I nves nvestment tment bank in g is a particular form of banking which finances
capital requirements of an enterprise. Investment Investment banking assists as it performs IPOs, private placement and bond offerings, acts as broker and carries through mergers and acquisitions. Investment banking is a field of banking that aids companies in acquiring funds. In addition to the acquisition of new funds, investment banking also offers advice for a wide range of transactions a company might engage in. Traditionally, banks either engaged in commercial banking or investment banking. In commercial banking, the institution collects deposits from clients and gives direct loans to businesses and individuals. Through investment banking, an institution generates funds in two different ways. They may draw on public funds through the capital market by selling stock in their company, and they may also seek out venture capital or private equity in exchange for a stake in their company. company. An investment banking firm also does a large amount of consulting. Investment bankers give companies advice on mergers and acquisitions, for example. They also track the market in order to give advice on when to make public offerings and how best to manage the business' public assets. Some of the consultative activities investment banking firms engage in overlap with those of a private brokerage, private brokerage, as as they will often give buy-and-sell advice to the companies they represent. 1
The line between investment banking and other forms of banking has blurred in recent years, as deregulation allows banking institutions to take on more and more sectors. With the advent of mega-banks which operate at a number of levels, many of the services often associated with investment banking are being made available to clients who would otherwise be too small to make their business profitable. At a very macro level, „Investment Banking‟ as 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). Banking and financial institution on the one hand and the capital market on the other are the two broad platforms of institutional that investment for capital flows in economy. Therefore, it could be inferred that investment banks are those institutions that are counterparts of banks in the capital markets in the function of intermediation in the resource allocation.
2
The banking sector is one of the biggest contributors to a nation's economy, provided it is managed in an innovative and professional environment. Investment Investment banking is one rapidly growing form of banking. An investment bank is a type of financial intermediary that performs a variety of functions such as underwriting, facilitating mergers and acquisitions or brokerage services for institutions. The work of an investment bank begins right from the counseling before the underwriting sessions, and stretches right till the securities are properly handled and distributed. Investment banks play a very crucial role in market transactions on behalf of, or for private and public investors, government and corporations. There are a number of investment banks that also provide highly professional services in assisting their clients with industrial know-how on various parameters. The role of an investment bank as a mediator is to directly familiarize the nature of the investment and the entity being invested in. In case of conventional banking, people deposit finances in the form of cash, assets and so on with a bank. The bank in turn can lend to a borrower under some standard norms to utilize in his own way. In the case of investment banking, there is a direct familiarization of both the investor and the borrower. This means that an individual or institutional investor has an option to choose his type of investment or division of investment into any given entity looking out for funds. An investment bank can also assist investment in the financial market.
3
Investment banks provide companies with expert guidance and formulate strategies on their behalf for disinvestment, and also to merge or acquire new entities. Good investment banking involves procedures to maintain and upgrade the quality of services and keep a close watch on the emerging trends in the market, where their customer's money can be invested. It also incorporates risk management services in order to streamline the flow of capital, check its overuse, and come up with a detailed analysis of credit risks.
4
Investment banking has changed over the years, beginning as a partnership form focused on underwriting security issuance (initial public offerings and secondary offerings), brokerage, and mergers and acquisitions and evolving into a "full-service" range including sell-side research, proprietary trading, and investment management. Investment banking (fees for M&A advisory services and securities underwriting); Asset management (fees for sponsored investment funds), and Trading and principal investments (broker-dealer activities including proprietary trading ("dealer" transactions) and brokerage trading ("broker" transactions).
5
Traditional investment banking is a human capital business. The relationships upon which an investment bank‟s information marketplace rests are managed by its employees. Information producers are incentivized using informal contracts which are designed and implemented by skilled investment bank staff. Much of the investment bank‟s expertise is not written down anywhere. In fact, it would be impossible to distill the activities of a skilled investment banker into an instruction book. The relationship between the investment bank and its employees is shaped by the danger that key worker will migrate to competitor firms, and take their skills with them. As a result, investment bankers are in a position to extract in negotiation with their employers a high proportion of the returns from their human capital.
