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Presented By: Group# 4 Aniket Vipat 101108 Saurav Modi 101144 Shreyansh Rajpurohit 101145 Sunit Lohia 101149 Vipul

Agrawal 101158 Vishal Kukal 091255

INVESTMENT AND MERCHANT BANKING

INVESTMENT BANKING

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Bank of America (Merrill Lynch) Citigroup Credit Suisse Wells Fargo Securities Barclays Capital Morgan Stanley Deutsche Bank UBS Nomura Securities Cholamandalam Investment & Finance Company JP Morgan Chase Bajaj Capital Goldman Sachs

Investment Bank (Definition)

A financial intermediary that performs a variety of services. This includes underwriting, acting as an intermediary between an issuer of securities and the investing public, facilitating mergers and other corporate reorganizations, and also acting as a broker for institutional clients.

Investment Bank.(Features)  1/2  Unlike commercial banks and retail banks. underwriting. research.e. There are two main lines of business in investment banking. Many firms have buy and sell side components. have historically not maintained such a separation.e. mutual funds. the United States maintained a separation between investment banking and commercial banks. while dealing with pension funds. From 1933 (Glass–Steagall Act) until 1999 (Gramm–Leach–Bliley Act). facilitating transactions. investment banks do not take deposits.. market-making). hedge funds. and the investing public (who consume the products and services of the sellside in order to maximize their return on investment) constitutes the "buy side". etc. including G8 countries.) is the "sell side".   Trading securities for cash or for other securities (i. .. or the promotion of securities (i. Other industrialized countries.

Investment Bank.(Features)  2/2 An investment bank can also be split into private and public functions with a Chinese wall which separates the two to prevent information from crossing. The private areas of the bank deal with private insider information that may not be publicly disclosed. while the public areas such as stock analysis deal with public information .

. With foreign investment banks in 1990s merchant banking came to be known as Investment banking Comes under the purview of SEBI.Indian Context Commercial Banks and financial institutions set up subsidiaries in 1972.

Types of Investment Banks Investment Banks Full Service Global Investment Banks Regional Investment Banks Boutique Firms .

g.Full Service Global Investment Banks Operates on global basis and provides a complete set of services to their clients  Large investment firms serving multinationals  E.  Kotak Investment Banking .  JP Morgan Chase &Co.   Jefferies  Goldman Sachs.

g.  Variety of product offerings  Also known as ‘Speciality Investment Banks’  E.Regional Investment Banks Concentrated in particular region with specialized geographical knowledge.   Piper Jaffray Companies  Simmons & Company .

g   Avendus Capital  Veda (Chennai based)  Montague Partners .Boutique Firms Small Investment Firms organized at local level  Specialize in particular industry or product  Better advisors in some particular deals  E.

INVESTMENT BANKING SERVICES Investment Banking Fund-Raising Services Advisory Services .

FUND-RAISING SERVICES 1/1 Initial Public Offerings (IPOs) Follow-on Public Offers (FPOs) Qualified Institutional Placements (QIPs) Rights Issues .

FUND-RAISING SERVICES 2/2 Preferential Allotments Foreign Currency Convertible Bonds (FCCBs) Global Depository Receipts (GDRs) .

INVESTMENT BANKING SERVICES  Advisory Services  Export and Project Finance  Project Advisory  Project Debt Arrangement  Forfaiting  Mergers and Acquisitions .

INVESTMENT BANKING SERVICES  Mergers and Acquisitions Package of Services Scope of Services • Strategic Advise • Buy-side and Sell-side Advisory • Divestures • Recapitalizations • Buyouts • Capital Raising • Legal Documentation • Valuation .

INVESTMENT BANKING SERVICES  Mergers and Acquisitions Buy Side Advisory Sell Side Advisory • • • • Target Short Listing Preparing and Executing Term Sheet Due Diligence and Transaction Closure Transaction Closure • • • • Collateral Preparation Target Short-Listing Preparing and Executing Term Sheet Due Diligence and Transaction Closure .

INVESTMENT BANKING SERVICES  Promoter and Acquisition Financing Services  Promoter Financing  Acquisition Financing Private Equity Advisory  Infrastructure Advisory   Capital  Advisory  Strategic Advisory Services .

