Overview

Investment banking includes a wide variety of activities, including underwriting, selling,

and trading securities, providing financial advisory services, and managing assets. Investment
banks cater to a diverse group of stakeholders companies, governments, non-profit institutions,
and individuals and help them raise funds on the capital market. They perform the following
major functions for their customers:

Serve as trading intermediaries for clients

Lend and invest banks assets
Provide advice on mergers, acquisitions, and other financial transactions
Research and develop opinions on securities, markets, and economies
Issue, buy, sell, and trade stocks and bonds
Manage investment portfolios

Investment banks once contrasted sharply with commercial banks, where people mainly
deposited their money and sought commercial and retail loans. In recent years, though, the two
types of structures have become increasingly similar; commercial banks now offer more
investment banking services as they attempt to corner the market by presenting themselves as
one-stop shops.
Investment banks do differ from brokerages and broker-dealers, though, even though
those three entities are often thought of as one and the same. A brokerage firm takes a
commission for assisting in the purchase and sale of stocks, bonds, and mutual funds. A brokerdealer executes similar functions, but it also trades for its own account. An investment bank
actually is a broker-dealer that provides corporations with financial services, such as assistance
with initial public offerings, merger and acquisitions advice, and strategic planning.

Introduction:
Investment banking is a particular form of banking which finances capital
requirements of an enterprise. 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.
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, as they will often give buy-and-sell advice to the companies
they represent.
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.
Nevertheless, it would be unfair to conclude so, as that would confine investment
banking to very narrow sphere of its activities in the modern world of high finance. Over the
decades, backed by evolution and also fuelled by recent technologies developments, an
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 always enjoyed celebrity status, but at times, they have paid the price for the price
for excessive flamboyance as well.

What is Investment Banking?

A person or organization sometimes acts as an underwriter or mediator for corporations and
municipalities issuing securities.
Most of them also preserve broker-dealer operations to maintain markets for formerly issued
securities and suggest advisory services to investors.
Investment banking also has a large role in facilitating mergers and acquisition, private equity
placements and corporate restructuring.

Few facts about Investment Banking

Unlike traditional banks, investment banks do not accept deposits from and provide loans to
individuals also called investment banker.
Investment banks help companies and governments (or their agencies) raise money by issuing
and selling securities in the capital market (both equity and debt).
Almost all investment banks also offer strategic advisory services for mergers, acquisition,
divestiture or other financial services for clients, such as:
trading of derivatives
fixed income
foreign exchange
commodity
Equity security.
Trading securities for hard cash or securities (i.e., facilitating dealings, market-making), or the
endorsement of securities (i.e., underwriting, research, etc.) is referred to as the "sell side".
On the other hand the "buy side" constitutes :
the pension fund,
mutual funds,
hedge funds,
The investing public who use the goods and services of the sell-side with the intention of
make best use of their return on investment.
Many firms have both buy and sell side mechanism.

Functions of Investment Banking:

Investment banks have multilateral functions to perform. Some of the most important functions
of investment banking can be jot down as follows:
Investment banking help public and private corporations in issuing securities in the
primary market, guarantee by standby underwriting or best efforts selling and foreign
exchange management. Other services include acting as intermediaries in trading for
clients.
Investment banking provides financial advice to investors and serves them by assisting in
purchasing securities, managing financial assets and trading securities.
Investment banking differs from commercial banking in the sense that they don't accept
deposits and grant retail loans. However the dividing line between the two fraternal twins
has become flimsy with loans and securities becoming almost substitutable ways of
raising funds.
Small firms providing services of investment banking are called boutiques. These mainly
specialize in bond trading, advising for mergers and acquisitions, providing technical
analysis or program trading.