6
An investment bank is a financial institution that assists individuals, corporations, and governments in raising capital by underwriting and/or acting as the client's agent in the issuance of securities. An investment bank may also assist companies involved in mergers and acquisitions and provide ancillary services such as market making, trading of derivatives and equity securities, and FICC services (fixed income instruments, currencies, and commodities). Unlike commercial banks and retail banks, investment banks do not take deposits. There are two main lines of business in investment banking. Trading securities for cash or for other securities (i.e. facilitating transactions, market-making), or the promotion of securities (i.e. underwriting, research, etc.) is the "sell side", while buy side is a term used to refer to advising institutions concerned with buying investment services. Private equity funds, mutual funds, life insurance companies, unit trusts, and hedge funds are the most common types of buy side entities. An investment bank can also be split into private and public functions with an information barrier 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. An advisor who provides investment banking services in the United States must be a licensed broker-dealer and subject to Securities & Exchange
7
Commission (SEC) and Financial Industry Regulatory Authority (FINRA) regulation.
An individual or institution, which acts as an underwriter or agent for corporations and municipalities issuing securities. Most also maintain broker/dealer operations, maintain markets for previously issued securities, and offer advisory services to investors. Investment banks also have a large role in facilitating mergers and acquisitions, private equity placements and corporate restructuring. Unlike traditional banks, investment banks do not accept deposits from and provide loans to individuals. Also called investment banker.
8
The modern concept of “Investment Bank” was created in the Glass-Steagall act (Banking Act of 1933). Glass Steagall separated commercial banks, investment bank s , and insurance companies. An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment banking business. The Glass-Steagall Act was sponsored by Senator Carter Glass, a former Treasury secretary, and Senator Henry Steagall, a member of the House of Representatives and chairman of the House Banking and Currency Committee. The Act was passed as an emergency measure to counter the failure of almost 5,000 banks during the Great Depression. The Glass-Steagall lost its potency in subsequent decades and was finally repealed in 1999.
9
Investment banks are financial institutions that help companies or governments raise capital (money), as well as advise them on other financial decisions.
Investment banking is all about meeting client‟s objectives Advise companies about the most efficient ways to raise money Create securities that meet both clients‟ and investors‟ objectives Serve as a liaison between companies who want to raise money and Investors that want to invest money Serve as an advisor in mergers & acquisitions (M&A) transactions Market makers (facilitate trading) for vast array of securities – SALES & TRADING Provide research on companies they cover for clients – RESEARCH
10
I nvestment banks provide f our prim ary types of ser vices: 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 spec ific 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.
11
3.
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.
4.
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.
12
Investment banks want employees with a combination of strong analytical and interpersonal skills. Some jobs lean more towards one skill set than another (e.g. brokers need to be mainly sales people). A typical job of an equities analyst requires both analytic and interpersonal skills. The skills involved include: Key Skill Area
Requirement
People skills:
High
Sales skills: Communication skills:
Medium High
Analytical skills:
High
Ability to synthesize: Initiative:
High High Medium
Work hours:
50-120/week
Creative ability:
Hard Work Expected and Respected Investment banking is a high work, high risk, high reward profession. When you start your hours will typically be long but the work can be exciting. Be prepared for moments of frustration where you are stretched too thin and moments of exhilaration where everything clicks.
Tough to Break In It's relatively hard to break into investment banking. You need to be prepared to pursue firms on your own after you have thoroughly prepared yourself.
Math Skills Can Help 13
Some jobs in investment banking call for very strong mathematical ability. If you are good at math think about getting an advanced degree in a technical field (studying areas such as stochastic calculus and differential equations), then take some advanced finance courses in options pricing or bond valuation and apply to a research department on Wall Street.
Accounting Skills Valuable The ability to analyze accounting numbers critically is important in most analyst positions. If you have ambitions too "bail out" some day and become a corporate financial analyst you might also want to consider the CMA (Certified Management Accountant) designation.
