INVESTMENT BANKING IN INDIA

ACADEMIC YEAR:- TYBMS FINANCE

SUBJECT:- INVESTMENT ANALYSIS PORTFOLIO

MANAGEMENT

FACULTY:- RAKHI PITAKAR

COLLEGE NAME:- GURU NANAK KHALSA

COLLEGE
 DECLARATION

We, the students of Guru Nanak Khalsa College,

Mumbai, of TYBMS [Semester:- IV] hereby
declare that we have completed our project, titled
“Investment Banking In India”. The information
submitted herein is true and original to the best of
our knowledge.

GROUP MEMBERS

• TEJAS P. MALOKAR 131

• HARPREET KAUR GILL 122
• ADITYA CHAVAN 112
• TAMAN PREET 123
• TANVEER KAUR 141
• PAMANDEEP KAUR 105

SIGNATURE OF THE FACULTY

RAKHI PITAKAR
 ACKNOWLEDGEMENT

We, take this opportunity to express my profound

gratitude and deep regards towards Rakhi Pitakar mam for her
exemplary guidance, and constant encouragement throughout
the course of this project. The help and guidance given by her
from time to time shall carry us a long way.
Lastly we would like to thank our parents, staff
members of the college and friends for their constant
encouragement without which this assignment would not be
possible.
 INDEX

SR.NO TOPIC PAGE NO.

1 INTRODUCTION ON INVESTMENT BANKS

1
IN INDIA
2 INVESTMENT BANKING 2

3 DETAILED HISTORY ON INVESTMENT BANKING 3

4 GLASS-STEAGALL ACT 4
5 GRAHAM LEACH ACT 5

ORGANIZATIONAL STRUCTURE OF AN 6
6 INVESTMENT BANK
7 ROLE OF AN INVESTMENT BANKER 7-8

8 RECENT DEVELOPMENTS IN INVESTMENT 9

BANKING
9 EVOLUTION OF INVESTMENT BANKING IN 10
INDIA

10 TOP 10 BANKING FIRMS IN INDIA 11-12

11 OTHER INVESTMENT BANKS IN INDIA 13-14

12 CAPITAL ADEQUACY NORMS 15
13 CASE STUDY 16

14 CAREER OPPORTUNITIES 17

15 SWOT ANALYSIS 18

16 SUMMARY 19

17 CONCLUSION 20
18 BIBLIOGRAPHY 21
 INVESTMENT BANKS IN INDIA

>Introduction:- Investment banks are defined as companies that help other companies in increasing
financial capital in the capital markets, through things like issuance of stock and bonds. An investment
bank offer financial services for clients, such as the trading of derivatives, fixed income, foreign
exchange, commodity and Equities or advisory services for mergers and acquisitions. Investment bank
perform, Initial Public Offering (IPO), trades on securities and bonds and they also act as brokers. All
investment banking activity is classed as either “sell side” or “buy side”. The “sell side” involves trading
securities for cash or for other securities or the promotion of the securities. The “buy side” involves the
provision of advice to institutions that buy investment services. Private equity funds, mutual funds, life
insurance companies, unit trusts, and hedge funds are the most common types of buy- side entities.

The history of investment banking in India traces back to when European

merchant banks first established trading houses in the region in the 19th century. Since then, foreign
banks have dominated investment and merchant banking activities in the country. In the 1970’s, the
State bank of India entered the business by creating the Bureau of Merchant Banking and ICICI
Securities became the first Indian financial institution to offer merchant banking services. By 1980, the
number of merchant banks had risen to more than 30. This growth in the financial services industry
included rapid expansion of commercial banks and other financial institutions.

In the 21st century the SEC filings of major independent investment banks such as Goldman Sachs
and Morgan Stanley reflect three product segment:-

• Investment banking (mergers and acquisitions, advisory services and securities underwriting)
• Asset management (sponsored investment funds) and,
• Trading and principal investments (broker-dealer activities including proprietary trading and
brokerage trading.
 INVESTMENT BANKING

Investment banking is a part of the financial services industry and offers an

increasingly important range of services to corporations throughout the world. Investment banking is
neither an investment agency nor a banking organisation. I-Banking as it is often called, is the term used
to describe the business of raising capital for companies and advising them on financial and merger
alternatives. Capital in this sense means money. When firms need money in order to grow and expand
their businesses, I-banks sell securities to public investors in order to raise this money. Investment banks
buys securities, such as bonds and stocks, from an issuer and then see them to the final investors.

• Investment Banks:- An Investment bank is a financial institution that assists individuals, corporations
and governments in raising capital by underwriting and/or acting as the client’s agent in the issuance of
securities . An investment bank assists companies in mergers and acquisitions, and provide ancillary
services such as market making, trading of derivatives, fixed income instruments, foreign exchange,
commodities, and equity securities.