INVESTMENT BANKING SERVICES  Debt Syndication and Structure Finance  Raising Debt Capital  Debt Structuring Financial Restructuring and Turnaround Financing  Private Client Services  Sales and Trading  Equities Research and Broking  .

MERCHANT BANKING .

Consultant.MERCHANT BANKING  Merchant Banker is any person who is   Engaged in the business of issue management OR Acting as a Manager. Advisor   Facilitate the issue process by coordinating various activities Mandatorily required in case of     Public issues Rights issues Open offers Buy-backs  Prohibited from carrying out any fund based activity .

MERCHANT BANKING – ISSUE MANAGEMENT 1 2 3 4 • Preparation of prospectus and other documents • Determining financial structure • Tie-up of financiers • Appropriate pricing and marketing of the issue • Final allotment and refund of subscription 5 .

MERCHANT BANKERS REGISTERED WITH SEBI .

applicant should not accept or hold any public deposit Should have necessary infrastructure Should not be guilty of any economic offence . 1992  The applicant should comply with the following requirements: Should be a body corporate other than a non-banking financial company Being a primary dealer registered with RBI.SEBI (MERCHANT BANKER) REGULATIONS.

100 Crores but less than Rs. 200 Crores Rs. 500 Crores.APPOINTMENT OF LEAD MERCHANT BANKERS  Number of lead merchant bankers depends on the size of issue and may not exceed as below: Size of Issue Less than Rs. of Merchant Bankers Two Three Four Five As may be agreed by the Board . 100 Crores Rs. 50 Crores but less than Rs. 50 Crores Rs. 400 Crores Above Rs. 200 Crores but less than Rs. five or more No.

MERCHANT BANKING  Responsibility of Lead Managers  No lead manager shall agree to associate unless his responsibilities are clearly defined. allocated and determined Acquisition of shares on the basis of unpublished price-sensitive information is prohibited  Information to the board – about acquisition of securities  Disclosures to the SEBI  Appointment of Compliance Officer  .

SUBMISSION OF UNDERTAKING Transactions in securities between the date of filing the offer documents and the closure of the issue will be reported to the stock exchanges concerned within 24 hrs . SUBMISSION OF DOCUMENTS Offer document Memorandum of Understanding Inter-Se Allocation of Responsibilities Due-diligence certificate Certificates signed by the CS or CA 2.PRE-ISSUE OBLIGATIONS 1.

SUBMISSION OF LIST OF PROMOTER’S GROUP The issuer company shall issue the list and the individual shareholding to the SEBI 4. APPOINTMENT OF INTERMEDIARIES A merchant banker shall not lead manage the issue if he is a promoter or a director or an associate of the issuer company 5.PRE-ISSUE OBLIGATIONS 3. that issuer companies enter into MoUs with the intermediaries concerned . APPOINTMENT OF OTHER INTERMEDIARIES The lead merchant shall ensure that the other intermediaries are duly registered with the Board.

APPOINTMENT OF UNDERWRITER The lead merchant shall satisfy himself about the ability of the underwriters to discharge their underwriting obligations. from the date of filing the offer document with the SEBI 8. MAKING OFFER DOCUMENT PUBLIC The draft-offer document filed with the SEBI shall be made public for a period of 21 days.PRE-ISSUE OBLIGATIONS 6. the lead merchant banker shall file a statement withh the board . also he should ensure that the relevant details of underwriters are included in the offer document 7. FILING A NO-COMPLAINT CERTIFICATE After a period of 21 days from the date the draft offer was made public.

ENTERING INTO AN AGREEMENT WITH DEPOSITORY(IES) The lead manager shall ensure that the issuer company has entered into agreements with all the depositories for dematerialisation of securities .PRE-ISSUE OBLIGATIONS 8. APPOINTING AUTHORISED COLLECTION AGENTS The issuer company can appoint authorised collection agents according to the discretion of the lead merchant banker 9.