Traders are Multi-Talented It's hard to define what makes a good trader. A good understanding of the market, quick reactions, analytical skills and the ability to bluff help.
Teamwork Crucial A crucial success factor in investment banking is teamwork. Being able to pull together persons with large egos to get a presentation together for a client is a challenge and is likely to be rewarded highly.
Scientists and Lawyers Wanted There's definitely an interest in people with backgrounds in science and law. Scientist types can work on everything from derivatives algorithms to biotech banking. Lawyers can help design new securities, sell leasing business and use their analytical prowess to talk to clients. This said, you 14
have to sell yourself. It often doesn't hurt to go back and get an MBA from a top school, and then try to repurpose your career into investment banking.
Contacts are Everything The key to breaking into investment banking is a good network of contacts. You may already be blessed with such a network, but if you don't have one, you can start to develop one by going on informational interviews, attending industry conferences, finding alumni from your school in the business etc. Our contact lists may be helpful in this process. Keep in mind that your network might not really "pay off" for some time. If you are young and haven't gone for an MBA degree, try to get into the best possible school and then go for quantitative and analytical coursework.
Getting Things Done is Important Starting off in an investment bank, you are usually responsible for getting projects done well and on-time, whether it be writing reports, running spreadsheets, trading, doing research or coding programs. Later, once you get involved with clients and ideas for generating revenue, you will be rewarded greatly if you can bring in business. At higher levels (usually Director, Managing Director and up) you are exposed to much greater risk. At this level, people are often fired for non-performance, whereas at lower levels you may not be scrutinized as closely.
15
A Masters in Business Administration with 2 years of post-graduate study is essential to grow up in this particular area.
Jobs in entry-level for analyst programs are obtainable to those graduate undergoes who require experience in investment banking profession.
Analysts are essential in making proposals in finance and travel in order to sit with the clients during meetings and sessions where senior bankers discuss ideas to potential customers.
After this comes the requirement of MBA degree holder investment banker.
16
With increasing competitive pressures being placed on businesses and the trend towards globalization, companies are engaging more and more in M&A activity. Many companies looking to expand or streamline their business will use investment banks for advice on potential targets and/or buyers. This normally will include a full valuation and recommended tactics. The investment bank‟s role in mergers and acquisitions falls into one of either two buckets: seller representation or buyer representation (also called "target representation" and "acquirer representation"). They help target companies to develop and implement defensive tactics. They help in valuing the target company. They help in financing mergers and, They invest in stock of firms which are likely to merge.
17
Organizing Mergers : Suppose steel manufacturers interested in merging with one of its suppliers such as iron or coal mining firm. Investment bankers help steel manufactures to acquire its suppliers.
Developing Defensive Tactics : In order to avoid takeover by big firms, a target firm make use of Investment banking firm and a law firm. Some of the defensive strategies are Golden parachutes, Poison pills, white square, white Knights etc.
Financing Mergers : If acquiring firms do not have enough fund of cash, then there is need for searching source of funds.
Arbitrage Operations : Here it refers to buying and selling of securities in different markets at different prices and taking risk free return.
18
Many investment banks are divided into three categories that deal with front office, back office, or middle office services.
Front Office Investment Bank Services: Front office services typically consist of investment banking such as helping companies in mergers and acquisitions, corporate finance (such as issuing billions of dollars in commercial paper to help fund day-to-day operations, professional investment management for institutions or high net worth individuals, merchant banking (which is just a fancy word for private equity where the bank puts money into companies that are not publicly traded in exchange for ownership), investment and capital market research reports prepared by professional analysts either for in-house use or for use for a group of highly selective clients, and strategy formulation including parameters such as asset allocation and risk limits.
Middle Office Investment Bank Services: Middle office investment banking services include compliance with government regulations and restrictions for professional clients such as banks, insurance companies, finance divisions, etc. This is sometimes considered a back office function. It also includes capital flows. These are the people that watch money coming into and out of the firm to determine the amount of liquidity the company needs to keep on hand so that it doesn't get 19
into financial trouble. The team in charge of capital flows can use that information to restrict trades by reducing the buying / trading power available for other divisions.
