INTRODUCTION

Investment banks create securities, including stocks and bonds, for themselves
and other companies, and facilitate the trade in them. They also help companies manage
mergers and acquisitions. The primary role of investment banking in the economy has
traditionally been to help businesses raise capital for their operations by selling
investment securities to the general public.
At a very macro level, ‘Investment Banking’ as the term suggests, is concerned
with the primary function of assisting the capital market in its function of capital
intermediation, i.e. the movement of financial resources from those who have them (the
Investors), to those who need to make use of them for generating GDP (the Issuers). As
we know, banking & financial institutions on the one hand and capital market on the
other are the 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
resource allocation. Nevertheless, it would be unfair to conclude so, as that would
confine investment banking to a very narrow sphere of its activities in the modern world
of high finance. Over the decades, backed by evolution and also fuelled by recent
technological developments, investment banking has transformed repeatedly to suit the
needs of the finance community and thus become one of the most vibrant and exciting
segment of financial services. Investment bankers have also enjoyed celebrity status, but
at times, they have paid the price for excessive flamboyance as well.

To continue from the above, in words of John F. Marshall and M.E. Ellis,
‘investment banking is what investment banks do.’ This definition can be explained in
the context of how investment banks have evolved in their functionality and how history
and regulatory intervention have shaped such an evolution. Much of investment banking
in its present form thus owes its origins to the financial markets in USA, due to which,
American investment banks have been leaders in the American and Euro markets as well.
Therefore, the term ‘investment banking’ can arguably be said to be of American origin.
Their counterparts in UK were termed as ‘merchant banks’ since they had confined

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themselves to capital market intermediation until the US investment banks entered the
UK and European markets and extended the scope of such businesses.

Investment Banking is a system under which banks arrange long-term funds for
business and industry. They work both as financiers as well as underwriters. As
financiers they themselves provide long-term funds to business and industry. As
underwriters they work as middlemen between Business Corporation and investors. They
undertake the responsibility of selling shares or debentures of the corporation to the
general public for commission. In the absence of failure of the public to subscribe in full,
they take the unsubscribed portion of the shares or debentures underwritten by them.

The Investment Banking in India proved important agencies for mobilizing

savings of small masses in rural as well as urban areas. With a view to make a proper
assessment of the investment banks operating in India, a detailed study is necessary of
leading investment banks engaged in mobilization of saving and investment.

The increasing sophistication and deepening of the financial markets on one

hand, and fast transforming corporate landscape from a protective background to a
globalised market place on the other, would lead to more complex corporate transactions,
and therefore the role of investment bankers as transaction experts and advisers would
become dispensable.

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 MEANING OF INVESTMENT BANKING

Investment banks, informally I-banks, 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 mergers, acquisitions and other types of financial
transactions. They also act as intermediaries in trading for clients. Investment banks
differ from commercial banks, which take deposits and make commercial and retail
loans. In recent years, however, the lines between the two types of structures have
blurred, especially as commercial banks have offered more investment banking
services... Investment banks may also differ from brokerages, which in general assist in
the purchase and sale of stocks, bonds, and mutual funds. However some firms operate
as both brokerages and investment banks; this includes some of the best known financial
services firms in the world.
There appears to be considerable confusion today about what does and does not
constitute an "investment bank" and "investment banker". In the strictest definition,
investment banking is the raising of funds; both in debt and equity, and the name of the
division handling this in an investment bank is often called the "Investment Banking
Division" (IBD). However, only a few small boutique firms solely provide this - such as
Greenhill, with almost all investment banks heavily involved in providing additional
financial services for clients such as the trading of fixed income, foreign exchange,
commodity and equity securities. It is therefore acceptable to refer to both the
"Investment Banking Division" and other 'front office' divisions such as "Fixed Income"
as part of “investment banking" and any employee involved in either side an "investment
banker".
More commonly used today to characterize what was traditionally termed
"investment banking" is “sell side". This is trading securities for cash or securities (i.e.,
facilitating transactions, market making), or the promotion of securities (i.e.
underwriting, research, etc.).
The "buy side" constitutes the pension funds, mutual funds, hedge funds, and the
investing public who consume the products and services of the sell side in order to
maximize their return on investment. Some firms have both buy and sell side
components.

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 ROLE OF THE INVESTMENT BANK

Investment banks provide four primary types of services: raising capital, advising
in mergers and acquisitions, executing securities sales and trading, and performing
general advisory services. Smaller investment banks may specialize in two or three of
these categories.

Raising Capital:-
An investment bank can assist a firm in raising funds to achieve a variety of
objectives, such as to acquire another company, reduce its debt load, expand existing
operations, or for specific project financing. Capital can include some combination of
debt, common equity, preferred equity, and hybrid securities such as convertible debt or
debt with warrants. Although many people associate raising capital with public stock
offerings, a great deal of capital is actually raised through private placements with
institutions, specialized investment funds, and private individuals. The investment bank
will work with the client to structure the transaction to meet specific objectives while
being attractive to investors.

Mergers and Acquisitions:-

Investment banks often represent firms in mergers, acquisitions, and divestitures.
Example projects include the acquisition of a specific firm, the sale of a company or a
subsidiary of the company, and assistance in identifying, structuring, and executing a
merger or joint venture. In each case, the investment bank should provide a thorough
analysis of the entity bought or sold, as well as a valuation range and recommended
structure.

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Sales and Trading:-

These services are primarily relevant only to publicly traded firms, or firms
which plan to go public in the near future. Specific functions include making a market in
a stock, placing new offerings, and publishing research reports.

General Advisory Services:-

Advisory services include assignments such as strategic planning, business

valuations, assisting in financial restructurings, and providing an opinion as to the
fairness of a proposed transaction.

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 FUNCTIONS OF INVESTMENT BANKING

Investment banks in countries like Australia, the UK or US typically have

corporate finance, capital markets, trading, institutional equity and fixed income, private
clients advisory, derivatives, compliance and research departments as well as other major
functions like project finance, structured finance, investment management and mergers
and acquisitions.

Increasingly, investment banking is migrating in two distinctly different

directions: one, the tendency for global banking entities to merge and grow larger to reap
the global scale economies created by falling capital controls; and two, the emergence of
small niche industry, technology or regional entities that fulfill specialist tasks.

For major investment banks the key areas are corporate finance which involves
designing financing proposals such as IPO’s or structured financings; institutional equity
departments which market the proposals or IPO’s (sometimes called primary offerings);
and research which provide the detailed analysis and information on companies for
corporate finance and institutional equity to market to their respective clients: the
companies supplying equity and the institutions demanding equity.

For smaller specialist players it is increasingly the provision of specialist

quantitative, technology or customized knowledge capital that is key. Those investment
banks that also run investment management businesses and stock broking businesses
have to be careful to maintain strict “firewalls” with their corporate finance arms to
ensure that price sensitive information does not reach these parts of the business before it
is announced to the market as a whole. In practice, this requires investment banking
managements to require keen compliance to ethical and regulatory codes of conduct to
avoid conflicts of interest, a source of constant challenge to the industry.