Investment banks raise money by issuing and selling securities in the primary market.
They assist public and private corporations in raising funds in the capital markets (both equity and debt),
as well as in providing strategic advisory services for other types of financial transactions. Even though
investment banks, brokerages and broker-dealers are often thought of as one and the same but investment
banks are differing from them. A brokerage firm takes commission for assisting in the purchase and the
sale of stocks, bonds and mutual funds. Broker-Dealer executes similar functions, but it trades for its own
account. An investment bank actually is broker-dealer that provides corporations with financial services,
such as assistance with initial public offerings, mergers and acquisitions advice and strategic planning.

Investment banks offers their services in different ways and forms such as:-

• Origination and management of new financial issues;

• Underwriting of issued securities;

• Distribution, involving selling securities to ultimate holders.

> Commercial banking vs. Investment banking

Commercial and investment banking share many aspects, but also have many
fundamental differences. In recent years, though the two types of structures have become increasingly
similar; commercial banks now offer more investment banking services and presenting themselves as one
stop shop. Investment banking covers both fund and fee-based activities .

> Merchant banking vs. Investment banking

Predominantly investment banks focus on Initial Public Offerings (IPO’s). Merchant

banks tend to operate on small-scale companies and offer creative equity financing, bridge financing,
mezzanine financing and a number of corporate credit products.
 DETAILED HISTORY OF INVESTMENT BANKING

The history of Investment banking in England has a significant start in the 1500s or
1600s. In ancient times investment institutions extending credit to merchant and helping finance to foreign
trade and simultaneously accumulate funds for long -term foreign investments. The nineteenth century saw
the rise of several prominent banking partnerships financing the import of commodities for European
manufacturers and helping them export their finished products around the world. The 1800s also saw the
birth of some of the most famous firms in investment banking, many of them are still present today. By the
middle of 1800, professional investment banks had sprung up in the US to help government raise funds for
infrastructure projects and The Civil War. In the 1830, commercial banks started adding investment banking
services to their regular banking activities in the US. Investment banking hit a milestone in the 1870s when
syndicate banks from Europe and US teamed up to buy $50 million worth of US treasury bonds for resale to
public. The syndicate sold billion dollar’s worth of government bonds to large number of individual
investors through the use of thousands of salesmen and an extensive advertising campaign. This venture
marked the first mass securities-selling operation carried out in The United States. In the early 1900s, JP
Morgan and company put together another syndicate to recognise US Steel from an array of affiliated
companies into the first billion dollar corporation by trading shares of its smaller affiliates for the merge
entity.

The firm of JP Morgan played a major role in the corporate mergers such as the
merger of US Steel Corp and the Northern Pacific and Great Northern railroads. The firm grew to such size
and prominence at the turn of the century that JP Morgan, the founder, is credited for “saving”, Goldman
Sachs was founded in 1869 by German Jewish immigrants. Marcus Goldman was among the pioneers of
the Initial Public Offering (IPO), and managed one of the largest IPO’s at that time, for Sears, Roebuck and
Company in the 1906. During the period from 1890-1925, the investment banking industry was highly
concentrated and dominated by an oligopoly, that consisted of JP Morgan and Co; Kuhn, Loeb and Co;
Brown Brothers and Kidder, Peabody and Co. There was no legal requirement to separate the operations of
commercial and investment banks. As a result, deposits from the commercial banking side of the business
constituted an in-house supply of capital that could be used to fund the underwriting business of the
investment banking side.
 GLASS-STEAGALL ACT - 1933

The famous Glass-Steagall Act enacted in 1934, erected barriers between commercial
banking and the securities industry. Glass-Steagall was created in the aftermath of the stock market
crash of 1929 and the subsequent collapse of many commercial banks. The modern concept of
“Investment Bank” was created in the Glass-Steagall Act (Banking act of 1933). Glass-Steagall
separated commercial banks, investment banks, and insurance companies. The act prohibited the
combination of a depository institution, such as a banking holding company, with other financial
companies, such as investment banks and brokerage houses. Reacting to the 1933 banking collapse in
the US, two Senators Carter Glass and Henry Bascom Steagall proposed the separation of investment
banking and commercial banking. The Act passed in the US Congress restricted commercial banks from
investment activities. The restrictions put by GSA were not applied for foreign banks. The Act was
making the banking industry riskier rather than safer by putting curb on diversifying them like JP
Morgan less competitive in the US market. Carter Glass, Senator from Virginia, believed that
commercial banks securities operations had contributed to the crash of 1929. Banks failed because of
their securities operations and those commercial banks used their knowledge as lenders to do insider
trading of securities. Professor George Benston argued that unregulated banks have lower failure rate in
comparison to regulated banks. Other countries (Germany, Switzerland) have always allowed universal
banking system.
 GRAHAM-LEACH ACT, 1999

