Investment Banking and Security

Analysis
 What is Investment?

 The act of committing money or capital

to an endeavour with the expectation of
obtaining an additional income or profit
is termed as investing.
 Why investment is necessary?

Investing has become important due to the following

reasons:
 Inflation is eating away your returns
 You have a substantial standard of living to maintain
 Planned expenses
 Future prospectus
 What is Investment Banking?

 Investment banking is a specific division of

banking related to the creation of capital for
other companies, governments and other
entities.
 What is Investment Banking?

 Investment banks underwrite new debt and

equity securities for all types of corporations,
aid in the sale of securities, and help to
facilitate mergers and acquisitions
, reorganizations and broker trades for both
institutions and private investors.
 Investment banks also provide guidance to
issuers regarding the issue and placement of
stock.
 Investment Banks in Pakistan

 Escorts Investment Bank Limited

 IGI Investment Bank Limited
 First Dawood Investment Bank Limited
 Topics

 Investment banking activities

 Financial statement analysis
 Weighted average cost of capital
 Investment Appraisal
 Corporate restructuring
 Financial modelling
 Forex
 Role of Investment Banks

 Extend finance facilities

 Project Financing
 Eligible financier for capital markets
 Brokerage services without engaging in deposit raising
activity
 Finance Portfolio Management – Discretionary (fund
owner will participate) & Non-Discretionary basis
 Role of Investment Banks

 Advisory Services including financial restructuring,

mergers, professional analysis to investors for
securities, assist in obtaining various types of finances
including placement of debt and equity etc.
 Issuance of guarantees and counter-guarantees.
 Act as Underwriter
 Provide custodial / trustee services subject to fulfillment
of certain criteria
 Risk of Investments

 In general, the term risk refers to the

probability of some undesirable event.
 The element of risk that troubles investors is
the possibility of downside fluctuations in
value and return.
 Types of Investment Risk

 Market Risk
 Discount Rate Risk
 Inflation Risk
 Currency Risk
 Liquidity Risk
Key Points for Investment Banking
Clients?

Clients interested in using the services of an investment

bank must assure:
 The company is registered with the SECP.
 The company is licensed to perform investment
finance services.
 The company has developed proper systems and
controls with appropriate level of documentation for
dealing with clients.
 Proper documentary evidence in the form of
invoice/certificate/receipt is issued for every transaction
with clients.
Key Points for Investment Banking
Clients?

 All transactions valuing more than Rs. 50,000 are

made through cheques.
 The company has its official website which is updated
regularly.
 The persons acting on behalf of the company are duly
authorized representatives of the company.
 The company is not performing any unlawful business.
 All the product features, terms and conditions should
be thoroughly examined before executing any
transaction with the company.
Securities and Exchange Commission
of Pakistan (SECP)

The Securities and Exchange Commission of Pakistan (SECP) was set

up in pursuance of the Securities and Exchange Commission of Pakistan
Act, 1997 and became operational on January 1, 1999.  It has
investigative and enforcement powers.
The current mandate of the SECP includes the following:
 Regulation of corporate sector and capital market
 Supervision and regulation of insurance companies
 Supervision and regulation non-banking finance companies and
private pensions schemes
 Oversight of various external service providers to the corporate and
financial sectors, including chartered accountants, credit rating
agencies, corporate secretaries, brokers, surveyors etc
 Functions of SECP

 Registration
 Licensing
 Appellate bench
 Investors awareness
 Administration of professionals, company
secretaries, accountants etc.
 Divisions of SECP

 Company Law Division

 Securities Market Division
 Specialized Companies Division
 Insurance Division
 Adjudication Division
 Prosecution and Legal Affairs Division
 Support Services Division