Investment bankers perform the following four basic economic functions:

1) Arrange the provision of capital for corporations and governments by
underwriting and distributing new issues of securities;

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 2) Maintain markets in securities by trading and executing orders in secondary
market transactions;
3) Provide advice on the issuance, purchase, and sale of securities, and on other
financial matters.
4) Create and manage collective investment vehicles

In contrast to commercial banks, whose chief functions are to accept deposits and
grant short-term loans to businesses and consumers, investment bankers engage
primarily in long-term financing.

They also solicit new untapped funds from large institutions and wealthy
individuals on a case by case basis to finance transactions they arrange, instead of
drawing on the existing pool of funds from commercial banks.

Underwriting:-
When a company needs financing to expand or undertake new projects in many
countries today, an investment bank will step in to offer advice on possible methods and
sources of funding.

Sometimes the investment bank will offer to buy the entire issue and resell the
securities in smaller amounts to investors, a procedure known as 'firm commitment'
underwriting. At other times the investment bank will offer to act on a "best efforts"
basis for commission only, or sometimes in a mixture of the two.

The method chosen will depend on the nature of the firm and industry, the reason
for the financing, the size of the issue and the state of capital market supply and demand.
Often before deciding on the mechanism the investment bank will work alongside other
financial advisers, such as accountants and lawyers, to analyses the issuers’
circumstances and strategy in order to design the optimal financing mix to fit this
strategy.

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Interaction with Institutions:-

The investors to whom these issues are marketed include individuals, insurance
companies, pension funds, trust companies, investment companies, and other financial
institutions. Investment banks are therefore careful to work closely with financial
institutions to gauge the level of their demand and interest for current or other issues.

At other times an investment bank may offer to help a corporate issuer sell an
entire issue of securities directly to one or more institutional buyers, such as insurance
companies, without registering the issue for public sale. These sales are known as private
placements.

Syndication:-
Large issues are usually underwritten by syndicates or groups of firms in order to
share the risk. The “originating” investment bank that proposes and designs the financing
mix is usually named as the lead manager of the issue.

The lead manager conducts a thorough investigation of the issuing corporation,

analyzing financial, marketing, and production matters involved in the proposed
transaction. It then enlists the participation of other houses in a syndicate; each syndicate
member agrees to take a specified part of the issue.

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MAIN ACTIVITIES AND UNITS OF INVESTMENT BANK

Large, global investment banks typically have several business units, including
Investment Banking, concerned with advising public and private corporations; Research,
concerned with producing reports on valuations of financial products; and Sales and
Trading, concerned with buying and selling products both on behalf of the bank’s clients
and also for the bank itself. Banks undertake risk through Proprietary Trading, done by a
special set of traders who do not interface with clients and through Principal Risk, risk
undertaken by a trader after he buys or sells a product to a client and does not hedge his
total exposure. Banks seek to maximize profitability for a given amount of risk on their
balance sheet.

Investment
Bank

Front Middle Back

Office Office Office

An investment bank is split into the so-called 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. Investment bankers prepare idea pitches that they bring to
meetings with their clients, with the expectation that their effort will be rewarded
with a mandate when the client is ready to undertake a transaction. Once
mandated, an investment bank is responsible for preparing all materials

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 necessary for the transaction as well as the execution of the deal, which may
involve subscribing investors to a security issuance, coordinating with bidders,
or negotiating with a merger target. Other terms for the Investment Banking
Division include Mergers & Acquisitions (M&A) and Corporate Finance.

 Financial Markets is split into four key divisions: Sales, Trading, Research and
Structuring.
 Sales and Trading is often the most profitable area of an investment bank,
responsible for the majority of revenue of most investment banks. 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.
Sales is the term for the investment banks sales force, whose primary job
is to call on institutional and high-net-worth investors to suggest trading
ideas and take orders. Sales desks then communicate their clients' orders
to the appropriate trading desks, which can price and execute trades, or
structure new products that fit a specific need.
 Research, is the division which reviews companies and writes reports about
their prospects, often with "buy" or "sell" ratings. While the research
division generates no revenue, its resources are used to assist traders in
trading, the sales force in suggesting ideas to customers, and investment
bankers by covering their clients. In recent years the relationship between
investment banking and research has become highly regulated, reducing
its importance to the investment bank.
 Structuring has been a relatively recent division as derivatives have come into
play, with highly technical and numerate employees working on creating
complex structured products which typically offer much greater margins
and returns than underlying cash securities.

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MIDDLE OFFICE:-

 Risk Management involves analyzing the risk that traders are taking onto the
balance sheet in conducting their daily trades, and setting limits on the
amount of capital that they are able to trade in order to prevent 'bad' trades
having a detrimental effect to a desk overall.

BACK OFFICE:-

 Operations involve data-checking trades that have been conducted, ensuring that
they are not erroneous, and transacting the required transfers. Whilst it
provides the greatest job security of divisions within an investment bank, it is
widely known to involve the most monotonous work at relatively low pay.
 Technology - Every major investment bank has considerable amounts of in-
house software, created by the Technology team, who are also responsible
for Computer and Telecommunications.

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 RISK IN INVESTMENT BANKING

Risk is defined as the volatility or standard deviation (the square root of the
variance) of net cash flows of the firm, or, if the company is very large, a unit within it.
In a profit – maximizing bank, a unit could be a whole bank, a branch, or, a division. The
risk may also be measured in terms of different financial products. But the objective of
the investment bank as a whole will be to add value to the bank’s equity by maximizing
the risk – adjusted return to shareholders. In this sense, a bank is like any other business,
but for banks, profit ability (and shareholder value added) is going to depend on the
management of risks. In the extreme, inadequate risk management may threaten the
solvency of bank, where insolvency is defined as a negative net worth, that is, and
liabilities in excess of assets.

 Credit Risk:-
Credit risk is the risk that an asset or a loan becomes irrecoverable in the case of
outright default, or the risk of delay in the servicing of the loan. In either case, the
present value of the asset declines, thereby undermining the solvency of a bank. If the
agreement is a financial contract between two parties, counterparty risk is the risk that
the counterparty reneges on the terms of the contract. The term counterparty risk is
normally used in the context of traded financial instruments, whereas credit risk refers to
the probability of default on a loan agreement.

 Liquidity and Funding Risk:-

This is the risk of insufficient liquidity for normal operating requirements, that is,
the ability of the bank to meet its liabilities when they fall due. The problem arises
because of a shortage of liquid assets or because the bank is unable to raise cash on the
retail or wholesale markets. Funding risk is the risk that a bank is unable to fund its day- to-
day operations.

Liquidity is an important service offered by investment bank. Customers place

their deposits with a bank, confident they can withdraw the deposit when they wish. If

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 the ability of the bank to pay out on demand is questioned, all its business may be lost
overnight. Since the bank can do nothing to reduce its overhead costs during such a short
period, it will incur losses and could become insolvent.