Basics of Investment Banking:

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 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.
Industries from diverse sectors like media and telecommunications, real estate,
industry, finance, health care, consumer products and various such segments are provided
assistance by investment banking services. Along with these, an investment bank also deals in
the securities, trading services, credit counseling, financial engineering and merchant banking.
The primary source of income for investment bankers is the commissions, fees and gain margins
on transactions provided for the above mentioned institutions.
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.
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.
The investment banking market was increasing leaps and bounds, until the present
recession struck. Banks all over the world are trying to recoup the losses. The US is the biggest
market for investment banks, followed by Europe, Middle East, Africa and Asia. The global hubs
of investment banking are a few economically sound centers like London, New York and Tokyo.
However, investment banking is not restricted in its scope to a few regions of the world. It caters
to a global community which makes it highly sensitive to global ups and downs, along with
innovative fluctuations.

Investment Banks:
An investment bank is a financial institution that assists corporations and governments in
raising capital by underwriting and acting as the agent in the issuance of securities. An
investment bank also assists companies involved in mergers and acquisitions, divestitures, etc.
Further it provides ancillary services such as market making and the trading of derivatives, fixed
income instruments, foreign exchange, commodity, and equity securities.
Unlike commercial banks and retail banks, investment banks do not take deposits.
Trading securities for cash or securities (i.e., facilitating transactions, market-making), or the
promotion of securities (i.e., underwriting, research, etc.) was referred to as the "sell side".
Dealing with the pension funds, mutual funds, hedge funds, and the investing public who
consumed the products and services of the sell-side in order to maximize their return on
investment constitutes the "buy side". Many firms have buy and sell side components.
Investment banks help companies and governments and their agencies to raise money by
issuing and selling securities in the primary market. They assist public and private corporations in
raising funds in the capital markets (both equity and debt).
Investment banks 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.

Definition:
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.

Concept of Investment Bank:

The banking scenario in India is itself huge, covering the different facets of the economy. By
and large, investment banks in India are itself an institution which generates funds in two
different ways. The first manner in which it works is by drawing public funds via the capital
market by way of selling stock in their company. The other way in which it operates is to seek
for venture capital or private equity, as a substitute for a stake in their company.

Who needs 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 provide 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, 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 investmentbanking firm can provide the services.

Role of an Investment Bank:

The major work of investment banks includes a lot of consulting. For instance, they offer
advices on mergers and acquisitions to companies. The role that an investment bank plays
sometimes gets overlapped with that of a private brokerage house. The usual advice of buying
and selling is also given by investment banks.
There is no demarcating line between the investment banking and other forms of banking
in India. This has been observed majorly of late. All banks nowadays want to provide their
customers the best of services and create a niche for themselves and that is why apart from
investment banks, all other banks too are aiming at making it big.
At the macro level, investment banking is related 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 producing
GDP (the issuers). Over the decades, investment banks have always suited the needs of the
finance community and thus become one of the most vibrant and exciting segment of financial
services.
Globally investment banks handle significant fund-based business of their own in the
capital market along with their non-fund service portfolio which is offered to the clients. All
these activities are broadly segmented across three platforms - equity market activity, debt
market activity and merger and acquisitions (M&A) activity.

What to Look For In an Investment Bank:

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.
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.
Record of Success:
Although no reputable investment bank will guarantee success, the firm must have a
demonstrated record of closing transactions.
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 onetime 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
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.

TYPES OF PLAYERS IN INVESTMENT BANKING

Full-Service Firms- These are type of investment banks who have significant presence in all
areas like underwriting, distribution, M&A, brokerage, structured instruments, asset management
etc. They are all rounder 0f the game.
Commercial Banks- Commercial Banks operating through Section 20 subsidiaries referring to
the subsidiaries formed under section 20 of the Glass- Steagall Act which was allowed to carry
on limited investment banking services.
Boutique Firms-These are the type of players which specialist in particular areas of investment
banking.
Brokerage Firms- These firms offers only trading services to retail & institutional clients. They
have huge investor base which is also used by underwriters to place issues.
Asset Management Firms- These firms offer on investment services. This includes activities
like fund management, wealth management, cash management, portfolio management depending
on the type of investors, tenure of corpus, purpose of investments, type of instrument invested in
etc.

What are the different types of groups within an investment bank?