Back Office Investment Bank Services: The back office services include the nuts and bolts of the investment bank. It handles things such as trade confirmations, ensuring that the correct securities are bought, sold, and settled for the correct amounts, the software and technology platforms that allow traders to do their job are state-of-the-art and functional, the creation of new trading algorithms, and more. The back office jobs are often considered unglamorous and some investment banks outsource to specialty shops such as custodial companies. Nevertheless, they allow the whole thing to run. Without them, nothing else would be possible.
20
The investment banking seniority structure/hierarchy is very strict. A typical hierarchy includes (from most Junior to most Senior): Analyst, Associate, Vice President, Director, and Managing Director. Analysts will tend to work almost exclusively with an Associate, and the Analyst-Associate pair will be responsible for the majority of deliverables in a typical client engagement.
Investment banking deals are done in small teams of 4-6 bankers who usually work with one analyst, one associate, one vice president, possibly a director, and the lead managing director on the deal. Work flow will be executed from the bottom-up: analysts create the material, which is quickly approved up the team hierarchy, to the managing director on the deal. The managing director will have final say on all deal material before it is shown to the client (the company that the bank is representing on the deal). It is very common for deal teams to consist of bankers from across Product or Coverage groups depending on the type of deal or engagement.
21
The investment banker serves multiple roles as an adviser to a company. The banker must understand the current situation of the company and help it move in the direction it wishes to go. This means assisting the company to improve its competitive standing while adding and subtracting assets and liabilities in order to strengthen the position of the company. Bankers do this by finding takeover candidates, leading sales of stock and bonds or suggesting new investment techniques. The ability of the banker to understand the thinking of a corporate client is key to his or her success.
Achieving Strategic Objectives : Investment bankers meet regularly with management to discuss what objectives the company is strategically focusing on. The banker also needs to provide an outside view of what competitor companies are doing and what, if any, strategic complications this provides. Bankers must provide solutions for achieving objectives and have the financial strength to lead bond and stock offerings on behalf of the company.
Due diligence : If a company has made a bid for another company an outside third party such as the investment banker will need to supply an opinion regarding the careful study and decision making that went into acquiring the company. 22
This is called a due diligence report. The due diligence report is a necessary document and requires that the investment banker ask probing questions and ascertain that the company did everything in its power to uncover problems that might arise later.
Fairness Opinions : Another document necessary for the purchase of one company by another is the fairness opinion. The fairness opinion is written by the investment banker and provides detailed determinations, often using several investment metrics, to demonstrate that the company did not overpay for the acquired company. Fairness opinions allow management to show that substantial effort was used to get the best price possible for investors. An investment banker may be sued by shareholders if it is later learned that his opinion was incorrect.
Managing Debt Offerings : Investment bankers suggest ways to finance or refinance financial obligations. In a period of low interest rates a banker may demonstrate cost savings by redeeming outstanding debt at higher interest rates and substituting a new, lower interest cost issue. The banker earns fees for the underwriting while guiding the company's efforts to choose the proper size and maturity of the offering as well as handling negotiations with the debt rating agencies.
Managing Stock Offerings : Investment bankers are responsible for bringing new companies to the public markets for the first time (also called an IPO or initial public offering), raising capital for privately held companies, or improving the capital strength of 23
existing public companies by redeeming debt with additional stock offerings. Taking a company public is a difficult task as the stock offering may not be received well if it is overpriced or will rise greatly in value if it is under priced.
Global
transaction
banking is
the division which provides cash
management, custody services, lending, and securities brokerage services to institutions. Prime brokerage with hedge funds has been an especially profitable business, as well as risky, as seen in the "run on the bank " with Bear Stearns in 2008.
I nvestment management is the professional management of various
securities (shares, bonds, etc.) and other assets (e.g., real estate), to meet specified investment goals for the benefit of investors. Investors may be institutions (insurance companies, pension funds, corporations etc.) or private investors (both directly via investment contracts and more commonly via collective investment schemes e.g., mutual funds). The investment management division of an investment bank is generally divided into separate groups, often known as Private Wealth Management and Private Client Services.