Maturity matching will guarantee liquidity and eliminate funding risk because all
deposits are invested in assets of identical maturities: then every deposit can be met from
the cash inflow of maturing assets. But such a policy will never be adopted because
intermediation in the form of asset transformation is a key source of bank profit.

 Interest Rate Risk:-

Interest rate risk arises from interest rate mismatches in both the volume and
maturity of interest – sensitive assets, liabilities, and off-balance sheet items. An
unanticipated movement in interest rates can seriously affect the profitability of the bank,
and therefore, shareholder value added. The traditional focus of an asset liability
management group within a bank is the management of interest rate risk.

Bank can lend at either fixed or variable rates, here the variable rate is linked to
some central base or bank rate. Banks will always have some interest mismatch, such as
a mismatch between fixed and variable rate assets and liabilities. If they have excess
fixed rate liabilities, they are vulnerable to failing rates. Banks may be either asset
sensitive, meaning their interest sensitive assets reprise faster than their interest sensitive
liabilities, or liability sensitive, where the opposite is the case. Typically, the former is
the norm, meaning a fall in interest rates will reduce net interest income by increasing the
bank’s cost of funds relative to its yield on assets. If a bank is liability sensitive, a rise in
rates will reduce net income.

 Market or Price Risk:-

Banks incur market (or price) risk on instruments traded in well – defined
markets. The value of any instrument will be a function of price, coupon, coupon
frequency, time, interest rate, and other factors. If a bank is holding instruments on
account (for example, equities, bonds), then it is exposed to price or market risk, the risk
that the price of the instrument will be volatile. General or systematic market risk is

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 caused by a movement in the prices of all market instruments because of, for example, a
change in economic policy. Unsystematic or specific market risk arises in situations
where the price of one instrument moves out of line with other similar instruments,
because of an event (or event) related to the issuer of the instrument. Thus the
announcement of an unexpectedly large government fiscal deficit might cause a drop in a
general share price index, while the announcement of an environmental law suit against a
firm will reduce its share price, but is unlikely to cause a general decline in the index.

A bank can be exposed to market risk (general or specific) in relation to debt

securities (fixed and floating rate debt instruments, such as bonds) debt derivatives
(forward rate agreements, futures and options on debt instruments, interest rate and cross
country swaps, and forward foreign exchange positions) equities, equity derivatives
(equity swaps, futures and options on equity indices, options on futures, warrants), and
currency transactions.

 Foreign Exchange or Currency Risk:-

Under flexible exchange rates, any net short or long open position in a given
currency will expose the bank to foreign exchange risk, a special type of market risk. A
bank with global operations experiences multiple currency exposures. The currency risk
arises from adverse exchange rate fluctuations, which affect the bank’s foreign exchange
positions taken on its account, or on behalf of its customers. Banks engage in spot,
forward and swap dealing. These banks have large positions that change dramatically
every minute. Mismatch currency and by maturity is an essential feature of the business
– successful mismatch judgments may reflect successful risk management.

 Sovereign and Political Risks:-

Sovereign risk normally refers to the risk that a government will default on debt
owed to a private bank. In this sense, it is a special form of credit risk, but the bank may
not have the usual tools for recovering the debt at its disposal. For example, if a private
debtor defaults, the bank will normally take possession of assets pledged as collateral.
But if the defaulter is a sovereign government, the bank is unlikely to able to recover the
debt by taking over some of the country’s assets.

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 Political risk is the risk of political interference in the operations of a private
sector bank. It can range from banks being subjected to interest rate or exchange control
regulations, to nationalization of a bank. For example, since the Second World War,
France has vacillated between nationalization and privatization of its banking sector. All
businesses are exposed to political risk but banks are particularly vulnerable because of
their critical position in the financial system.

 Risk of Global Banking:-

Global diversification of assets often allows a bank to improve upon its risk
management, thereby raising profitability and shareholder value added. However, global
exposure makes the business of risk management more complex, for a number of
reasons. First, banks with branches or subsidiaries in other countries have part of their
infrastructure exposed to currency, exchange control, and political risk. Second,
evaluating credit risks in foreign countries requires additional research and intelligence.
Third, the interbank and Euromarkets are vulnerable to any unexpected financial shocks
arising from key players in these markets, such as Japan or the USA. Fourth, sovereign
risk may be a greater threat in the institutional arena, if political default in foreign
countries is more common than in the home country. Finally, fraud or financial
mismanagement is harder to defect in international operations, thereby increasing
operating risk.

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 TYPES OF INVESTMENT BANKING

When you talk about investment and investment banking, the first thing that
would come to your mind is business management and finance. An investment is
something that you place in a bank or venture in the hopes of either saving the money or
letting it grow. It is usually for the latter reason that individuals and organizations
transact investments. To understand investment banking, first, we have to understand its
roots. The term "invest" comes from the term "vests," which is Latin for "garment" and
was used to denote the act of putting resources into another one's pockets. Like the Latin
term, the investor puts the assets into another entity's pocket; the latter is where the
investment banks come in.

Basically, investment banking involves the client purchasing assets from the investment
bank. The client expects that the purchased asset capital will gain dividends and grow. In
effect, the investor did not work on anything other than making the initial purchase.

Generally, a bank is a financial institution. It is usually concerned with being the middle
entity from which the client can transact business. The client places the money in the
different forms of banking services and gains some interest out of this input. The bank, in
turn, invests the client's money into business ventures or allows the clients to borrow
money for interest in order to grow the initial cash investment. On the other hand,
investment banking is a specific type of banking, which are transactions related and
limited to the financial market. This type of banking is concerned with investments as a
whole.

Investment banks come in two types:-

STOCKS & BONDS:-

The basic investment bank issues stocks and bonds to the clients for a pre-
specified amount. The bank then invests the money that the client used to purchase the
stocks and bonds. These investments differ among banks. In countries where it is
allowed to do so, investment banks have their networks of financial and lending

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institutions from which they profit. Others also invest in property development and
construction. The client with the stocks and bonds would then receive payments from the
profits made on his money on a specified period of time. It can be justified that both the
client and the investment bank profited from the client's initial investment. Because
these banks know the ins and outs of their trade, it is not unusual that small or large
business ventures and corporations seek their help on matters regarding mergers,
acquisitions, and other corporate activities.

MERCHANT BANKS:-

The second type of investment banks is the merchant bank. These banks are
involved in trade financing and providing capital to business ventures not in terms of
loans but of shares. Because these investment banks are based on security of the shares,
they finance only those ventures that have made their mark in the business world. New
merchant companies are usually not financed.

However, versatility is necessary in business. Therefore, a lot of banks have evolved to

encompass all aspects of banking to cater to the needs of a wide range of customers.
These banks offer savings deposits and loans services to regular customers and, at the
same time, offer investments to the financially advanced ones.