Broadly speaking, there are two types of groups within a typical investment bank (or
investment banking division): product groups and industry groups (also called sector groups or
domains). The three most well known product groups are mergers and acquisitions (M&A),
leveraged finance (lev fin) and restructuring. Bankers in product groups have product knowledge
and tend to execute transactions (respectively, M&A transactions, leveraged buyouts (LBOs)
and restructuring transactions/bankruptcies).
Bankers in industry groups cover specific industries and tend to do more marketing
activity (pitching). Industry bankers tend also to have more of the relationships with companies
senior management than do product bankers (though some senior product bankers have excellent
relationships as well). Examples of common industry groups include FIG (Financial Institutions
Group), Healthcare, Consumer/Retail, Industrials, Energy and Utilities, Natural Resources, TMT
(Telecom, Media and Technology), Gaming and Lodging and Real Estate. Often subgroups exist
within the broader group. For example, a Healthcare group may be segregated into
biotechnology, medical devices, managed care, pharma, etc. Though not covering a specific
industry, one other group that falls under the category of industry groups is Financial Sponsors.
Bankers in a Financial Sponsors group cover (have relationships with and market their services
to) private equity firms.

The Typical Hierarchy/Ladder within an Investment Bank?

Just about all investment banks have the same strict hierarchy or ladder of professionals.
From junior to senior, the typical hierarchy is

Analyst
Associate
Vice President
Senior Vice President/Director
Managing Director.

Some banks deviate from this hierarchy a bit, for example having the Senior Vice
President and Director be separate positions. Other banks, especially non-U.S. banks, have the
same hierarchy but with somewhat different names for each position (Associate Director for
Associate, Director for Vice President and Executive Director for SVP). One exception for U.S.
banks is that Bear Stearns calls the Senior Vice President/Director position a Managing Director,
and calls Managing Directors, Senior Managing Directors. However, regardless of the names,
the general job functions of each relative position tend to be consistent bank to bank.

1) Role of the Analyst:

Analysts are typically men and women directly out of undergraduate institutions who join
an investment bank for a two-year program. Top performing Analysts are often offered the
chance to stay for a third year, and the most successful Analysts can be promoted after three
years to the Associate level.
As Analysts are the bottom rung on the investment banking ladder, they do the bulk of
the work. Broadly speaking there are three types of work that Analysts do: presentations,
analysis and administrative tasks. Presentation work involves the putting together and writing of
various PowerPoint presentations including marketing documents and documents for live
transactions.
The second main task of an analyst is analytical work. Pretty much anything done in
Excel is considered analytical work. Examples include entering historic company data from
public documents, analyzing such data for valuation purposes and projecting a companys
financial statements. Administrative work, being the third type of task, involves things like
scheduling and setting up conference calls and meetings, making travel arrangements and
keeping a list of deal team members up to date. While on live transactions, Analysts often refer

to themselves as glorified admins, given all of the administrative work for which they are
responsible.

2) Role of the Associate:

Associates are typically either folks directly out of top MBA programs or Analysts that
have been promoted. Typically, bankers will be at the Associate level for three and a half years
before they are promoted to Vice President. Associates are also categorized into class years
In addition to overseeing the Analysts work, the Associate will often help write the text for the
presentations as well as do much of the modeling work.
3) Role of the Vice President (VP):
The primary role of the Vice President is to be the project manager, whether for
marketing activities or on a transaction. It is the VP that typically decides the structure of the
presentation. On live engagements, the VP is typically the banker running the deal. The VP
must manage the client, manage the senior bankers and manage the Analysts and Associates that
are actually doing the work. It is often at the VP level that bankers begin to form valuable
relationships with clients. Depending on the individual and also the bank, some VPs will start to
play a role in client development and marketing.
4) Role of the Director/Senior Vice President (SVP):
Depending on the person (and sometimes the bank), the Director or SVP may either act
more like a Managing Director or more like the VP. Sometimes, the Director/SVPs role will
depend also on the specific situation and/or other deal team members. Ultimately, for
Director/SVPs to be promoted to Managing Director, they will have to demonstrate that they can
form client relationships and have the ability to market and to bring in new business.
5) Role of the Managing Director:
As the senior level banker, the role of the Managing Director (MD) is mostly one of
client development. The MD will likely be the one with the senior level company relationships
and is typically responsible for spearheading marketing efforts. On a live transaction, the MD
often plays only a minor role, getting involved when difficulties arise in the deal and during high
level negotiations.