24
Corporate Finance : Raises capital for businesses typically by underwriting stocks and bonds, or other equity and fixed income securities, and re-selling them in the public markets or as private placements to large investors.
Mergers & Acquisitions : Negotiate corporate mergers and acquisitions, advise companies on assessing the value of their businesses.
Public Finance : Raises capital for state and local governments, school districts, and other tax-exempt entities.
Syndicate : Coordinates efforts of investment banking, sales and trading to move new securities issues to market. Organizes underwriting and sales syndicates. Prices, sells, and generates interest in, new securities.
Institutional Sales : Sell securities and investment recommendations, investment management capabilities, and services to large investors typically referred to as “institutional investors.”
25
Retail Sales : Sell stocks, bonds, mutual funds and other investments to the general public and small businesses. Provide investment advice and financial planning services.
Trading : Specialists are market makers on the floor of a stock exchange required to buy and sell to maintain fair and orderly markets in the securities they are assigned by the exchange. Floor Traders execute buy and sell orders for clients of the firms and individuals that they work for as agents.
Research : Equity Researchers review companies and write 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.
Over-the-Counter Trading (OTC) : OTC traders buy and sell stocks, bonds and other securities over electronic trading systems and by telephone as agents for customers or as principals for their own firms.
26
Investing: Investing involves not only managing pools of assets for example, closed and open end mutual funds but also pension fund in competition with life insurance companies. Investment bankers can manage such funds either as agent for other investors or as principal for themselves. The objective in funds management is to choose asset allocation to make sure sufficient return.
Investment Banking: Investment banking indicates activities related to underwriting and distributing new issues of debt and equity in the market. New issues can be both form for example, initial public offering and secondary issue. Initial public offering now-a-days has become major trending issue for corporations as it provide capital from the market as well as general investors. When a corporation wants to raise funds from the market, they go for initial public offering through a prescribed process guided by the Securities and Exchange Commission.
Market Making: Market making involves creating a secondary market in an asset by a securities firm or investment bank. Investment bankers thus make available market place for buying and selling various kinds of securities for example, stocks, bonds, treasury bills, futures and options and derivatives instruments. Investment bankers also make some arrangement for exchanging these securities among different clients by providing transaction mechanism. 27
Trading: Trading is another part of market making where investment bankers play a key role providing trading facilities for prospective buyers and sellers. They purchase securities on behalf of their clients and make sell on behalf of their clients if clients may willing to sell their holding securities. This kind of trading process involve arbitrage pricing gap that entails some commission for trading such securities on the organized stock exchanges.
Cash Management: Investment bankers also offer deposit like cash management accounts to individual investors. Cash management offers services like any other commercial banking and under these service clients may write cheques in order to withdraw money when they demand and investment bankers are liable to meet such immediate financial claims presented by their customers.
Mergers and Acquisition : Investment banks are frequently involved providing advice and assisting in mergers and acquisitions. For example, they assists in finding merger partners, underwriting new securities to be issued by the merged firms, assessing the value of the target firm, recommending the terms and conditions of the merger agreement.
28
The investment bank is a financial institution that helps corporate organizations, company and individual persons to raise enough capital to invest in their projects. Investment banking is all about money and security trading, turning the paper works into real money. They also helps to advice you on the proper kind of investment to in vest your money into at the right time, in other words they give professional advice on when to issue a sell or buy request for stocks, bonds and securities, or better still invest the money for you if given the veto power. Th ese are some of th e ser vices of an i nvestment ban k i n the investment industry;
Invest your money : Unlike the commercial banks that helps you to invest your money directly where you deposit and withdraw money; the investment banks indirectly helps you invest your money in a chosen market, though this may not be done directly but you would surely get a maximum returns on your securities.
Sales of company stocks : Another duty of investment banking is the sales of company shares and bond in order to raise funds and capital for government, corporations, companies and individuals.