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 HOW INVESTMENT BANKING OPERATION DIFFER
FROM OTHER BANKS

Unlike commercial banks and savings and loans, investment banks do not seek cash
deposits from customers in the form of checking and savings accounts, and they do not
make traditional interest-bearing loans to individual customers.
Investment banks instead make their money primarily
 By advising corporate clients on the creation of stocks, bonds and other
securities
 By underwriting securities
 By facilitating mergers and acquisitions, along with any due diligence and
securities exchanges that may go along with them.
 And by brokering (or selling) securities to investors.

Investment bankers have also created a broad array of investment options to go

along with traditional stocks and bonds, including securities derivatives such as call and
put options, which allow investors to lock in a buy or sell price on an investment at a
future date, and credit default swaps, which insure bond buyers against the risk that a
bond seller will renege on the debt.

Investment banks also lend stocks to facilitate short trades, in which speculators
borrow stock and sell it in hopes that its price will decline before they re buy it and return
it to the lender.

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 CHANGES IN INVESTMENT BANKING

In 1933, Congress passed the Glass-Steagall Act, which separated key investment
banking functions from commercial banks. In the midst of the Great Depression,
lawmakers feared that combined investment and commercial banking institutions would
be tempted to use money in commercial banking deposits, such as checking accounts, to
bail out unwise bets on the investment banking side if the two remained combined.

Glass-Steagall was effectively repealed in 1999 and, although commercial banks and
investment banks were once again given the leeway to combine under one roof, pure
investment banks enjoyed greater relief from government regulations. In one notable
case, the federal Securities and Exchange Commission raised the debt limit for
investment banks in 2004, which allowed Wall Street’s largest pure investment banks,
such as Merrill Lynch, Lehman Brothers, Bear Stearns and Goldman Sachs, to invest
more freely with borrowed money – an option largely denied to commercial banks, who
were forced to maintain higher levels of cash and securities reserves to back up their
loans and investments.

when a widespread financial crisis forced all of the largest surviving Wall Street
firms to convert themselves into bank holding companies in order to gain eligibility for
federal aid. The move transferred the firms from the investment-oriented regulatory
oversight of the Securities and Exchange Commission to the commercial banking-
oriented regulation of the Federal Reserve, with consequences that are still unclear.

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 INVESTMENT BANKING CONFERENC

With times being hard these days, investment banking is a good way to invest
money and still feel secure. In this type of banking, an individual or a company or the
government seeks the assistance and guidance of an investment bank to buy or sell
securities. It is the investment banks that address concerns on mergers of companies or
acquisition of new properties. They are also the experts in providing comprehensive
advice to clients to manage their capital and investments. They also help in risk
management and assessment.

To be able to serve their clients well, periodically, investment banking conferences

are held to keep the clients up-to-date with what measures the banks are doing to protect
the investments and at the same time how these investments are faring in the ever-
changing world of business and finance. These conferences are also designed to build a
holistic relationship between the clients and the banks to be able to identify the needs and
the responsibilities of the clients as well as the corresponding responsibilities of the
banks.

These investment banking conferences are also done to provide a way for various
investment banks to help one another and share their expertise in different fields to help
augment the status of this type of banking and, at the same time, find timely solutions to
current problems targeting the banking community.

The whole world is experiencing an alarming economic crisis. Because this global
crisis interconnects, various finance institutions are at a great risk. Therefore, the
investment banking conference aims to address common issues such as credit markets
affecting the economy, corporate environments being affected by constant changes, and
investment banks that need to be kept abreast with the fast events.

For an investment banking conference to be effective, it has to accept the fact that
banks could not stand by themselves. Therefore, client issues should be addressed, and
experts on various industrial fields should be allowed to share the practical knowledge

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that they have learned. Also, the usefulness and timeliness of academic research being
done by renowned business researchers should not be overlooked. Current issues will
help understand and solve current problems, and current trends will be useful to predict
the future of the financial world.

A good investment banking conference will allow all concerned sectors to interact
with one another and provide inputs to benefit all. The professional inputs of industry
experts along with the intellectual inputs from the academic researchers can solve a lot of
issues that may have been difficult for just one team to solve.

Because important decision-making issues will be discussed, investment banking

conferences usually cater to CEOs and other top executives. The presenters from various
fields of industrial or academic expertise are also renowned in their own right and at par
with the CEOs in attendance. These conferences therefore strengthen the networks that
the financial market holds over global issues and events.

During this difficult time of world crisis and poverty, the general banking clients can
still sit peacefully and trust that the investment banks will do their best in finding
solutions to solve current issues.

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 GLOBAL INDUSTRY STRUCTURE

The investment banking industry on a global scale is oligopolistic in nature ranging

from the global lenders (known as ‘Global Bulge Group’) to ‘Pure’ investment banks and
‘Boutique’ investment banks. The bulge group consisting of eight investment banks has a
global presence and these firms dominate the league tables in key business segments.
The top ten global firms in terms of their fee billings as in following table:-

Banks % of Total
Merrill Lynch 9.0
Goldman Sachs 7.5
Credit Suisse First Boston 7.2
Salomon Smith Barney (Citigroup) 6.7
Morgan Stanley 6.3
J. P. Morgan 5.5
UBS Warburg 4.6
Lehman Brothers 3.6
Deutsche Bank 3.5
Bank of America 2.4

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 Market Share of Global Investment Banks

Within the listing given in the table referred to above are the top ‘Pure’ investment
banks, i.e. which do not have commercial banking connections, which are Merrill Lynch,
Goldman Sachs and Morgan Stanley Dean Witter; Listed therein are also the leading
European Universal banks that are called so due to their role in both commercial and
investment banking. The five leading universal banks in the world and their important
group affiliates are listed in the table below.

Citigroup Deutsche J. P. Morgan UBS Warburg

CSFB (Swiss)
(US) (German) (US) (Swiss)

Citiba Deutsc J.P. Morgan

CSFB UBS Warburg
nk he Bank Chase

Salmon
Smith Donaldson,
Morgan Chemical Bank
Barney Lufkin & Dillon Read
Grenfell (merged)
(Investment Jenrette
Bank)

Schroder’s Pershing Alex Brown Beacon Group Paine Webber

Bankers Trust Robert Fleming Philips & Drew

Hambrecht & Swiss Bank

Quist (merged)

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 INVESTMENT BANKING LEAGUE TABLES

 Worldwide mergers and acquisitions:-

24
 Services Provided by an Investment Bank

 Investment Bankers work with the different “product” groups

within the broader Investment Bank to service our clients’
needs
Transaction Product Group

Equity Capital
Equity
Markets (ECM)

Debt Capital
Debt - Bonds
Markets (DCM)
Investment Bankers Client

Debt - Loans Corporate Bankers

M&A, Restructuring,
M&A Group
Divestiture

 Other key resources: Equity and Debt Research, Merchant

Bank, Sales & Trading (e.g. Derivative instruments)

