Professional Documents
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TO
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DECLARATION
CANDIDATE CO-ORDINATER
SIGN. SIGN.
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Acknowledgement
Investment Banking' as the term suggests, is concerned with the primary function of assisting
the capital market in its function of capital market intermediation, ie. the movement of financial
resources from those who have them means investors, to those who need to make use of them
means issuer for generating profit. Banking & financial institutions on the one hand & capital
market on the other hand are two broad Platforms of institutional intermediation for capital
flows in the economy. Therefore, it could be inferred that investment banks are those institutions
that are the counterparts of banks in the capital market in the function of intermediation in
governments and their agencies to 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 expansion acquisitions,
Investment banking is much wider term than merchant banking as it implies significant fund
based exposure to the capital market. Internationally, investment banking have progressed both
in fund based & fee based segments of industry. In India, the dependence is heavily on
merchant banking, more particularly with issue management & underwriting. However
downturn in primary market has forced merchant banks to diversify & become full fledged
investment banks. Over the decades, backed by evolution & also fuelled by recent technological
developments, investment banking has transformed repeatedly to suit the needs of the finance
community & thus become one of the vibrant & exciting segments of financial services. The
future for investment banks is bright with scope for merchant banks to convert themselves into
investment banks. Much of the investment banking in its present form, thus owes its origins to
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the financial market in U.S.A due to which, American investment banks have been leader in the
American & Euro market as well. Therefore, the term 'investment banking" can be said to be
American origin. Their counterparts in U.K were termed as 'merchant banks since they had
confined themselves to capital market intermediation until the UK & European markets &
KESHAV YADAV
Roll no-211401106005
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Sr. No INDEX Page No
1 INTRODUCTION 0-6
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INTRODUCTION
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TYPES OF PLAYERS IN INVESTMENT BANKING
Investment Banks
1. Full-Service Firms
4. Brokerage Firms
5. Commercial Banks
6. Boutique Firms
Full-Service Firms- These are type of investment banks who have significant
presence in all areas like underwriting, distribution, M&A, brokerage, structured
instruments, asset management etc. They are all rounder of the game. Commercial
Banks- Commercial Banks operating through "Section 20 subsidiaries referring
to the subsidiaries formed under section 20 of the Glass-Steagall Act which were
allowed to carry on limited investment banking services.
Boutique Firms-These are the type of players which specialist in particular areas of
investment banking.
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Brokerage Firms- These firms offers only trading services to retail & institutional
clients.
They have huge investor base which is also used by underwriters to place issues.
Asset Management Firms. These firms offer on investment services. This includes
activities like fund management, wealth management, cash management, portfolio
management depending on the type of investors, tenure of corpus, purpose of
investments, type of instrument invested in etc.
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INVESTMENT BANKING IN INDIA
The bane of Indian capital market today is lack of investor confidence. This is reflected in
the poor performance of both primary & secondary markets. The causes for existing
situation are many but primarily arise on account of lack of liquidity, unscrupulous issuers &
merchant bankers & poor or unappraised issues. Investment banking can solve this problem
because investor would be dealing with reputed investment banker in the primary market
rather than unknown issuers. The investment banks whatever be their issue management
techniques have their own capital on hold. The issues are likely to be properly appraised &
priced & sponsors on OTCEI have a two year lock-in period. Similarly investment banks
would hold the issues until market conditions are appropriate for issue, thus reducing the
risk exposure of investors in gestation for issue. Moreover, the price of reissue will be a
better indicator of issue's performance. Investment banks make the primary market
subscription. In sum, the quality of pricing, appraisal, & primary market functions will
Improve resulting in substantial improvement in investor confidence. Since the investment
banker lends its name to the issue it will imply an issue investors can trust. Investment
bankers may gradually replace merchant bankers in India
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SKILLS SUGGESTED FOR INVESTMENT BANKERS
Technical Skill
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competent to understand all or at least a majority of them. Before practical
solutions emerge, the tools for decision-making will give greater choice to the
solution provider. A strong grounding in theory and concepts facilitates this.