Looking at the disadvantages and owing to the pressures from Lehman Brothers,
Merrill Lynch, Goldman Sachs, Morgan Stanley, and Bear Stearns in 1999 the US Congress repealed the
GSA with the establishment of the Graham-Leach-Bliley Act. It eliminated the GSA restrictions against
affiliation between commercial and investment banks. President Clinton cancelled the Glass-Steagall Act
of 1933. Republican Congress and President Clinton passed the Graham-Leach-Bliley Financial Services
Modernization Act in 1999. Permission was given to insurance companies, investment banks, and
commercial banks to compete on equal footing across products and markets. The increased leverage
allowed by Graham-Leach-Bliley Act and proprietary trading ravaged the investment banking industry,
leading to the collapse, merger, or restructuring of all five major pure-play banks on Wall Street.
Consumer groups fought repeal of Glass-Steagall saying it would reduce privacy. Graham-Leach calls
for a study of the issues of financial privacy. The combined entity offered all services like Banking,
Insurance, Brokeraging under one roof. Graham Leach Bliley Act now allowed the US commercial banks
to do the work of I-Banks.

In the JP Morgan’s case, it created JP Morgan as a commercial bank, Morgan Stanley

as an investment bank, and Morgan Grenfell, as a British merchant bank. The Glass-Steagall Act
remained in force until it was repealed during the Clinton administration in 1999. In the mid-20th
century, large investment banks were dominated by the deal makers. Goldman Sachs, Morgan Stanley,
Lehman Brothers, First Boston and others advising clients on mergers and acquisitions and public
offering their main objective focus of major Wall Street partnerships. But, however, that trend began to
change in the 1980s due to Salomon Brothers, Merrill Lynch and Drexel Burnham Lambert into the
limelight as a new focus on trading propelled firms. Investment banks earned an increasing amount of
their profits from proprietary trading. Advances in computing technology also enabled banks to use more
sophisticated model driven software to execute trades and generate a profit on small changes in market
conditions. Investment banks profited handsomely during the boom years of the 1990s.
 ORGANIZATIONAL STRUCTURE OF AN INVESTMENT BANK

The investment bank is organised into activities and units commonly referred to as front-
office, middle-office, and back-office. The individual activities are described below:-

• Front-office:-Investment banking is the traditional aspect of investment banks, which involves helping
customers raise funds in the capital markets and advising on mergers and acquisitions.Financial
markets is split into four key divisions: Sales, Trading, Research and Structuring.

Sales and trading is the most profitable area of an investment bank. Majority of revenue
are generating from this area. In the process of market making, traders will buy and sell financial products
with the goal of making an incremental amount of money on each trade. In the term of investment banks
sales means its sales force. Their primary job is to call on institutional and high-net-worth investors to
suggest trading ideas and take orders. Then sales desks communicate their client’s orders to the
appropriate trading desk, which can price and execute trades or structure new products that fit a specific
need. Research is the division which reviews companies reports about their prospects along with often
“buy” or “sell” ratings. Research divisions resources are used to assist traders in trading.

• Middle-office:- Traders are considering risk management with analysing the market and credit risk to
their daily trades and taking into the balance-sheet. It also sets limits on the amount of capital that they
are able to trade in order to prevent “bad” trades which will have detrimental effect to the bank.

• Back-office:- Operations department generally involves data-checking trades and ensuring that they are
transacting the required transfers as per requirement. It is also managing the financial information and
reporting of the bank which ensures efficient functions of capital markets.

• Technology:- Technology has changed considerably in the last few years as most sales and trading
desks are using electronic trading platforms nowadays. Investment bank maintains networks of
frequent traders, who provide them with the information and the liquidity necessary to float new
securities. Most investment banks manage large research departments working on problems similar to
those faced by the network members. These departments provide the bank with a bargaining chip in its
negotiations with network members, although they seem hard to justify on a standalone basis. So,
every major investment bank is having considerable amounts of in-house software created by the
technology team to deal with computer and telecommunication-based support for hedging the complex
model driven algorithms.
 ROLE OF AN INVESTMENT BANKER

Any firm contemplating a significant transaction can benefit from the advice for an
investment bank. A quality investment banking firm can provide the services required to initiate and
execute a major transaction, thereby empowering small to medium sized companies with financial and
transaction experience without the addition of permanent overheads. Although large corporations often
have sophisticated finance and corporate development departments, an investment bank provides
objectivity, a valuable contact network, allows for efficient use of client personnel, and is vitally interested
in watching the transaction close.