25
 DEPARTMENTS IN INVESTMENT BANKING

1) Corporate Finance: Assists corporate clients to raise capital to finance their

operations and expansionary plans. Teams evaluate the needs of the clients and
assess the inclination of various capital Market.
2) Derivatives: Work with large clients who are exposed to risk of price fluctuations in
certain markets to structure products in order to ease these risks.
3) Mergers & Acquisitions (M&A): One of the most revered departments in I-banking.
M&A provides advisory to companies in varying industries who wish to acquire
other companies or divest current assets.
4) Private Client Services (PCS): Also known as Wealth Management. PCS builds
relationships and networks with high net-worth individuals and helps clients manage
their financial portfolios.
5) Public Finance: Mainly deals with securities issued by governments. These securities
often have unique features and structured tax implications and require substantial
legal and public administration cooperation.
6) Retail: Purchases and sells stocks, bonds, derivatives and other financial instruments
on behalf of small, individual clients.
7) Sales & Trading : Make trades in securities for the primary and secondary markets
for currencies, stocks, bonds, derivatives, futures, commodities, asset-backed
treasuries etc on behalf of institutional clients (mutual and pension funds), individual
investors and for the banks themselves.

26
 INVESTMENT BANKING: PAST, PRESENT, AND
FUTURE BANKING

 Investment banks are changing fast. Forty years ago the industry was dominated by a
few small partnerships that made the bulk of their income from the commissions they
earned floating securities on behalf of their clients. Today’s investment banks are
huge full-service firms that make a substantial proportion of their revenues in
technical trading businesses that started to attain their current prominence only in the
1980s. The CPI-adjusted capitalization of the top ten investment banks soared from $1
billion in 1960 to $194 billion in 2000. Between 1979 and 2000, the number of
professionals1 employed by the top five investment banks (ranked by capitalization)
rose from 56,000 to 205,000.
 The enormous upheavals documented in the previous paragraphs raise a number of
difficult questions. What have the investment banks of today got in common with
their predecessors? Is it possible to draw any meaningful parallels between businesses
that today call themselves investment? Banks and the investment banks of 20, 40, or
even 100 years ago? What is the source of the recent changes to the investment
banking landscape, and can we say anything about the likely future direction of the
industry?
 These questions point to a more fundamental one: namely, if investment banks did not
exist, would we need to invent them? In other words, what are investment banks for?
A sufficiently general answer to this question should explain the past evolution of the
investment bank, shed some light upon investment banking policy debates, and help
us to understand the forces currently shaping the investment banking industry and
their likely impact. Surprisingly, although a wealth of academic and policy work
analyzes specific lines of business within investment banks, very little has been
written to explain the economic purpose of the investment banking institution. In a
recent book we attempt to fill this gap.
 We argue that investment banks have traditionally added value in transactions
involving assets over which it is extremely hard to establish property rights. Since
their inception, investment banks have facilitated complex deals by creating a

27
 marketplace in which informal property rights over these assets could be created and
enforced. Over the past 200 years a series of technological advances has altered the
economic situations that require informal property rights, and investment banks have
changed their focus accordingly.
 The immediate antecedents of the modern investment bank concentrated upon the
commodities of the North Atlantic trade; since the early 19th century, however, the
critical asset has been the information that underpins security market trades. In this
article, we outline our theory and go on to show how it relates to investment banking
history. As we note above and discuss in greater depth below, large-scale capitalism is
underpinned not only by contracts between capitalists and the businesses and
individuals in which they invest, but also between the sellers and buyers of valuable
information.
 Investment banks have always been located at the nexus of these contracts, and their
position has left them particularly exposed to political interference. We show how the
prospect of such interference relates to our theory, and we point to some relevant 20th-
century examples. Finally, we discuss recent changes to the investment banking
landscape and try to identify some of the trends that will influence the future
development of the industry.

Market Revenue of Investment Bankin

28
 Top 10 Investment Banks in India

No Name

1 Avenues Capital

2 Bajaj Capital

3 Cholamandalam Investment & Finance Company

4 ICICI Securities Ltd

5 IDFC

6 Kotak Mahindra Capital Company

7 SBI Capital Markets

8 Tata Investment Corporation Limited (TICL)

9 Yes Bank

10 UTI Securities Ltd

29
 “INVESTMENT BANKING”

 The factors of liberalization and globalization

that have forced the Indian industry to consolidate.
 The institutionalization of corporate
acquisitions by SEBI through its guidelines,
popularly known as the Takeover Code.

One of the cream activities of investment banks has always been M&A advisory.
The larger investment banks specialize in M&A as a core activity. While some of them
provide pure advisory services in relation to M&A, others holding valid merchant
banking licenses from SEBI also manage the open offers arising out of such corporate
events.

 Corporate Advisory
Investment banks in India also have a large practice in corporate advisory
services relating to project financing, corporate financing, capital restructuring though
equity repurchases (including management of buyback offers under section 77A of the
Companies Act, 1956), raising private equity, structuring joint ventures and strategic
partnerships and other such value added specialized areas.

Support Services and Businesses

 Secondary Market Activities:-

Most of the universal banks such as ICICI, IDBI and Kotak Mahindra have their
broking and distribution firms in both the equity and debt segments of the secondary
market. In addition several other investment banks such as the IL & FS and pure
investment banks such as DSP Merrill Lynch and JM Morgan Stanley have a strong
presence in this area of activity. In the past few years, the derivative segment has been
introduced in Indian Capital market and this provides an additional avenue of
specialization for investment banks. Derivative Trading, risk management and structured
product offerings are the new segments that are fast becoming the areas of future

30
 “INVESTMENT BANKING”

potential for Indian investment banks. The securities business also provides extensive
research offerings and guidance to investors. The secondary market services cater to both
the institutional and non-institutional investors.

 Asset Management Services

Most of the top financial groups in India which have investment banking
businesses such as the – ICICI, the IDBI, Kotak Mahindra, DSP Merrill Lynch, JM
Morgan Stanley, SBI and IL&FS also have their presence in the asset management
business through separate entities. As per the three layer structure propounded by SEBI,
the parent organization acts as the sponsor of the fund and the fund itself is constituted as
a trust. The trust is managed by an asset management company and a separate trustee
company which oversees the interests of the unit holders in the Mutual Fund. The whole
structure has an arm’s length distance from the sponsor’s other business and entities.

 Wealth Management Services (Private Banking)

Many reputed investment banks nurture a separate service segment to manage the
portfolio of high net worth individuals, households, trusts and other type of non-
institutional investors. This can be structured either as a pure advisory service wherein
the investment manager does not have any access to the funds or as a fund management
service wherein the investment manager is given charge of the funds. In the former case,
it becomes a non-discretionary portfolio and in the latter case, it becomes a discretionary
portfolio. Such activity is regulated under the SEBI guidelines. In other cases, wealth
management may be restricted based activity wherein the investor is provided good
investment recommendations from time to time.