4. Legal Knowledge- While clear cut guidelines can be issued to the traders regarding
their market related activities that are governed by the law, the complexity
multiplies for an M&A deal. The regulators' guidelines have to be strictly followed,
even while envisaging a combination. Legal knowledge is also important for
structuring such deals, which will help identify the constraints associated with
proposed solution. The situation gets more intense when the deal is a cross-border
M&A proposal. Apart from the knowledge of the inland laws, foreign laws also
have to be considered. Any regulation by the foreign government can make an
otherwise desirable deal, unviable.
5. Knowledge of Capital Markets and Functioning- More than any other industry, it is
the investment banking industry that has a direct bearing on the way capital
markets function. Any changes in the capital market regulations affect the
brokerage side of the business, along with the trade clearing and settlement
houses. The trading personnel should be conversant with the regulations,
guidelines, procedural formalities and actual trade execution processes involved in
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capital market. E.g. Trading system involves a lot of additional skills than online
trading. He has to be conversant with the codes, symbols and conventions
followed by the market. Quick signaling and accurate interpretation are of utmost
significance. Any mistake in these would lead to faulty execution of orders and
might entail additional costs to the firm in correcting the errors.
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orders & maintaining databases. The technology helps management and other
departmental professionals and even the clients to disseminate such data in
negligible time. Asset managers have now complicated tools for scientific and in-
depth valuation of portfolios. Comp frameworks can be solved with minimum
effort using technology.
⚫ Communication Skills
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object in the mind & quickly evaluate the various counter offers & suggestions
made by other party.
3. Personality Traits- Personality Traits plays an important role in developing the skill
set of an investment banker. Creativity is an important feature. It comes in use
while handling prospectus, clients & team members. It is essential when solutions
are to be identified for complex problem. Innovations & creativity are required
structure deals.
⚫ Other Skills
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3. Networking Skills- Networking refers to the process of developing a web of
contacts and acquaintances. Some of the special attributes required to develop
networking abilities would include:
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ROLE OF INVESTMENT BANKERS IN DEVELOPING AN ECONOMY.
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MAJOR FUNCTIONS OF THE INVESTMENT BANK
Raising Capital & Security Underwriting. Banks are middlemen between a company
thatwants to issue new securities and the buying public.
Mergers & Acquisitions. Banks advise buyers and sellers on business
valuation,negotiation, pricing and structuring of transactions, as well as procedure
and implementation.
Sales & Trading and Equity Research. Banks match up buyers and sellers as well as
buy and sell securities out of their own account to facilitate the trading of securities
Retail and Commercial Banking. Investment banks now offer traditionally off-limits
services like commercial banking.
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SCOPE OF INVESTMENT BANKS
Following are activities of investment banks. They can be allocated into categories such as
"Corporate Finance," "Capital Markets," "Wealth Management / Private Client," "Alternative
Investments," and the like.
There are four general types of public offerings: 2) Initial public offerings (IPOs) of securities
issued by companies that have never before issued any public securities (normally common
stock is the first security to be issued in an IPO); 2) Initial public offerings of new securities
that companies that are already public have not before issued (e.g., a new class of
convertible debt security): 3) Further public offerings of securities that are already publicly
traded (e.g., the issuance of additional common stock when its price is sufficiently high so
that cost of capital is sufficiently low); 4) Public offerings by company shareholders of
securities that are already publicly traded (e.g., when an original large shareholder, say a
private equity fund, wants to cash out its position).
In the past we could cleanly differentiate debt and equity securities and put them into
separate categories. Investment grade corporate bonds were distinct from high-yield
("junk") bonds. Today the old distinctions are fuzzy. Debt and equity are more points on a
continuum than boxes on a chart. Junior subordinated zero-coupon convertible debentures
can be thought more equity than debt and dutch-auction preferred stock can be thought
more debt than equity. Geography, as well, is no longer a constraint: Companies can reach
anywhere in the world to lower their cost of capital.