POST-ISSUE OBLIGATION OR REQUIREMENTS The following are the post-issue obligations:  Receiving of application forms.  Deciding allotment procedure.  Shares certificate or demat account entries and refund orders.  Mailing of allotment letters.  Screening of applications. .

or 78 days from the date of closure of the issue subscription. The due date for the report is the third day from the date of closure of the issue. 3-day monitoring report in other cases • Fixed price portion of the book-built issue. 3-day monitoring report for book-built portion • The due date for this report is the third day from the date of allocation. irrespective of the level of subscription. or one day before the opening of the fixed price portion. whichever is earlier. .MONITORING REPORTS The lead merchant banker ensures the submission of the post-issue monitoring reports based on the formats. Final post-issue monitoring report for all issues • The due date for the report is the third day from the date of listing of the report.

This is based on the product of the total number of shares applied for in that category and the inverse of the oversubscription ratio. .ALLOTMENT PROCEDURE The Executive Director or Managing Director of the Regional Stock Exchange consults with the post-issue lead merchant banker and the registrars regarding public issue of securities. • The total number of shares to be allotted to each category is done on a proportionate basis. Proportionate allotment procedure The lead banker must ensure that the allotment is made on a proportionate basis as explained below: • The applicants are divided into separate category based on the number of shares they have applied for.

. The merchant banker must regularly monitor the redress of investors’ grievances arising from the activities.REDRESSAL OF INVESTORS’ GRIEVANCES  The post issue lead merchant banker must interact on a regular basis with the post-issue activities such as allotment and refund.

and also arranges to assign the officers of intermediaries at regular intervals after the closure of the • • Finalization of the basis of allotment Sending off the security certificates • • Completion of refund orders Listing of securities. .COORDINATION WITH INTERMEDIARIES Close co-ordination with the registrars to an issue.

value and percentage of applications received with the stock invest. • The post-issue lead merchant banker ensures the advertisement circulates in at least three publications in English. number. . This is applicable for all issues. brokers or any other agencies associated with the issue do not publish any kind of advertisement describing the status of the issue. Hindi and a regional language at the place.POST ISSUE ADVERTISEMENTS • Advertisement gives the details regarding oversubscription. where registered office of the issuer company is situated. • The post-issue lead merchant banker ensures that the issuer company. advisors. basis of allotment.

OTHER RESPONSIBILITIES The post-issue lead merchant banker is responsible for post issue activities till: • The subscribers have got the shares or debenture certificates or refund of application money • The listing agreement is entered into by the issuer company with the stock exchange • The listing or trading permission is received .

The certificate must certify that the stock invests are released on the basis of the allotment finalised.REALIZATION OF STOCK INVESTS The post-issue lead merchant banker must submit a certificate within two weeks from the date of allotment to the board.  .

CHANGING LANDSCAPE •Investment banking was a lucrative business till 2007 •Sub prime crisis took toll of the global investment banks. . •Investment banks were not under control of either Federal reserve bank or the US securities and Exchange Commission.

 Impact on Indian Investment banks – Drop In big deals and revenues Growth rate slowed down but comparatively good .

to pay back all or part of their bonuses Emphasis on Equity Derivatives and Currency trading  Fewer big banks and more small boutiques  .FUTURE OF INVESTMENT BANKING  • More Stringent Laws and Restrictions Claw-back ProvisionsThis provision requires those whose trades cause subsequent losses.

) • Lesser Dependence on Short-Term Funding – – – As the investment banks are largely financed with short-term funding. a massive asset/liability mismatch is created which is difficult to manage It is also probable that more investment banks will be pushed into the arms of banking acquirers with large and stable deposit bases This will provide solution to the investment banks which are generally financed for the good times. not the bad ones • Potential conflicts of interest: Some of the conflicts of interest that can be found in investment banking are – Credit Rating: Historically.FUTURE OF INVESTMENT BANKING (CONT. . equity research firms were founded and owned by investment banks – Market Manipulation: Many investment banks also own retail brokerages.

CHALLENGES AHEAD • • • • • • Align their product capabilities and cost structures to exploit their competitive advantage Move towards more integrated client relationship and service models Adopt new performance measurement and reward systems Understand the product life cycle and manage their product portfolio more aggressively Adopt a more segmented approach to serving clients Build scale on an operational level to cut costs .

THANK YOU! .

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