 Institutional Investing
Institutional investors have been a recent phenomenon in the Indian capital
market, which till then had the presence of a handful of public financial institutions such
as the UTI and the insurance companies. The term lending institutions such as the IDBI
and IFCI did not participate in secondary market dealing as a matter of policy. With the
advent of liberalization, there are presently a large number of domestic institutional
investors in the secondary market apart from approved foreign institutional investors. In

31
 “INVESTMENT BANKING”

addition, institutional investments have risen significantly in the primary markets

through venture capital and private equity investments by investors in both the domestic
and non-resident categories. Several of the leading investment banks either have
dedicated venture funds or private equity funds that invest in primary market. In
addition, they make proprietary investments in the secondary market through their
dealing and market making activities.

32
 “INVESTMENT BANKING”

REGULATORY FRAMEWORK FOR INVESTMENT

BANKING

Investment banking in India is regulated in its various facets under separate

legislations or guidelines issued under statute. The regulatory powers are also distributed
between different regulators depending upon the constitution and status of investment
bank. Pure investment banks which do not have presence in the lending or banking
business are governed primarily by the capital market regulator (SEBI). However,
universal banks and NBFC investment banks are regulated primarily by the RBI in their
core business of banking or lending and so far as the investment banking segment is
concerned, they are also regulated by SEBI. An overview of the regulatory framework is
furnished below:
 At the constitutional level, all investment banking companies incorporated under the
Companies Act, 1956 was governed by the provisions of that Act.
 Investment banks that are incorporated under a separate statute such as the SBI or
IDBI are regulated by their respective statute. IDBI is in the process of being
converted into a company under the Companies Act.
 Universal Banks are regulated by the Reserve Bank of India under the RBI Act, 1934
and the Banking Regulation Act which put restrictions on the investment banking
exposures to be taken by banks. The RBI has relaxed the exposure limits for merchant
banking subsidiaries of commercial banks. Till now, such companies were restricting
their exposure to a single entity through the underwriting business and other fund
based commitments such as standby facilities etc. to 25% of their net owned funds
(NOF). Therefore these companies are now on par with other investment banks which
can do so up to 20 times their NOF.
 Investment banking companies that are constituted as non-banking financial
companies are regulated operationally by the RBI under Chapter IIIB (sections 45H to
45QB) of the Reserve Bank of India Act, 1934. Under these sections RBI I
empowered to issue directions in the area of resource mobilization, accounts and
administrative controls. The following directions have been issued by the RBI so far:

33
 “INVESTMENT BANKING”

 Non-Banking Financial Companies Acceptance of Deposits (Reserve Bank)

Directions, 1998.
 NBFCs Prudential Norms (Reserve Bank) Directions, 1998.
Functional, different aspects of investment banking are regulated under the Securities
and Exchange Board of India Act, 1992 and the guidelines and regulations issued
there under. These are listed below:
 Merchant banking business consisting of management of public offers is a licensed
and regulated activity under the Securities and Exchange Board of India (Merchant
Bankers) Rules 1992 and Securities and Exchange Board of India (Merchant Bankers)
Regulations 1992.
 Underwriting business is regulated under the SEBI (Underwriters) Rules, 1993 and
the SEBI (Underwriters) Regulations 1993.
 The activity of secondary market operations including stock broking are regulated
under the relevant by-laws of the stock exchange and the SEBI (Stock Brokers and
Sub Brokers) Rules 1992 and the (Stock Brokers and Sub Brokers) Regulations 1992.
Besides, for curbing unethical trading practices, SEBI has promulgated the SEBI
(Prohibition of Insider Trading) Regulations, 1992 and the SEBI (Prohibition of
Fraudulent and Unfair Trade Practices Relating to Securities Markets) Regulations
1995.
 The business of asset management as mutual funds is regulated under the SEBI
(Mutual Funds) Regulations 1996.
 The business of portfolio management is regulated under the SEBI (Portfolio
Managers) Rules, 1993 and the SEBI (Portfolio Managers) Regulations, 1993.
 The business of venture capital and private equity by such funds that are incorporated
in India is regulated by the SEBI (Venture Capital Funds) Regulations, 1996 and by
those that are incorporated outside India s regulated under the SEBI (Foreign Venture
Capital Funds) Regulations 2000.
 The business of institutional investing by foreign investment banks and other
investors in India secondary markets is governed by the SEBI (Foreign Institutional
Investors) Regulations 1995.
 Investment 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

34
 “INVESTMENT BANKING”

governed in respect of the foreign investment by the Foreign Exchange Management

Act, 1999 and the Foreign Exchange Management (Transfer of issue of security by a
Person Resident outside India) Regulations 2000 issued there under as amended from
time to time through circulars issued by the RBI.
 Apart from the above specific regulations relating to investment banking, investment
banks are also governed by other laws applicable to all other businesses such as the-
tax law, property law, local state laws, arbitration law and the other general laws that
are applicable in India.

35
 “INVESTMENT BANKING”

ROLE OF INVESTMENT BANKER

In case of Listed Companies:-

one, project finance, restructuring and other corporat e advisory services. Listed
companies have several areas where
investment bankers play a significant role as
advisors and issue managers. In some of these
areas, apart from playing the statutory role of
merchant bankers, they also take significant
financial exposure in underwriting, providing
safety nets, market making and in placement obligations to issuer companies. There
are other areas as well, wherein the investment bankers’ guide listed companies. The
functional areas for investment bankers in listed companies are thus listed below:
 Acting as advisers and arrangers in raising debt and equity finance through the
capital market.
 Acting as advisors and arrangers for private placement of debt and equity.
 Acting as merchant bankers for transactions relating to secondary public offers, right
issues and composite issues.
 Advise companies on pricing and valuation for various types of offers.
 Advise companies on post-listing issues and offerings.
 Advise promoters and help in transactions relating to creeping acquisitions, dilution
management, open offers and preferential allotments.
 Advise companies on delisting and act as merchant bankers for delisting offers.
 Advise companies on buy backs and act as merchant bankers for such offers.
 Advise companies on market capitalization and related issues.
 Advise companies on issue of sweat equity, shares with differential rights, ESOPs
and ESPS.
 Act as sponsor / merchant bankers for private equity deals / bought out deals with
subsequent offers for sale.

The above list is not intended to be exhaustive. However, it brings out the
fact that the service areas are many insofar as listed companies are concerned. Full

36
 “INVESTMENT BANKING”

service investment banks come in with other strengths as well, such as in mergers
and acquisiti

 Due diligence
Armed with information about the company and its operations, the short listed
candidates are then allowed to visit the Data Room prepared for the purpose of due
diligence. An advisor has a critical role to play in the performance of due diligence. It
is at this stage that the bidding company gets an opportunity to see the various
documents and books of the company being disinvested and also visit the
manufacturing facilities of the company. Information that is gathered at this stage is
critical in the preparation of the bid document. Since due diligence has to be
performed within the given time, sufficient preparation and care has to be taken to
ensure that all information that is required is obtained and that there are no
information gaps or lack of understanding on any issue subsisting thereafter. Among
the documents, special mention has to be made about the draft SPA and the SHA that
would be provided to the bidders at this stage. These are two important documents
that need to be examined in detail. Legal advice is normally sought for this purpose.
Special attention has to be paid to important clauses that deal with employees,
affirmative rights of the Government on certain issues, exit mechanism, board
representation and indemnity. Since these documents become the center point for all
future negotiations, it is upmost importance that these are examined and understood
well before submitting the final bids.

