that they helps a lot to maximize the
portfolio value. They regular communications with the
investors, satisfied service from portfolio manager and rich CSD
are also contributing to the capital market to increase the
confidence of the investors and confidence is a very important
prerequisite for an established and stable capital market.
Investment banks rarely offer trade financing because most
investment banking clients have already outgrown the need for
trade financing and the various credit products linked to it.

Conclusion:
The Investment banker plays a vital role in channelizing the
financial surplus of the society into productive investment
avenues. Hence before selecting an Investment banker, one
must decide, the services for which he is being approached.
Selecting the right intermediary who has the necessary skills to
meet the requirements of the client will ensure success. It can
be said that this project helped me to understand every details
about Investment Banking and in future how it’s going to get

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Investment Banking in Bangladesh

emerged in the Bangladesh economy. Hence, Investment
Banking can be considered as essential financial body in
Bangladeshi financial system. Market development is predicted
on a sound, fair and transparent regulatory framework. To
sustain the growth of the market and crystallize the growing
awareness and interest into a committed, discerning and
growing awareness and interest into an essential to remove the
trading malpractice and structural inadequacies prevailing in
the market, and provide the investors an organized, well
regulated market in Bangladesh.

The End

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