Investment Bankers:
Investment bankers are regarded as those persons who generally give consultation to
their valued clients in order to sort out any of their high level issues that may have taken place in
their financial organization.

Functions of Investment Bankers:

Investment bankers administer the bonds-issuance.
Control the selling of the stock of their organization to the general public.
They also play the role of strategists in order to solve out financial problems of their
clients
They also help the clients to develop their financial policies and also apply them.
Since all the works are time consuming investment bankers also work for prolong hours.
Investment bankers also emerge new innovative ideas and schemes for developing
strategies to pitch to clients
Prepare pecuniary analyses and documents
An investment banker should not accept deposits or make commercial loans.
Even Investment bankers do the grunt work for IPO's and bond issues.

Attributes of Investment Bankers:

As the work also involves various fiscal analyses so a well-built background in finance
and economics is the prime necessity.
Not only this but also personal and strategic skills are significant for investment bankers.
Need to work for at least 70 hours a week or more and all night sessions before deals
close are treated as the norms rather than the exception.
Investment Banker must be efficient and tactful enough to manage all the operation at a
single point of time.

Qualification for Investment Bankers

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.

Organizational structure
An investment bank is split into the so-called front office, middle office, and back office. While
large service investment banks offer all of the lines of businesses, both sell side and buy side,
smaller ones sell side investment firms such as boutique investment banks and small brokerdealers focus on investment banking and sales/trading/research, respectively. Investment banks
offer services to both corporations issuing securities and investors buying securities. For
corporations, investment bankers offer information on when and how to place their to an
investment bank's reputation, and hence loss of business. Therefore, investment bankers play a
very important role in issuing new security offerings.

Core Investment Banking Activities:

Front Office:
Investment banking is the traditional aspect of the investment banks which also involves
helping customers raise funds in the capital markets and giving advice on M&A's aka
mergers and acquisitions. Investment banking may involve subscribing investors to a
security issuance, coordinating with bidders, or negotiating with a merger target. Another
term for the investment banking division is corporate finance, and its advisory group is
often termed mergers and acquisitions (M&A). The investment banking division (IBD) is
generally divided into industry coverage and product coverage groups. Industry coverage
groups focus on a specific industry such as healthcare, industrials, or technology, and
maintain relationships with corporations within the industry to bring in business for a
bank.
Sales and trading: On behalf of the bank and its clients, the primary function of a large
investment bank is buying and selling products. In 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.
Strategists advise external as well as internal clients on the strategies that can be adopted
in various markets. Ranging from derivatives to specific industries, strategists place
companies and industries in a quantitative framework with full consideration of the
macroeconomic scene. This strategy often affects the way the firm will operate in the
market, the direction it would like to take in terms of its proprietary and flow positions,
the suggestions salespersons give to clients, as well as the way structures create new
products.
Research is the division which reviews companies and writes reports about their
prospects, often with "buy" or "sell" ratings. While the research division may or may not

generate 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. Research
also serves outside clients with investment advice in the hopes that these clients will
execute suggested trade ideas through the Sales & Trading division of the bank, thereby
bringing in revenue for the firm. There is a potential conflict of interest between the
investment bank and its analysis in that published analysis can affect the profits of the
bank.
Other businesses that an investment bank may be involved in:
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.
Investment 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 the 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.
Merchant banking is a private equity activity of investment banks.
Commercial banking sees article commercial bank.
Middle Office:
Risk management involves analyzing the market and credit 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. Another key Middle Office role is to
ensure that the above mentioned economic risks are captured accurately, correctly
and on time. In recent years the risk of errors has become known as "operational
risk" and the assurance Middle Offices provide now includes measures to address
this risk.