Private placement is the selling of securities to investors without the regulatory requirements
of public offerings. The regulations defining private placements are complex and the
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securities and investment vehicles offered are numerous. Ranging from corporate equities
to real estate interests, privately placed securities carry a higher return than similarly
structured securities that can trade in the public markets. The loss of liquidity enhances risk
and therefore requires a proportionally higher return.
This is the front-page stuff - the huge acquisitions, takeover battles, hostile attacks and fierce
defenses. But it's not all war. The vast majority of M&As are friendly, Investment bankers
seek to optimize price and terms, so that the "best price" may not be the highest price for
client sellers (all cash or confidence in closing may be more important) nor the lowest price
for client buyers (certainty of getting the deal done may be more vital). Investment banks
find, facilitate, price, and finance mergers and acquisitions. Also included in M&A are
leverage buyouts by private equity, the restructuring and recapitalization of companies, and
the reorganization of troubled companies,
Financial advisory services have grown dramatically as investment banks work with the large
number of private funds - hedge funds and private equity that have mushroomed in recent
years and control hundreds of billions of dollars. Services include (i) raising of capital for
general funds, (ii) M&A acquisitions, (iii) financing acquisitions, (iv) IPOs of portfolio
companies owned by the funds (when appropriate) and (v) M&A of these companies (when
IPOs are not appropriate). Investment banks like to involve themselves with hedge funds
and private equity since they are transaction oriented, generate huge fees and are in
perpetual deal mode-
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Fairness Opinions
Faimess opinions support M&A, leveraged buyouts and restructurings for public companies.
Providing an independent, defensible, expert statement on values and the "faimess" of those
values is an essential part of any such public transaction. Investment banks command what
may seem to be exorbitantly high fees for giving faimess opinions, considering the number
of hours worked (and the amount of paper produced). The reason is the significant liability
the investment bank assumes, which can be realized both in the courts via shareholder suits
and in industry reputation. In fact, major investment banks do not like to provide faimess
opinions - the risks are too high for the fees - but generally do so only to serve important
clients.
The creation of synthetic financing mechanisms and structures makes possible allocations
of capital with better risk-return features for both issuers and investors. This is generally
achieved by instruments that (i) pool assets, (ii) allocate liabilities into different "trenches"
(with different risk-return profiles), and (iii) are contained within an independent legal entity.
Securitization is the process by which formerly illiquid assets, mostly small consumer
receivables of all kinds (e.g., home mortgages, automotive loans, credit card receivables),
can be liquefied by their being "rolled up" into large, publicly tradable securities with
improved risk-return for both issuers and investors. (Such innovations exemplify investment
banking's contribution to financial markets.)
Securitized obligations are sophisticated in design and often require statistical analysis and
sensitivity testing of key criteria (e.g., default rates, prepayment profiles, interest rate
sensitivity, tax changes, etc.). For example, a change from forecasted rates of prepayment
(eg, due to interest rate declines and the resulting refinancing of older, higher-rate
mortgages) can result in shocking differences in returns from initial expectations. (Principal
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itself can suffer significantly.) Other kinds of structure finance include project finance, which
is used to fund large-scale enterprises such as power plants and infrastructure.
Risk Management
Hedging positions in interest rates, foreign currency exchanges and commodity positions
through swaps, options and futures are an essential building block of financial markets.
Swaps are the mechanism by which two or more parties exchange their debt obligations in
order to control more precisely each party's desired risk/return profile. Swaps work because
different entities have different comparative advantages when pricing different categories
of debt in different financial markets. Parties of dissimilar credit ratings or financing needs
can exchange their obligations (eg, from shorter term to longer term and vice versa) in
order to optimize their financial strategy and structure. Risk management groups combine
expertise in diverse hedging instruments to develop a complete hedging strategy for
enterprises.
Merchant Banking
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Public Trading of Debt and Equity Securities
Most large investment banks maintain strong trading capabilities, which is a significant
though volatile profit center profits are made both from commissions generated by trading
for clients and from capital appreciation generated by trading for the firm's own account.