 Valuation and Preparation of the Final Bid

The last stage in the bidding process would be to actually prepare the final bid
document. As bids are normally required to be submitted in two parts i.e. the financial
bid and the technical bid. The bid documents have to be filled in without any errors or
misrepresentation. The financial bid is the price that the company / group / consortium
are willing to pay to acquire a strategic stake in the company being disinvested. Hence
to arrive at this price, a detailed valuation has to be made by the advisor based on the
information furnished in the CIM and discussions with the global advisors to the
Government or the officials of the PSU. The advisor has to use all the skills and prior

37
 “INVESTMENT BANKING”

experience required for this purpose, along with a lot of market intelligence in arriving
at the appropriate financial bid. The recommendations on the valuations have to be
discussed with the management to arrive at the final price. The technical bid would
normally contain information about the bidder’s track record, financial performance,
reasons for bidding, detailed plan of action for the company being acquired and
required documentary evidence.

Usual documents that are required are:

 Bank Guarantee
 Board Authorization
 Application under Section 108A of the Companies Act, if required
 FIPB / SIA application, if required
 Copy of the Share holders’ agreement / Share Purchase agreement authenticated by
the bidder based on which the bid has been made.
 Other documents if any.

Bidders are allowed to be present at the time of opening the bids. Thereafter, the
highest bidder is called for negotiation and conclusion of the deal. The advisor plays a
very important role at this stage and has to demonstrate the necessary skills in
concluding the transaction in the best interest of the client.

38
 NEED & REQUIREMENTS OF INVESTMENT BANK

Who Need an Investment Bank:-

Any firm contemplating a significant transaction can benefit from the advice of
an investment bank. 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
seeing the transaction close.

Most small to medium sized companies do not have a large in-house staff, and in
a financial transaction may be at a disadvantage versus larger competitors. 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 overhead.

Need & Requirements:-

Investment banking is a service business, and the client should expect top-notch
service from the investment banking firm. Generally only large client firms will get this
type of service from the major Wall Street investment banks; companies with less than
about $100 million in revenues are better served by smaller investment banks. Some
criteria to consider include:

 Services Offered :-

For all functions except sales and trading, the services should go well beyond
simply making introductions, or "brokering" a transaction. For example, most projects
will include detailed industry and financial analysis, preparation of relevant
documentation such as an offering memorandum or presentation to the Board of
Directors, assistance with due diligence, negotiating the terms of the transaction,
coordinating legal, accounting, and other advisors, and generally assisting in all phases
of the project to ensure successful completion.

39
 Experience:-

It extremely important to make sure that experienced, senior members of the

investment banking firm will be active in the project on a day-to-day basis. Depending
on the type of transaction, it may be preferable to work with an investment bank that has
some background in your specific industry segment. The investment bank should have a
wide network of relevant contacts, such as potential investors or companies that could be
approached for acquisition.

 Ability to Work Quickly:-

Often, investment banking projects have very specific deadlines, for example when
bidding on a company that is for sale. The investment bank must be willing and able
to put the right people on the project and work diligently to meet critical deadlines.

 Fee Structure :-
Generally, an investment bank will charge an initial retainer fee, which may be one-time
or monthly, with the majority of the fee contingent upon successful completion of the
transaction. It is important to utilize a fee structure that aligns the investment bank's
incentive with your own.

 Ongoing Support :-
Having worked on a transaction for your company, the investment bank will be
intimately familiar with your business. After the transaction, a good investment bank
should become a trusted business advisor that can be called upon informally for
advice and support on an ongoing basis.

Because investment banks are intermediaries, and generally not providers of

capital, some executives elect to execute transactions without an investment bank in
order to avoid the fees. However, an experienced, quality investment bank adds
significant cant value to a transaction and can pay for its fee many times over. The
investment banker has a vested interest in making sure the transaction closes, that the
project is completed in an efficient time frame, and with terms that provide maximum

40
value to the client. At the same time, the client is able to focus on running the
business, rather than on the day-to-day details of the transaction, knowing that the
transaction is being handled by individuals with experience in executing similar
projects.

41
 RECENT TRENDS IN INVESTMENT BANKING

One of the trends that have been developing in the past few years in the global and
Indian investment banking arena, is the strong emergence of universal banks ahead of
pure investment banks as market leaders. These universal banks have the additional
financial muscle of their banking arms that add to their investment banking strengths.
Pure investment banks have found it unmanageable to maintain leadership positions due
to difficult market conditions and the economic downturn. The year has been dubbed as
the watershed year in investment banking for over a decade. Globally, universal banks
such as the – Citigroup, JP Morgan Chase and Deutsche Bank are emerging strongly
against pure investment banks such as Goldman Sachs and Morgan Stanley. This trend
could probably reappear in India as well with the emergence of SBI, ICICI, IDBI and
Kotak Mahindra Bank as strong universal banks. However, pure investment banks such
as JM Morgan Stanley and DSP Merrill Lynch still occupied top positions in the
investment banking league tables.

Some recent developments in the investment banking industry as reported in some

and other press clippings are listed below:

International:-
 The Wall Street IPO market has been the fewest number of issues with just five in the
first quarter. These have mostly been from insurance and financial services firms and
four of them were IPOs.
 There was a drop of 28% in global equity related issuances according to Thomson
Financial. IPOs were the main casualty with a drop of 34% to $60.6 billion. European
markets saw a 53% drop in IPOs and 54% drop in convertible bond issuances. In Europe,
the market focus has shifted from fund raising through IPOs and public issues to more of
restructuring deals. These are termed as ‘rescue finance’ deals such as rights issues and
fully convertible bond issues by troubled companies. Ericsson, Sonora and Zurich
Financial Services are some companies that made rights issues .According to Dialogic,
the volume of rights issues in Europe rose from $20.7 billion to $21.5 billion. The most
popular instrument in USA and Europe has been the ‘mandatory convertible’ (fully