 Corporate treasury is responsible for an investment bank's funding, capital

structure management, and liquidity risk monitoring.
Financial control tracks and analyzes the capital flows of the firm; the Finance
division is the principal adviser to senior management on essential areas such as
controlling the firm's global risk exposure and the profitability and structure of the
firm's various businesses.
Corporate strategy, along with risk, treasury, and controllers, often falls under the
finance division as well.
Compliance areas are responsible for an investment bank's daily operations'
compliance with government regulations and internal regulations. Often also
considered a back-office division.
Back Office:

Operations involve data-checking trades that have been conducted, ensuring that they
are not erroneous, and transacting the required transfers. While some believe that
operations provide the greatest job security and the bleakest career prospects of any
division within an investment bank, many banks have outsourced operations. It is,
however, a critical part of the bank.

Technology refers to the information technology department. Every major investment

bank has considerable amounts of in-house software, created by the technology team,
who are also responsible for technical support. Technology has changed considerably in
the last few years as more sales and trading desks are using electronic trading.

Investment Banks Provide Four Primary Services:

1. 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,
some

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specialized investment funds, and private individuals. The investment bank will work with the
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2. Mergers and Acquisitions:
Investment banks often represent firms in mergers, acquisitions, and divestitures.
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case, the investment bank should provide a thorough analysis of the entity
bought or sold, as well as a valuation range and recommended structure.
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.

Multinational Investment Banking:

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.

Policies of Firm:
The firms have different policies to overview the following aspects:
Growth:
The investment banks are freshly enjoying an almost extraordinary stage of strong
economic conditions and growth, which has enabled them to bring record gain. The industry has
greatly stabilized in current years around a handful number of major players, and there have been
few latest mergers and acquisitions.
Performance:
The prime attention in the investment banking industry has always been on top-line
growth, rather than decreasing cost and efficiency. Focus on people and cost control in the
current has a very positive phase that suggests that investment banks are learning to control
through good times and bad.
Governance:
Good quality governance, domestic controls, and reporting are decisive in an industry
that thrives on risk. Although there continues to be examples of disastrous breakdowns in
controls, leading to major trading sufferings, these tend to turn up more in the hedge funds, as
new entities to the market. Many of the more veteran players have implemented policies and
initiatives that guard against these losses. The control device continues to claim high values of
governance and control.

Recent Scenario of Investment Banking:

 Struggle for investment banking jobs is severe. Investment banks and financial services
firms are hiring, but competition for jobs is fierce.
Knowledge & financial skills are crucial. In particular, greater financial skills and

experience are essential for potential applicants to attain an aggressive circumference in

the interview and hiring process.

Role of Investment Banking Companies in India:

Investment banking companies generally help their clients to access capital through
equity, debt and other kinds of investment products. These firms also trade in equities and
derivative products and also help companies with merger and acquisition deals.

About a couple of years back, when the world economy was reeling under a recession,
many investment banking firms either collapsed or were on the brink of closure. Even a few
firms in India were affected by this global downturn. This led to many skeptics writing off the
revival of these firms.

The Future of Investment Banking Services in India:

Investment banking India has always been very crucial for the smooth flow of market
transactions between various investors, companies, firms and the government. These banks will
have a role to play even in the future, irrespective of the economic conditions in the country.

POTENTIAL FOR INVESTMENT BANKING IN INDIA

The bane of Indian capital market today is lack of investor confidence. This is reflected in the
poor performance of both primary & secondary markets. The causes for existing situation are
many but primarily arise on account of lack of liquidity, unscrupulous issuers & merchant
bankers & poor or unapprised issues. Investment banking can solve this problem because
investor would be dealing with reputed investment banker in the primary market rather than
unknown issuers. The investment banks whatever are their issue management techniques have
their own capital on hold. The issues are likely to be properly appraised & priced & sponsors on
OTCEI have a two year lock-in period. Similarly investment banks would hold the issues until
market conditions are appropriate for issue, thus reducing the risk exposure of investors in
gestation for issue. Moreover, the price of reissue will be a better indicator of issues
performance. Investment banks make the primary market subscription. In sum, the quality of
pricing, appraisal, & primary market functions will improve resulting in substantial improvement
in investor confidence. Since the investment banker lends its name to the issue it will simply an
issue investors can trust. Investment bankers may gradually replace merchant bankers in India.