An investment bank performs six functions in their role as intermediary between

“issuers” and “investors”. An issue can be a public/private company or any other entity that sells financial
assets in the form of stocks or bonds. An investor can be company or a person who buys these assets. So,
issues can be viewed as a buyer of capital and investor can be viewed as a provider of capital. Investment
banking includes a wide variety of activities, including:- underwriting, selling, and trading securities,
providing financial advisory services, restructuring, venture capital, market making, property trading,
financial engineering, and asset securitisation, clearing and settlement and money management, within the
bank, each group are performing their own specialised set of activities.

Investment banks cater towards diverse group of stake holders-companies, governments, non-profit
institutions, and individuals- and help them raise funds on the capital market. They perform the following
major functions for their customers:-

• Serve as trading intermediaries for clients

• Lend and invest banks assets

• Provide advice on mergers

• Acquisitions and other financial transactions

• Research and development opinion on securities

• Market and economies

• Issues

• Buy

• Sell

• Trade stock and bonds

• Manage investment portfolios.

They are members of a team with attorneys and accountants. The investment bankers value
added comes both from specific technical knowledge as well as from retrospection from the number of
times they have been through the process.
estment management :- Investment bankers also provide advice to investors to purchase, manages
trade various securities (shares, bonds, etc) and other assets like real estate, hedge fund, mutual
ds, etc . Investors may be financial institutions or big fund houses or private investors. The
estment management division of an investment bank is divided into separate groups, namely:-
vate wealth management and private client services.

derwriting:- When a company wishes to issue new securities and sell them to the public, it makes
arrangement with an investment banker whereby the investment bank agrees to purchase the entire
e at a set price, known as underwriting. Underwriting also refers to the guarantee by the
estment banker that the issuer will receive a certain minimum amount of cash for their securities.
investment banker buys a new security issue, pays the issuer and markets the securities. The
erwriter’s compensation is the difference between the price at which the securities are sold to the
lic and the price paid to the company for the securities.

rgers and acquisitions:- Handling mergers and acquisition is a major function of investment
kers. One of the main areas of expertise for an investment bank is its ability to evaluate the worth
possible acquisition and arrive at a fair price. An investment bank can assist in valuation,
otiation, pricing, structuring and facilitating the acquisition in order to make the deal go as
oothly as possible.

utiques:- Small investment banking firms providing financial services are called boutiques. These
nly specialise in trading bonds, advising for mergers and acquisitions, providing technical analysis,

ancial advisory:- The investment banker, through experience, becomes an expert in the issuance
marketing of new securities. Business firms may take valuable advice and counsel from the
estment bankers. Thus, investment banker performs and advisory function by analysing the firm’s
ncial needs and recommending appropriate means of financing.

earch:- Research is another important function of an investment bank which reviews companies
writes reports about their prospects with “buy” or “sell” ratings. Though this division does not
erate direct revenues. The information gathered or produced by them is used to guide investors and
ome cases for mergers and acquisition.

k management :- Risk management is a continuously ongoing activity which involves analysing

market and credit risk involved in day to day trading. This helps in setting limits on the amount of
ital that can be used for trading in order to prevent bad trades.

et management:- Investment bankers manage huge portfolios for pension fund, foundations, and
urance companies through their asset management department. Their experts help select the right
of stocks, debt instruments, real estate trusts and other investment vehicles to achieve their
nt’s unique goals.
 RECENT DEVELOPMENTS IN INVESTMENT BANKING: THE PLAYERS

JP Morgan functioned as an investment bank in earlier years but, after Glass-Steagall Act of
1933, the function of investment bank was split off from commercial banks. In 1980 commercial banks
again sought and obtained permission to enter arena of Wall Street business and the Glass-Steagall Act was
repealed.

In 2005, the US was the primary source of investment banking income contributing a total of
51%. Europe (with middle east and Africa) generated 31% of the total, slightly more than 30% share a
decade ago. Asian countries generated the remaining 18%. Between 2002 and 2005, fee income from Asia
increased by 98%. Investment banking is one of the most global industry and is hence continuously
challenged to respond to new developments and innovations in the global financial markets. Throughout
the history of investment banking, many have theorized that all investment banking products and services
are commoditized. New products with higher margins are constantly invented and manufactured by
bankers in hopes of winning over clients and developing trading knowhow in new markets. Previously,
investment banks had assisted lenders in raising more lending funds and having the ability to offer longer
term fixed interest rate by converting the lender’s outstanding loans into bounds. For example:- a mortgage
lender would make a house loan and then use the investment bank to sell bonds to fund the debt; the
money from the sale of the bonds can be used to make new loans while the lenders accept loan payment
and passes the payment onto the bond holders. This process is called securitisation. Another trend in
investment bank is the vertical integration of debt securitisation. However, lenders have begun to securitise
loans themselves especially in the areas of mortgage loans. Many investment banks have focussed on
becoming lenders, themselves making loans with the goal of securitising them and want to be a very
popular financing option for commercial property, investors and developers.