29
Buy securities : They also help corporate bodies to buy shares which they believe have a good value and have a ready and standby buyer whom would make a higher bargain. They act more or less like the stock broker when it comes to buying and selling of shares. These securities when traded could help the company in raising more capital.
Managing assets and investment portfolios : Investment banking also helps to manage your assets. As a corporate body or even a business man, you need the services of an investment bank to help you in the management of your assets, properties and finance.
Offer good financial advice : One of the functions of a good investment banker is to offer a good and profitable financial advice to clients. This professional advice requires proper research on when to issue shares to the public in order to raise funds, when not to issue public shares and also when to acquire a merger. All these and more are the professional duties of an investment banker.
30
A multinational investment banker has banking teams which are led by senior partners who have influence in their clients all over the world, experience and associations with many of the most important market players, regulators and top industry bodies. All listen to their firms' clients and comprehend. The outcome is the generation of the center of attention on the issues that really matter. These approaches provide the firm clients with a well established service in their markets. These give them access to specialized assistance which is characterized by obligation to national markets, and a perceptive of the commercial and cultural differences between countries.
31
Like extra-legal property rights institutions, investment banks rely upon their reputation. While much of the academic literature on investment banks includes a casual acknowledgment of the role of reputation in underpinning the investment banker‟s promises, the central importance of reputation to everything the bank does is seldom acknowledged. In this subsection we describe investment bank reputation, and we show how the investment bank manages its networks so as to maximize the yield derived from its reputational capital. The investment bank can fulfill its economic role of creating property rights over price-relevant information only if the informal contracts it writes with the members of its information network are credible. The investment banks promise to market an issuer‟s securities at a fair price is therefore meaningful only to the extent that it affects a reputation upon which a significant proportion of its future issuers will rely.
32
An y fir m contemplati ng a sign if icant tran saction can benefit from
the advice of an investment bank. Although lar ge cor porations 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. M ost smal l 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, 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.
33
Investment banks help companies, governments and other public institutions use the investment markets, to raise capital needed for new projects and ongoing operations, by issuing or trading securities (shares and bonds). Investment banks deal mainly with large organisations, other investment banks and institutional investors. They do not deal with the general public. They tend to be found in large cities such as London and New York. When these clients need to raise money (capital), they can hire an investment bank to advise them. The bank will determine the amount of funding required and how this is structured, i.e. how much equity (shares) or debt (bonds). Investment banks advise companies when they want to raise capital by floating the company on the stock exchange (known as an Inital Public Offering). They determine the number and value of the shares to be issued and distribute and time the release of this new stock. Investment banks will also assist companies with secondary share issues and help companies, governments and other public institutions to raise capital by issuing debt (bonds); they will help with distributing the new securities, usually to other banks and institutional investors. Investment banks not only help with the issuing of shares and bonds but also will underwrite the new securities issued by their clients, for a fee: that means they agree to purchase the securities if they fail to sell. For very large issues, several investment banks may work together, with one being the lead underwriter.
34
Some investment banks are also involved in private equity. This is finding buyers for private share offerings. Companies that are in private ownership, i.e. are not floated on the stock exchange, may wish to raise capital to expand or even to take a public company, or part of it, back into private ownership. Other key areas which investment banks undertake are mergers and acquisitions (M&A). They are involved in setting up deals and advising the world's largest organisations when they want to merge or take over another business. M&A is an important source of income for many investment banks. Even in a recession, strategic mergers continue to happen and banks that specialise in M&A continue to do deals, although at a lower volume. In recent years, investment banks have also been increasingly involved in management buy-outs. When these require a high level of borrowing, they are known as leverage buy-outs (LBOs). The banks will advise on the process and help with rising the funding, sometimes even taking their own investment stake (known as merchant banking). Investment banks also trade stocks, bonds, derivatives (futures and options) and currencies with commercial banks and large institutional investors, on the secondary markets. They make money by buying securities and other commodities as cheaply as possible and then selling them on for as much money as possible. Investment banks also advise clients about buying stocks, bonds and other securities. For larger clients, they will also manage their investments and invest on their behalf. This is known as asset management.