Initial Public Offering (IPO)

IPO Definition
An initial public offer, as the name indicates, is the first (initial) instance of a company (called
the issuer) offering its commons stock (or shares) to the general public for subscription.
It is a common misconception that only newly formed companies resort to raising money
through an IPO. Even long established private companies can access the IPO route to raise
capital, and become publicly traded companies as a result. An IPO is considered as a rite of
passage into the big league of publicly traded stocks. Any company that needs to be listed on
a stock exchange has to offer its shares to the public.
In addition to IPO, an already listed and publicly traded company may issue an FPO a Follow
on Public Offer to raise further capital for the company. At any given time, there are a number
of IPO and FPO issues floating around in the market, therefore, it is essential to understand the
difference between the two.
Shares issued in an IPO are bought in the primary market, while shares brought from
another investor are exchanged in the secondary market. The distinct between primary and
secondary market is notional, there is no physical separation between the two. An important
distinction between shares purchased during an IPO and shares purchased from the secondary
market is that while in case of an IPO, the money goes directly into the company coffers; in case
of secondary market, the money is transferred from one investor to another.

IPO Lifecycle Stages

The issuance of an IPO is a process with distinctive stages. The life cycle of an IPO can be
understood to be spread over these steps or stages. The various stages in the life cycle of
an Initial Public Offering are as follows Initialization In this stage, the company appoints various entities that are crucial in the
management of the IPO.These entities include the issue managers or book runners (mostly
investment banks) and registrars to the issue.
Pre Issue Activities In this stage, the draft offer prospectus is prepared and submitted to SEBI.
The lead manager may conduct road shows which are basically marketing activities to generate
awareness about the issue.
Prospectus Review SEBI reviews the prospectus submitted to it, and any changes and
revisions suggested by SEBI are incorporated at this stage. Once the draft is approved by SEBI,
it is termed as the Offer Prospectus.
Submits Prospectus to Stock Exchange The offer prospectus is now submitted to relevant
stock exchange for approval. When the date of issue and the price band (and not the exact price)
is decided and incorporated into the offer prospectus, it becomes the Red Herring Prospectus.
Distribution of Red Herring Prospectus and IPO Forms The prospectus and the forms are
distributed to retail investors through the syndicate members.
Public Issue In this stage, the issue is thrown open to the public and the bids are collected. The
public issue closes at a predetermined date. This stage can be considered to be the public face
of the IPO.

Price Fixing Once all the bids are collected, the lead managers decide the final issue price, and
inform the stock exchange and SEBI.

Processing of IPO Applications by Registrar This is the clerical stage, wherein the forms
are collected, checks are processed, share allotment is completed, shares are transferred to the
demat accounts and any excess money is refunded.
Listing in the Stock Exchange Once the date of listing is decided, the shares of the issuer
company are listed on the stock exchange shares.

Advantages of IPO:IPO has a number of advantages. IPO helps the company to create a public awareness about the
company as these public offerings generate publicity by inducing their products to various
investors.
The increase in the capital: An IPO allows a company to raise funds for utilizing in various
corporate operational purposes like acquisitions, mergers, working capital, research and
development, expanding plant and equipment and marketing.
Liquidity: The shares once traded have an assigned market value and can be resold. This is
extremely helpful as the company provides the employees with stock incentive packages and the
investors are provided with the option of trading their shares for a price.
Valuation: The public trading of the shares determines a value for the company and sets a
standard. This works in favor of the company as it is helpful in case the company is looking for
acquisition or merger. It also provides the share holders of the company with the present value of
the shares.
Increased wealth: The founders of the companies have an affinity towards IPO as it can
increase the wealth of the company, without dividing the authority as in case of partnership.