Investment banks act as brokers, dealers, and/or market makers (which can differ for
different securities). In addition to traditional stocks and bonds, money market instruments
and commodities (e.g., gold, silver, coffee, crude oil, various metals, various foods),
investment banks create "synthetic securities" (eg., striped Treasuries, interest only and
principal only instruments), which by appealing to different investors, enhance the risk-
return for all.lBrokers are commissioned agents who represent either buyers or sellers and
work much as do real estate agents; they carry no securities in inventory and therefore
assume no risk in price variation or interest-charge. Dealers set bid-and-ask prices for each
security they offer for trade; by maintaining an inventory of securities, dealers assume a
price risk since the market may go up or down during the time they hold the securities.
Market Makers establish (and support) the entire market for a security on either side of a
transaction. Brokers and dealers are regulated by the various exchanges of which they are
members and the National Association of Securities Dealers (NASD), which is the self-
regulating organization to which they all belong
For decades, the research capabilities of an investment bank's security analysts were often
the firm's most prestigious and visible strength. (More recently, M&A, IPOs, LBOS, and
private equity/ hedge funds have usurped the limelight.) Indeed, many investment banks.
used the reputation derived from their investment analysis expertise to develop
underwriting and money management businesses. Typical subdivisions are Global Equities
and Fixed-Income. Today, after various scandals and prosecutions, investment banks must
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enforce strict compartmentalization between their corporate finance and investment
research departments (the so-called "Chinese Wall").
Wealth Management
The accumulation of vast wealth by institutional investors (ie., pension and insurance funds),
and by rich and super-rich individuals, has made money management a vital business. (For
individuals, the departments are called "private banking" or "private client.") Investment
banks compete with one another, and with large commercial banks and specialized money
management firms in accumulating assets under management. Hundreds of billions of
dollars are at stake.
Alternative Investments
The investments in financial products other than exchange-traded stocks and bonds have
become a huge business, such as private equity, real estate, arbitrage, international, and the
like. The development of funds under management, including private equity and hedge
funds, has increased dramatically, and investment banks both develop their proprietary
products and sell others.
The raising of money for governments ("sovereigns") at all levels: national governments,
state governments, county and municipal governments. Also included is working with
national governments in the privatization of government assets
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INVESTMENT BANK ORGANIZATIONAL STRUCTUR
Investment banking is split into front office, middle office, and back office activities. While
large service investment banks offer all lines of business, both "sell side" and "buy side",
smaller sell-side investment firms such as boutique investment banks and small broker-
dealers focus on investment banking and sales/trading/research, respectively. Investment
banks offer services to both corporations issuing securities and investors buying securities.
For corporations, investment bankers offer information on when and how to place their
securities on the open market, an activity very important to an investment bank's
reputation. Therefore, investment bankers play a very important role in issuing new
security offerings.
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REGULATORY FRAMEWORK FOR INVESTMENT BANKING
Investment banking in India is regulated in its various facets under separate legislations or
guidance issued under statute. The regulatory powers are also distributed between
different regulators depending upon the constitutions & status of the investment bank.
Pure investment banks which do not presence in the lending or banking business are
governed primarily by the capital market regulator i.e. SEBI. However universal banks &
NBFC investment banks are regulated primarily by the RBI 9in their core business of
banking or lending & so far as the investment banking segment is concerned, they are
also regulated by SEBI. An overview of the regulatory framework is furnished below:-
1. At the constitutional level, all investment banking companies incorporated under the
Companies Act 1956 are governed by the provision of the act.
2. Investment banks that are incorporated under a separate statute such as the SBI or the
IDBI are regulated by their respective statue. IDBI is in the process of being converted into
Companies Act.
3. Universal Banks are regulated by RBI of India under the RBI Act 1934 & the Banking
Regulation Act which put restrictions on the investment banking exposures to be taken by
the banks. The RBI has relaxed the exposure limits for merchant banking subsidiaries of
the commercial banks. Till now, such companies were restricting their exposure to a single
entity through the underwriting business & other fund based commitments such as
standby facilities etc. to 25% of their net owned funds. Therefore these companies are
now on par withother investment banks which can do so upto 20 times their net owned
fund.