35
The top 10 Investment Banks in India offers large number of financial advisory services by tracking the economic trends, besides providing financial assistance to corporate and retail customers. Some of them are:
Avendus Capital: An investment bank providing mergers and acquisitions, fixed returns, controlled finance, calculated advisory facilities and Private Equity Syndication to its customers ranging from investors to corporates. The bank has a powerful research competence which it utilizes to close business deals in hostile circumstances. It presently concentrates on sectors where Indian firms
have
strategic
expansion
advantage
namely
Healthcare,
Pharmaceuticals, IT Services, Consumer goods, manufacturing, etc.
Bajaj Capital The Bajaj Capital Group is one of the renowned Investment consultant and Financial Planning firms in India. It is certified under the Category I of Merchant Bankers by SEBI. Bajaj Capital provides custom-made Fiscal Planning
facilities
and
investment
consultation
to
the
investors,
organizational investors, corporate, high income patrons and Non-Resident Indians (NRIs).
Being one of the biggest distributors of economic goods,
Bajaj provides an extensive range of investment schemes such as general insurance, life insurance, mutual funds, etc to both public and private institutions.
36
Cholamandalam Investment & Finance Company A combined fiscal service provider of three firms namely Cholamandalam DBS Finance Limited (CDFL), DBS Cholamandalam Distribution Limited and DBS Cholamandalam Securities Limited, Cholamandalam DBS operates in 16 international markets. DBS provides an extensive range of facilities to small and medium sized enterprise, corporate, customers and comprehensive banking activities across Middle East and Asia.
ICICI Securities Ltd India's biggest equity house, ICICI Securities Ltd provide back-to-back banking solutions through its extensive distribution network to cater to the varied needs of its retail and corporate clients. The firm is listed under the Monetary Authority of Singapore (MAS) and Financial Services Authority, UK and has an authoritative place in the core divisions of its functional areas such as consultant services, fiscal good distribution, Equity Capital Markets Advisory Services, etc.
IDFC Initiated in 1997 in Chennai, IDFC undertook the responsibility of providing financial support to 332 projects accruing a profit of upto Rs 2, 20, 400 million. The sectors under IDFC's financial assistance are infrastructure, agri related business, transportation, healthcare, tourism and others.
Kotak Mahindra Capital Company Initiator and leader in equity capital markets, Kotak Investment Banking has undertaken the developmental work of most ground breaking advances in 37
the Indian capital markets comprising the launch of book building and Qualified Institutional Placements (QIPs) in India. The investment bank has an impressive track record of controlling various sectors and has played a major role in the government's milestone disinvestments.
SBI Capital Markets SBICAPS is India's foremost investment bank and project consultant, aiding local firms in capital enlistment endeavors for last many years. The firm started it operations in 1986 and is an entirely owned subordinate of the State Bank of India. Asian Development Bank (ADB) possesses 13.84% stakes in equity segment of SBICAPS.
Tata Investment Corporation Limited (TICL) A non-banking financial company (NBFC), TICL is listed with the Reserve Bank of India under the group of 'Investment Company'. The firm's commercial activities constitute mainly of endowing in long-standing investments in equity of the firms in various sectors. The chief source of return for the firm entails income on investment trading and income accrued on dividend.
Yes Bank This Investment Banking association is engaged in the classification, arrangement and implementation of deals for their clients in varied sectors and nations. Some of the archetypal transactions incorporate divestitures, private equity syndication, mergers & acquisitions and IPO consultation.
38
UTI Securities Ltd Endorsed as a self-regulating professional body in 1994, UTI Securities Ltd., is one of the renowned investment bank of India. After the termination of Unit Trust of India (UTI) Act, the total share fund of UTISEL is now controlled by superintendent of particular enterprise of UTI. The firm has been offering all sorts of investment associated activities which incorporates investment banking and corporate consultation facilities.
39