The US economy is subjected to series of credit squeeze measures which led the way to credit
creation beyond the usual banking orbits. Thus, a large number of US firms started having access to short-
term credit by using, as collaterals, securitised assets like commercial papers. As the movement of
securitisation of assets caught on, new forms of financial intermediation are provided by the investment
banks which lent their expertise in repackaging the securities which are now marketed easily and sold to
other banks or non-banks financial units that includes the investment banks as well. The Federal Bank is
having no regulatory power over these transactions. Thus, mortgages on property opened up new profit
opportunities for the broker-mortgage firms, the issuers and insurers of asset based securities (ABS),
investment banks that readily purchased and repackaged the ABS, and other financial institutions.
 EVOLUTION OF INVESTMENT BANKING IN INDIA

In 19th century, European merchant banks set-up their agency houses in the country to
assist in the settling of new projects. In the early 20th century large business houses acted as issue house for
securities, promoters for new projects and also provided finance to Greenfield ventures only to their
companies in which they belong. In 1967, ANZ Grindlays bank set-up a separate merchant banking
division. Soon in 1970 City bank also started investment banking activities. These two banks primarily
provided loan syndication, equity raising and other advisory services. In 1972, a banking commission
report asserted the need for Merchant Banking services in India by public sector banks. SBI was the first
Indian public sector bank to set-up its merchant banking division in 1972. In 1972, ICICI became the first
financial institution to offer merchant banking services. Initial stage the growth of the industry was very
slow and by 1980, merchant banks rose to 33 numbers and were set by commercial banks, financial
institutions and private sector. The securities scam in May 1992 was a major setback 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 layers involved in the scam where Canbank financial
services, SBI capital markets, Andhra bank financial services, etc, leading private sector players involved in
the scam included fair growth financial services and Champaklal investments and finance (CIFCO). The
market turned bullish again in the end of 1993 after the tainted shares problem was substantially resolved.
Currently, there are 136 merchant banks registered with SEBI. Currently no person can act as a merchant
banker without holding a certificate of registration granted by the Securities and Exchange Board of India.
The categories for which merchant banking registration granted by the SEBI is as follows:-

• Category-1:- to carry on the activity of issue management and to act as adviser, consultant, manager,
underwriter, portfolio manager.

• Category-2:- to act as adviser, consultant, co-manger, underwriter, portfolio manager.

• Category-3:- to act as underwriter, adviser or consultant to an issue.

• Category-4:- to act only as adviser or consultant to an issue

>The capital requirement depend upon the category.

The minimum net worth requirement for acting as a merchant banker are as follows:-

• Category-1:- Rs:- 5 crore

• Category-2:- Rs:- 50 lakh

• Category-3:- Rs:- 20 lakh, and

• Category-4:- NIL
 LIST OF TOP 10 INVESTMENT BANKING FIRMS IN INDIA

• JP Morgan:- JP Morgan is a pathbreaker in providing financial services and solutions to its patrons in
more than 100 nations across the world assisted by one of the most wide-ranging international
product proposals. The firm has been assisting its patrons in commercial and business ventures,
besides administrating their wealth for more than two centuries. It is a division of JP Morgan Chase
and Co. (NYSE:JPM) with assets worth USD 2.5 trillion.

• UBS AG:- UBS AG is an expanded international fiscal service provider with its main office in Zurich
and Basel locate in Switzerland. 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. The
firm has its branches spread across 50 nations with around 40% staff performing business in
American nations, 14% in Europe, 33% in Switzerland and 12% in Asia-Pacific. USB’s international
business institutes are assets and wealth management, and investment banking.

• Goldman Sachs:- Responsible for providing fund ideas and fiscal help to its clients, shareholders,
communities, etc, Goldman Sachs facilitate industrial expansion of Indian firms by investing in
people, companies and our communities present across the world. The banking firm administers
business risks of the firm and gives helpful suggestion in buying and selling businesses. It also assists
the state and national level government in sponsoring their functions through loans and equity shares.

• Deutsche bank:- With its headquarters in Frankfurt in Germany, Deutsche bank takes pride in being
the international leader in commercial banking and securities, operational banking, wealth
management, asset management, and retail banking. It is world’s foremost global fiscal service
supplier with total assets worth Euro 2.2 trillion assisted by the workforce of 80,000 employees
across the globe. The bank is registered in the renowned exchange markets namely:- New York Stock
Exchanges (NYSE) and Frankfurt (FWB).