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4. Investment banking companies that are constituted as non-banking financial companies
are regulated operationally by the RBI under Chapter IIIB section 45H & 45QB of the RBI
Act, 1934. Under these sections RBI is empowered to issue directions in the area of
resources mobilization, accounts & administrative controls. The following directions have
been issued by the RBI so far:
5. Functionally, different aspects of investment banking are regulated under the securities
& Exchange Board of India Act, 1992 & the guidelines & regulations issued under. These
are listed below:
✔ Underwriting business is regulated under the SEBI (underwriters) Rules & Regulations,
1993.
The activity of secondary market operations including stock broking are regulated under
the relevant by-law of the stock exchange & the SEBI (stock broker & sub broker) Rules &
Regulations, 1992. Besides for restricting unethical trading practices, SEBI has issued the
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SEBI (Prohibition of fraudulent & unfair trade practices relating to securities markets)
Regulations 1995& also SEBI prohibited insider trading under regulations, 1992.The
business of asset management as mutual funds is regulated under
Investment Banking
(Portfolio mangers) Rules & Regulations, 1993. ✓ The business of venture capital & private
equity by such funds that are incorporated in India is regulated by the SEBI(venture
capital) Regulations, 1996 & by those that are incorporated outside India is regulated
under the SEBI (Foreign venture capital funds) Regulations, 2000.
6. Investments banks that are set up in India with foreign direct investment either as joint
ventures with Indian partners or as fully owned subsidiaries of the foreign entities are
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governed in respect of the foreign investment by the Foreign Exchange Management Act,
1999& Foreign Exchange Management (Transfer or issue of a person resident outside
India) Regulations 2000 issued there under as amended from time to time through
circulars issued by the RBI.
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limitation of investment banking
As with every field, there are a few disadvantages of Investment banking that prospective
professionals should have knowledge about. It is helpful to have a grasp of the drawbacks
that a career in investment banking is challenged with. Let us discuss the few
disadvantages of Investment Banking here below:
Enhanced Accessibility
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challenging to seek out peer assistance or counsel. Being able to perform well under
pressure is advantageous when working as an investment banker. Making close
connections with your peers might provide you an advantage by giving you access to
resources that can help you achieve.
A lot of the work an investment banker does might be rather repetitious. For instance,
each organization may respond differently to research and report-writing about them.
However, the actions an investment banker takes to do this are probably the same
regardless of the company. This could be a disadvantage if you like your job to be
dynamic when thinking about this career. However, if you value stability in your career,
you might find routine activities appealing.
Can Be Stressful
Investment banking is one of the most demanding careers in the whole financial services
sector. This may perhaps be the biggest disadvantage of Investment banking. Bankers
may be in charge of a company's whole financial future, meaning that one poor choice
could result in their dismissal. Clients have unreasonable demands and expectations of the
bankers since they pay the bank enormous fees. Time often becomes an issue, and there
may be events of market forces going against you. Additionally, there is a lack of
collaboration in the environment, with people doing whatever it takes to progress.
Investment Banking professionals may be exhausted a lot of the time, which may add to
their stress. The reputation of having a fair amount of unpleasant and disagreeable
employees at investment banks may also be stressful.
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REASEARCH OF KOTAK SECURITIES
Welcome to the Kotak Securities Research Center - the special research cell where some
of India's finest financial analysts bring you intensive research reports on how the stock
market is faring, when is the right time to invest, when to execute your order and more.
Depending on what kind of investor you are, they bring you fundamental or basic
research and technical research. As an investor with Kotak Securities, you get access to
these research reports exclusively. You get access to the following reports.
Intraday calls:
These calls are provided according to changing market situations. Be it news, momentum
or technical perspectives; be updated with what our experts advise you to do during the
market hours.
Special Report:
These reports give you an in depth coverage on special events such as the Budget Report,
Quarterly results, RBI Credit & Monetary Policy. Monsoon Report and much more.
Market Morning:
A technical view summarizing the previous day movement and what is expected to
happen on the current day. This report will also provide you with technical calls for trading
along with various supports and resistances of chosen stocks.
