Unit 5

Core Services of Indian

Investment Banks
 Core Services of
IB
• Role in IPO

• M & A advisory

• Corporate Advisory

• Secondary Market Activities

• Asset Management Services

• Wealth Management Services

 1. Role in
IPO
• Investment banks play a vital role in primary market.

• They are responsible for finding investors for initial

public offering of securities in primary market.

• By bringing the buyers & sellers together, they create

a market.

• Investment bankers may also help as a finder for

private placement of securities with institutions.

• They also purchase new issues from security issuers & arrange
for their resale to the investing public.
 1. Role in IPO -
Underwriting
• Investment bankers buy the new issue at an
agreed price & hope to resell it at a higher price.
• In this capacity they are said to underwriter,
or
guarantee, an issue.
• A group of investment bankers join together
to
underwriting syndicate.
• The underwriting risk would be that the issue may not
attract buyer at positive differential.
• Investment banks put its effort in managing
& placement of an issue.
 1. Role in IPO – Issuance of
Securities
• Investment banks helps in issue by helping in deciding
type of security, size of the issue according to the
financial requirement of the issuer.

• It also helps in deciding time, pricing of issue which is

one of the important aspects of success of the issue.

• Investment banks help in listing of issue, issue

of
prospectus underwriting of issue, etc.
 2. M & A
advisory
• The investment bankers play the role of an advisor in
M&A deal.
• The financing capability of the investment banks is
beginning to play a crucial role in securing the goal.
• Those firms that have networks with banks & other
financial institutions & thereby can provide finance or
have necessary resources to finance the deal themselves
a better chance of success of deal.
• Investment banks thus helps in finding a buyer/seller, in
working out the terms of the transaction, financing the
structure, arranging bridge loans.
 2. M & A advisory
Contd..
• The investment bankers play the role of an advisor in
M&A deal.
• The financing capability of the investment banks is
beginning to play a crucial role in securing the goal.
• Those firms that have networks with banks & other
financial institutions & thereby can provide finance or
have necessary resources to finance the deal
themselves a better chance of success of deal.
• Investment banks thus helps in finding a buyer/seller, in
working out the terms of the transaction, financing the
structure, arranging bridge loans.
 2 M & A advisory
Contd..
• The form of financing includes cash, common stocks,
preferred stocks or debt or convertible securities.

• When these negotiations reach to a point agreement,

the investment banks of the parties must ensure that all
the regulatory & legal aspects of the deal are complied
with.

• Thus investment bankers act as chain for companies.

 3. Asset Management
Services
• This is a service provided by investment banks to local fund
managers for cross border settlement & administration.
• It involves receipt of dividends & interest, subscribing to the
right issues & adjusting portfolio.
• Asset management is the unglamorous aspect of investment
banking, the prosaic bank office work of settling traders,
making payments, keeping records & such related tasks.
• Investment banks provide this service for a fee to investors
such as mutual funds, pension fund & insurance companies,
enabling fund managers to buy & sell securities at home &
abroad.
• It is a hi-tech, hi-volume, low margin business, revolutionized
by advances in computer technology & information
exchanges.
 4. Secondary Market
Activities
• Investment banks also indulge in proprietary trading.
• Some investment banks have proprietary trading desks which
take risk on institution’s behalf, based on a view of economic
& market perceptions & expectations.
• They trade in securities or derivatives for the account of the
firm itself rather than on behalf of it’s clients.
• Proprietary trader tends to take decisions based on detailed
technical & fundamental research, analytic calculations &
time series forecasting.
• The banks incur profit out of the price movement in the
market.
• The commonly traded securities by investment banks include
the sovereign securities, equities, money market
instruments, investment grade corporate debt, high yield
debt, derivatives, mortgages, etc.
 4. Secondary Market
Activities (Functions of IB)
• The traders of investment banks help in making market.
• The traders maintain a position in the stock that their
firms has underwritten, quote the bid & ask prices & sell
at those price.
• Advise the salespeople, client & research analysts on the
market activity & pricing for different equity issues.
• Put major trades together by negotiating with the
salespeople, client & the other dealers.
• Manage the firm’s investment risks.
• Develop a sound knowledge the
about companies & the industries. markets,
 4. Secondary Market
Activities
• Derivative trading, & risk management & structured product
offerings are the new segments that are fast becoming the
areas of future potential for Indian Investment banks.

• The securities business also provides extensive research

offerings & guidance to investors.

• The secondary market services cater to the both the

institutional & non- institutional investors.
 5. Wealth Management
Services
• Wealth management services also called as private
banking.
• Many reputed investment banks nurture a separate
segment to manage the portfolio of high net-worth
individuals, households, trust, & other type of non-
institutional investors.
• This can be structured either as a pure advisory services
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
funds.
• Wealth management may be restricted to a research
based activity wherein in the investors is a provided
good investment recommendation from time to time.
 6. Corporate Advisory
Services
• Investment banks in India also have large practice in
corporate advisory services relating to project financing,
corporate restructuring through equity repurchase
including management of buyback offers under section
77A of the Companies Act,1956 raising private equity,
structuring joint ventures & strategic partnerships &
other such value added specialized areas.
• https://www.wallstreetmojo.com/investment-
banking-in-india/