• HSBC:- A subordinate of HSBC Holdings plc, HSBC bank is ranked as the biggest banking
organisation by the Forbes magazine, besides being ranked as the seventh biggest in the world in
2009. In India HSBC controls through its various subordinates namely HSBC Operations and
processing enterprise, HSBC Asset Management, HSBC Securities and Capital Markets, HSBC
Insurance Brokers, HSBC Software Development (India) Private Limited, etc.
• Morgan Stanley:- MSIM offers personalised wealth management facilities and goods to
administration, institutions, non-profit firms, pension funds, high income individuals, retail
investors, etc. In India the firm operates many local mutual fund schemes under Morgan Stanley
Mutual Fund brand for retail investors. Its subsidiary Morgan Stanley Advantage Services assists
Morgan Stanley’s Institutional Services operations ranging from fiscal structuring to research
activity, portfolio assessment to IT expansion, etc.

• ICICI Securities Ltd.:- ICICI is India’s chief equity house. ICICI Securities Ltd. offer back-to-back
banking solutions through its wide sharing network cater to the varied needs of its retail and
corporate clients. ICICI Securities meet the various requirements of its customer base. The firm
operates in fiscal product supply, Equity Capital Markets, Consultation facilities, Retail
Management, Organizational Equities, etc. The firm is listed under the financial power of Singapore
(FPS) and Financial Services power, UK and has a reliable place in the core division of its
functional areas such as consultancy services, fiscal good sharing, Equity Capital Markets optional
services, etc.

• Kotak Mahindra:- Initiated in the year 1984, Kotak Mahindra is India’s foremost private financial
institution. The diverse financial services offered by the firm are commercial banking, life
insurance, investment banking and stock broking. The bank features among the few first companies
to be certified under Reserve Bank of India in 2003.

• SBI Capital Markets:- SBI Capital Markets in India’s leading investment bank and system
consultant, aiding local firms in capital recruitment activities for last so many years. SBICAP is
providing stock broking facilities since the year 2001. The company is an associate of BSE and
NSE capital market divisions. The brokerage facilities offered by the firm are internet broking,
organizational equity, retail customer group equity, asset management solutions and equity
derivatives. Asian Growth Bank (AGB) possesses 13.84% stakes in equity segment of SBICAPS

• Ambit Corp Finance:- Leaders in our investment banking, Ambit Corp provide excellent financial
solutions to its clients. The firm speciality lies in offering holistic services to our investment
banking customers in context of Equity Financial Markets, Mergers and Acquisitions and Alternate
Fund.
 OTHER INVESTMENT BANKS IN INDIA

Other investment banks in India offers large number of financial optional services by tracking the
economic trends, besides as long as financial help to corporate and retail customers. Some of them are:-

• Bajaj Capital:- The Bajaj Capital group is one of the famous investment consultant and financial
planning firms in India. It is expert under the Group 1 of Merchant Bankers by SEBI. Bajaj Capital
provides specially made fiscal planning facilities and investment consultation to the investors,
organizational investors, corporate, high income patrons and Non-resident Indians (NRI’s)

Being one of the biggest distributors of economic goods, Bajaj Capital provides a wide range of
investment schemes such as universal insurance, life insurance, mutual funds, etc, to both public and
personal institutions.

• IDFC:- IDFC was initiated in 1997 in Chennai; IDFC undertakes financial liability support to 332
projects accruing a earning of up to Rs:- 2,20,400 million. The sector under IDFC’s financial support
the infrastructure, agri-related business, transportation, healthcare, tourism and others.

• Tata Investment Corporation Limited (TICL):- A non-banking financial company (NBFC), TICL is
scheduled with the Reserve Bank of India under the group of “Investment Company”. The firm’s
commercial behaviour constitute mostly of endour in ancient investments in equity of the firms in a
variety of sectors. The chief source of go back for the firm entails income on investment trading and
income accrued on dividends.

• UTI Securities Ltd.:- UTI Securities Ltd., is authorised as a self governing specialised body in 1994,
UTI Securities Ltd., is one of the famous investment bank of India. After annihilation of Unit Trust Of
India (UTI) Act, the total share funds of UTISEL is now controlled by manager of a particular enterprise
of UTI. The firm has contributed all sorts of investment linked behaviour which incorporate investment
banking and commercial consultation services.

• YES Bank:- The investment banking friendship is busy in the categorisation, understanding and
execution of deals for their clients in diverse sectors and nations. Some of the typical dealings
incorporate divestitures, confidential equity syndication, mergers and acquisitions and IPO discussion.