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Daily Morning Brief:
A report providing you information with fundamentally researched stocks everyday. You
also have information on all daily economic, political and various other factors which affect
the fundamentals of a company.
This Weekly Technical Analysis brings you a complete round up of the week gone by -
recommendations, major supports and resistances, what to look forward to and more.
Sectoral Reports:
Deciding which sector to invest in? Their Super Sector report can guide you. Know details
including the effect of government policies and regulations and estimates about how the
sector is expected to behave.
Stock Ideas:
Ever wanted to pick a needle from a stack of Hay. That's exactly what a stock Idea is. Their
research desk picks out potential stocks which can provide immense scope for returns on
investments. This is a report which is completely based on fundamentals
Derivative Reports:
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You can view the put call ratio, the most active derivative contracts and the top change in
open interest. You can also get FII Statistics, the top gainers and losers and the cost of
carrying out various derivative contracts.
Portfolio Advice:
You can avail the advice of our experts by simply writing an email to them. Whether it is
on choosing a stock or sector or anything regarding investments all your queries will be
answered. If you need advise simply.
And last, but not the least, you can get these expert tips and recommendations as SMS on
to your mobile phone.
Check out the returns on investments that our clientele has enjoyed over the past year.
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MUTUAL FUND RESEARCH
When you decide to invest in a Mutual Fund, selecting from hundreds of Mutual Funds
can get tough. With Mutual Fund Research, you can take your pick easily - from equity-
based or debt-based funds, to growth funds or dividend-based funds. Quick Research for
investments Get access to in-depth research. Or zero in from our concise list of funds,
stocks and bonds based on your preferred criteria Analyse with in-depth research
Investment Banking
Get independent research with reports, ratings, and rankings from expert analysts; plus,
insight into current analyst recommendations and their historical performance. Monitor
your investments Get breaking news and set alerts for your portfolio, and track
performance with watch lists
At Kotak Securities, this is precisely what they believe in. They are committed to make
trade easy for you. They understand your level of expertise in trading and provide you
solutions to fit your needs - whether you are a beginner, a seasoned investor or a
professional trader. They can help you invest wisely while taking into account, the amount
you wish to invest. Kotak Securities conducts research for all class of customers.
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Beginners
Looking to invest but don't know where and how? Wondering whether online trading
would be a good and reliable way to invest? At Kotak Securities, they make online
investing really easy for you so you can trade from the comfort of your home or office, or
even while you are on the move.
Seasoned Investors
Given the volatile nature of the stock markets, you can never be really sure of getting
stable returns every time, from your investments. If you have a family to look after, the
need for planning your investments in the long run becomes greater than ever. So
whatever you're life goals,investing wisely could make all the difference between a fortune
gained and an earning lost. Kotak Securities, help you plan investments keeping your
future in mind.
Super Trader
If the research for beginners and seasoned are taken care of by them, super traders
having a huge volume of transactions, who are dedicated customers, research is
conducted to maximize their returns with minimizing risks.
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MARKET SURVEY FOR KOTAK SECURITIE
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DATA ANALYTICS USE CASES IN INVESTMENT BANKS
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QUESTIONNAIRE
Yes
No
2) Do you have an account with Kotak Securities? If No, Than please Specify?
Kotak
HDFC
Others
YES
NO
4) How do you find the portfolio management services of Kotak securities? Rate on the scale
below Between 1-5 (1- Good, 5-
Worst)
Easy
Equity
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Derivatives
Fund
Easy
Easy Insurance
Mutual
6) How do you find the customer relationship management of Kotak? Rate it on the scale
below? Between 1-5 (1-Good, 5- Worst)
7) How do you find follow up services of Kotak securities in terms of Monthly reports and
others? Rate it on the scale below between 1-
5? (1-Good, 5-Worst)
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BIBLIOGRAPHY
1. www.wikipedia.org
2. www.investopedia.com
3. www.moneycontrol.com
4. money.livemint.com
5. http://www.technofunc.com/
6. www.finance-glossary.com
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