42
 convertible) bond which is considered as forward share sales which is superior in nature
to a right issue.
 The Citigroup was Wall Street’s top stock and bond underwriter. Citigroup affiliate
Salomon Smith Barney arranged $414 billion of offerings with a 10.6% market share
according to Thomson Financial. Merrill Lynch and CSFB were ranked second and third
respectively. However, the total underwriting pie fell by 5% during the same year.
 The top IPO investment bank 2012 was Salomon Smith Barney followed by Goldman
Sachs. Goldman arranged the largest IPO of 2012, the $4.6 billion CIT Group Inc. (Tyco
International Ltd.) unit.
 The reported fee of American investment banks fell by 21% to $14.1 billion. Salomon
took the highest fee of around $2 billion followed by the other two with around $1.2
billion each. Since April, 78000 jobs were slashed in this industry in USA accounting for
about 10% of the total strength.
 Global M&A market was also dull witnessing a sharp fall of 47% to stand at $996 billion
from $1,887 billion in the previous year. The biggest deals were HP-Compaq, Amgen-
Immune Corp, AOL Time Warner – AOL Europe, Bayer – Aventis Crop Science,
Comcast Corp, AT & T Broadband, Philips Petroleum – Conoco, and Siemens Robert
Bosch Atccs Mannesmann.
 Some of the big universal banks such as JP Morgan Chase took major hits in their private
equity businesses due to the technology meltdown. Incidentally, JP Morgan, which is one
of Wall Street’s largest private equity operators with a fund base of $28 billion,
generated $130 million in revenues in private equity fuelled mainly by the IPO market
boom in technology stocks. Due to the meltdown, many investment banks have felt it
necessary to spin off their private equity operations into separate entities. BNP Paribas,
Deutsche Bank, HSBC and Zurich Financial Services are some of those banks.

National:-
 JM Morgan Stanley which acted as advisor to M&A deals worth Rs. 16,022 crore was
rated the top investment bank in India. the other players in the big league were – ABN

43
 Amro (Rs.10,460 crore), DSP Merrill Lynch (Rs.7130 crore), Arthur Andersen (now part
of E7Y, Rs.3532 crore), Kotak Mahindra (Rs.1719 crore), Rabo India Finance (Rs.833
crore) and Lazard Capital (Rs.536 crore), In this market, Citibank was the leading
depository bank according to Instanex Capital Consultants. This was followed by Bank
of New York, Deutsche Bank and JP Morgan.

 In the M&A market; saw an increase of around 5% in the value of M&A deals in India.
Among these, more than 50% were cross-border deals according to a survey conducted
by KPMG Corporate finance. The deals were mostly in the SME segment with average
size not exceeding $25 million. The banking, finance and insurance sectors contributed
almost one third of the total volume. Privatization deals also played a significant part.

 DSP-ML de-listed from the stock exchanges since its promoters, Hemendra Kothari and
Merrill Lynch together held more than 90% of the shares. DSP was rated ‘The Best
Domestic Investment Bank’ in India by Finance Asia. Euromoney voted it ‘Best
Domestic M&A House in India’ as well as ‘Best Domestic Equity House in India’ .This
distinction has returned for three years in a row with DSP-Ml being named as the ‘Best
Domestic Securities House’ and ‘Best Domestic Investment Bank’ by Asia money.

 MUMBAI: Mutual funds are riding high these days, helped by sluggish growth in bank
credit. Banks, which are struggling to find customers to lend for large projects, have
registered a 30 per cent jump in investments in mutual funds over last year's levels.

44
 Bank investments in various mutual fund schemes till August stand at Rs 70,000 crore,
30 per cent higher over their investments in the same period last year (Rs 55,000 crore).
It jumped almost five times from about Rs 13,000 crore in early April 2015, the latest
RBI data indicated. Fund managers say that a bulk of these investments is in liquid/money-
market schemes which offer easy liquidity and relatively better returns. "Investments in
liquid schemes are a good cash management option for banks," said Alok Singh of
BOI AXA Mutual Fund. "Returns are higher than deploying idle cash in other alternative
avenues such as call money market or CBLO (Collateralised borrowing and lending
operations). Besides, there are no hassles of rollover of transactions.

 SHANGHAI: Officials from the world's largest emerging nations launched the New
Development Bank (NDB) on Tuesday, the second of two new policy banks heavily
backed by Beijing that are being pitched as alternatives to existing institutions such as
the World Bank.

45
The new bank will fund infrastructure and development projects in BRICS countries - Brazil, Russia, India, China and
South Africa.

Also known as the BRICS bank, it follows soon after the establishment of the China-led
Asian Investment Infrastructure Bank (AIIB). The new bank will fund infrastructure and
development projects in BRICS countries - Brazil, Russia, India, China and South
Africa.
The ceremony on Tuesday concludes a lengthy wait since the NDB was first proposed in
2012. Disagreements over the bank's funding, management and headquarters had slowed
its launch.
"Our objective is not to challenge the existing system as it is but to improve and
complement the system in our own way," NDB President Kundapur Vaman Kamath
said.
He added that after a meeting with the AIIB in Beijing, the NDB had decided to set up a
"hotline" with the AIIB to discuss issues, and to forge closer ties between "new
institutions coming together with a completely different approach."
The bank is considering raising funds by issuing a "substantial" amount of bonds in
member markets to help mitigate costs arising from exchange rate fluctuations, he
said.
Chinese Finance Minister Lou Jiwei said the NDB's support of infrastructure projects
will help "ease long-running bottlenecks faced by emerging and developing countries,

46
and help them speed up, adjust and upgrade economic development."
The ceremony, held in Shanghai where the NDB's headquarters are located, was
relatively low-key in comparison to a June signing of the articles of agreement for the
AIIB in Beijing, which was attended by delegates from 57 countries and President Xi
Jinping.

47
 C O N C L U SI O N

Looking to the scope for investment banking in India, the future looks bright sfor
the industry as a whole in India. This will lead India’s development in the world; also it
will increase the wealth of the country.

Many more pure merchant banks and advisory firms could convert themselves
into full service investment banks that would broaden the market and make the service
delivery much more efficient. In addition, the technological and market developments
shaping the capital market would also provide an added impetus to the growth of
investment banking. Better regulatory supervision and stricter enforcement of the code of
conduct of market intermediaries would ensure that better quality issuers come to the
market and existing issuers would also enhanced standards of corporate governance.

In the long run, all these developments would ensure fair return to investors, and
bring back investor support to the market. This would augur well for the capital market
in general and investment banking particular. Thus, development of investment bank will
build Investment Market in the country.

48
 B IB L I O G R A PH Y

SECONDARY DATA
BOOKS

 Investment Banking Handbook by J. Peter Williamson.

 Investment Banking Theory & Pratice by Edward
 Gardener & Philip Molyeux.
 Investment Banking in the Financial System by
 Charles R. Geisst, Prentice Hall.
 Investment Banking by Pratap G. Subramanyam
 Investment Banking and Brokerage by
 John F. Marshall and M.E.Mills, Probus Publishing.
 Indian Financial System by H. R. Machiraju,
 Vikas Publishing House Pvt. Ltd., Reprint 2000.

WEBSITES
 http://www.projectsparadise.com/investment-banking-project
 http://www.wisegeek.com/what-is-the-investment-banking.html

PRIMARY DATA

NEWS PAPER ARTICLES

 The Economic Times
 Business Standard

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