• Equities and Global Investment Banking:- Equities and Global Investment banking are offered by
HSBC Securities and Capital Markets (India) Private Limited. Global Investment Banking (GIB) group
provides public and private sector and Government clients with strategic advice and provides critical
financial advice in the areas of :- Mergers and Acquisitions, Equity Capital Markets, Strategic Advice,
Privatisations, Structured Financial Solutions.
 CAPITAL ADEQUACY NORMS

All the countries establish their own guidelines for risk based capital framework known as Capital
Adequacy Norms. Capital Adequacy measures the strength of the bank. Capital Adequacy Ratio is also
known as capital risk weighted assets ratio. Capital Adequacy Ratio (CAR)used in the bank to watch
bank’s health, specifically bank’s capital. Capital Adequacy Ratio is the ratio which determines the
capacity of the bank interns of meeting the time liabilities, other risk such as credit risk, market risk,
operational risk and others. It is a measure of how much capital is used to support the bank’s risk assets.
Bank capital plays a very important role in the safety and soundness of individual banks and the banking
system. Basel committee has prescribes a set of norms for the capital requirement for the banks in 1988
known as Basel Accords I. These norms ensure that capital should be adequate to absorb unexpected
losses or risks involved, if there is higher risk, then it would be needed to back-up with capital.

The focus of Capital Adequacy Ratio under Basel I norms were on credit risk and were calculated
as follows:-

• Capital Adequacy Ratio = Tier I Capital + Tier II Capital / Risk weighted assets.

>Tier I Capital :- This the bank’s core capital comprising of share capital, disclosed reserves and minority
interests.

> Tier II Capital :- This includes supplementary capital consisting of general loan loss reserves and
revaluation reserves on investments and properties held for investment.

Minimum requirement of Capital Adequacy Ratio (CAR):-

Under Basel II norms, 8% is the prescribed Capital Adequacy Norm

• In case of Scheduled Commercial Bank’s CAR = 9%

• For New Private Sector Bank’s CAR = 10%

• For Banks undertaking Insurance Business CAR = 10%

• And For Local Area Bank’s CAR = 15%

 CASE STUDY:- ASIAN BANK LTD.

The Asian Bank is India’s largest private sector bank. In terms of market capitalisation, assets and net
profits. The bank offers wide range of banking products and financial services to retail customers through
variety of channels and also associates in the areas of investment banking and asset management. The bank
is also expanded to overseas operations. It was incorporated on 31st January 1966 as private bank. The bank
commenced commercial operations on 12th April 1966. Further the bank was ranked as “Best Bank” by the
newspaper Survey among 100 nationalised foreign and private sector banks. The bank has a network of 20
fully computerised and automated branches covering 12 states. The principal objective of the bank was to
create developing, financial institutions for providing medium-term and long-term project financing the
India businesses.

All branches are connected through the satellite to a central database offering the facilities of
“anywhere banking” and instant fund transfer. The bank has a deposit base of Rs:- 6186.20 cr. The bank
certificate of Deposit Program has been rated PRI + by CARE for the last three consecutive years. The total
staff strength is 588 as of today. According to the Financial Express survey the bank has been ranked no:1
in terms of business per employee and no:3 in terms of operating profits per employee.

> CASE STUDY 2:- Upcoming New Indian Industry For Investment Banking:—

Reliance Capital, the financial services arm of ADA Group, is set to enter the
investment banking business soon. The company has already launched its PE arm and plans to sell part
stake in its life insurance business to unlock shareholder value, group chairman Anil Ambani told
shareholders on February 03, 2009. The company also expects to enter banking as and when regulations
permit.

According to Ambani, in the four years that Rel cap has functioned after splitting from
the undivided Reliance group, revenues have risen 14 times, net profit has grown 28 times, total assets nine
times and net worth five times. “At Reliance Capital, we continually scan the horizon for new business
avenues. Over the next year, their plan to take their first steps in the world of investment banking, Ambani
said at the Rel Cap AGM.

“Given the scale and magnitude of their relationships across corporate India and the sheer size
and reach of their distribution network, they are ideally positioned to create a significant presence in the
investment banking business,” Ambani added.

Rel Cap also looks to expand its PE arm Reliance Equity Advisors, whose focus will be on
growth capital and buyouts.
 CAREER OPPORTUNITIES

Investment banks recruit highly-motivated and talented personnel from various backgrounds.
There are plenty of opportunities available for undergraduates. MBA’s and other master degree holders.
Many investment banks offer summer internships for MBA’s and also for undergraduates they have many
programs.

The current scenario in India, there are variety of openings in investment banks. European
countries have large requirements for professional investment bankers. Huge investment banks like
Goldman Sachs, Merrill Lynch, Morgan Stanley, Lehman Brothers, Citigroup and Credit Sussie outsource
their works to India because of lower costs.

>Following are the skills required by an Investment banker:

• Analytical Ability

• Fluent communication in English

• Good academic record

• Problem solving skills

• Strong Analysis and Forecasting skills

• In-depth knowledge of the subject.

 SWOT ANALYSIS

> Strengths:-

• Wide Range of Financial Service Offerings:- Investment banking provides various types of services such
as trading, private equity, venture capital, M and A, Joint venture and project finance, etc

• Efficient Employees:- In investment banking all the workings are done by professionals because it
requires deft and proficient personnel. The major strength of this sector is its efficient employees.

• Technological Advancement:- Working efficiency of employees presently has been increased

tremendously due to advancement of technology. Hence, works are done quickly and easily.

• Advance Infrastructure:- The country is equipped with all the latest and advance amenities such as better
telecommunication, transportation, potable water, internet, land, etc which is adding advantage to
investment banks in India.

> Weaknesses:-

• Unawareness of Investors:- The major weakness of this industry is not able to reach to investors.
Investors are more dependent on the trading sector for their investments rather than any other field.

> Opportunities:-

• Huge Potential:- The knowledge of investment banking is increasing among investors and they are
diversifying their investment into many sectors besides trading. Number of mergers and acquisitions,
various projects in the countries are increasing day by day.

• Reform Policy:- 1991 Reform policy and recent amendments in international trade of India have
widened the area and scope of investment banking activities in India.

> Threats:-

• Increasing competition:- Competition in investment banking is increasing day by day. New players are
foraying to the market, due to this market share and profit of each existing company is getting affected.

• Decentralized Management:- Each branch manager are taking decisions in their respective branches
which may lead to heavy losses to the company in future if any wrong decision taken.
 SUMMARY

Investment banking is one of the most global industries and is hence continuously challenged to
respond to new developments and innovations in the global finance markets. Throughout the history of
investment banking it is only known that many have theorized that all investment banking products and
services would be commoditized. New products with higher margins are constantly invented and
manufactured by bankers in hopes of winning over clients and developing trading know-how in the new
markets. However, since these can usually not be patented or copyrighted, they are very often copied
quickly by competing banks, using down trading margins.
For ex:- Trading bonds and equities for customers is now a commodity business structuring and
trading derivatives retains higher margins in good times- and the risk of large losses in difficult market
conditions such as the credit crunch that began 2007. Each over-the-counter contract has to be uniquely
structured and could involve complex pay-off and risk profiles.
In addition, while many products have been commoditized, an increasing amount of profit within
investment banks has come from proprietary trading, where size creates a positive network benefit. The
fastest growing segments of the investment banking industry are private investments into public companies.
Such transactions are privately negotiated between companies and accredited investors.

A major task for investment banks is to follow their client base, increase their technical skills.
They must gain substantial industry expertise on an international scale, especially in the global industries
and develop both multinational and local expertise through their understanding of the main economic and
regulatory characteristics of the local and foreign markets. Investment banks must appear reliable,
responsive to client’s needs and special requirements. They must gain customer’s trust and confidence and
finally they must demonstrate empathy. Investment bank must improve and emphasise various service
dimensions in order to enrich their service quality. These are customer’s service demands and meeting them
is the best way for an investment bank to improve its competitive position. Investment banks have to
manage in a different way the outcome of the service, in order to optimise the rendered service quality.
 CONCLUSION

Investment banking is a field of banking that aids companies in acquiring funds. In addition
to the acquisition of new funds, investment banking also offers advice for a wide range of transactions
company might engage in.Traditionally, banks either engage in commercial banking or investment
banking. In commercial banking, the institution collects deposits from clients and gives direct loans to
businesses and individuals.

Investment banking is a particular form of banking which finance capital requirements of an enterprise.
Investment banking assists as it performs IPO’s, private placement, and bond offerings, access broker and
carries through mergers and acquisitions.

The investment banker plays a vital role in channelizing the financial surplus of the society into
productive investment avenues. Hence, before selecting investment banker, one must decide, the service
for which he is being approached. Selecting the right intermediary who has the necessary skills to meet
the requirements of the clients will ensure success. This project helped us to understand every details
about investment banking and in future how its going to get emerged in the Indian economy. Hence,
Investment banking can be considered as essential financial body in Indian financial system.
 BIBLIOGRAPHY

Books referred:-

• Investment Banking— Text and Cases by Naliniprava Tripathy

• Investment Analysis And Portfolio Management By Vipul publications

• Investment Analysis And Portfolio Management By Sheth publications

Websites referred:-

• www.corporatefinanceinstitute.com

• www.educba.com

• www.wikipedia.com