Disadvantages of IPO:
Increased disclosure
When a company moves from private ownership to public, it vastly increases the number of
people who have access to its financial records. This can be a huge shock to the existing owners,
not just the reporting of the companys results, but the disclosure of management salaries and
perks that often piques the interest of newspaper editors on a slow day.
Companies are required by stock exchanges, securities commissions and regulators to disclose
information on a regular basis so that investors and potential investors can make buy, sell or hold
decisions. A much greater amount of information is required at the time of the IPO and is
included in the offering prospectus.
Disclosure requirements vary by country. Those countries with the largest stock markets, relative
to the economy, typically have the highest disclosure requirements (e.g. Australia, Canada, UK,
USA).
The development of efficient capital markets in Central and Eastern Europe has been hindered
partially by the reticence of corporate executives to disclose information about their firms
operations and performance.
Its not all bad though. Botosan (1997) has found that increased disclosure on the part of the
company can reduce its cost of equity. By reducing its cost of equity, a company is able to invest
in more projects, raise capital more cheaply, and enhance its valuation.

Costs of IPOs:
Initial public offerings arent cheap. Investment bankers take commissions of between 2 and 7
per cent of the total amount raised; lawyers and accountants bill by the hour, and many hours are
required. The ancillary costs, such as public relations, printing, corporate advertising and others
can add several hundred thousand more dollars, euros or pounds.
In addition to the upfront costs of the IPO, there are the costs of maintaining a quote on the stock
exchange (stock exchange fees, management time, more extensive audits and reporting,
reconciliation of accounts to US GAAP if listed on a US exchange, etc.).
However, the direct costs of an IPO can pale beside the indirect cost of underpricing. Because no
cash is coming directly out of the issuers pocket, underpricing can sometimes be ignored as a
cost. It should not be. IPOs around the world are under priced compared with their short-term
performance. On average, an IPO will close at a price that is 15 to 20 per cent above its issue
price, although this varies by market and industry and over time. This means that selling
shareholders and the company are leaving significant sums of money on the table when they go
public.
The amount of money left on the table is calculated by subtracting the offer price from the first
day closing price and multiplying by the number of shares offered. For example, many analysts
believe Google left too much money on the table in its 2004 IPO.

List of Top 10 Investment Banks in India:

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:
1.

Avendus Capital:
Avendus Group (Avendus) is a leading provider of financial services with an emphasis on

customized solutions in the areas of financial advisory, capital markets, wealth management and
alternative asset management to its clients that include institutional investors, corporates and
high net worth families. These services are provided through varied delivery channels and
specialized subsidiaries.
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.

2.

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, corporates, 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.
Bajaj Capital Limited ("Bajaj Capital") is India's premier "Investment Services" Company, with
nearly 50 years of experience in helping people protect and grow their wealth. We've helped to
create more millionaires than any other firm in India. But it's our deep personal relationships
with clients that truly sets us apart.
No other firm can match the depth of our experience and our dedication to personal service. The
markets may fluctuate, but our dependability never does.

3.

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, corporates, customers and
comprehensive banking activities across Middle East and Asia.
Cholamandalam Investment and Finance Company Limited was incorporated in 1978 as the
financial services arm of the Murugappa Group. Chola commenced business as an equipment
financing company and has today emerged as a comprehensive financial services provider
offering vehicle finance, home loans, home equity loans, SME loans, investment advisory
services, stock broking and a variety of other financial services to customers.
Chola operates from over 579 branches across India with assets under management above INR
25,000 Crores. The subsidiaries of Cholamandalam include Cholamandalam Securities Limited
(CSEC) and Cholamandalam Distribution Services Limited (CDSL).

4.

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.
ICICI Securities Ltd is an integrated securities firm offering a wide range of services including
investment banking, institutional broking, retail broking, private wealth management, and
financial product distribution.
ICICI Securities sees its role as 'Creating Informed Access to the Wealth of the Nation' for its
diversified set of client that include corporates, financial institutions, high net-worth individuals
and retail investors.
Headquartered in Mumbai, ICICI Securities operates out of 66 cities and towns in India and
global offices in Singapore and New York.

5.

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.
Since 2005, we have built on our vision to be the 'one firm' that looks after the diverse needs
of infrastructure development. Whether it is financial intermediation for infrastructure projects
and services, adding value through innovative products to the infrastructure value chain or asset
maintenance of existing infrastructure projects, we focus on supporting companies to get the best
return on investments.
At IDFC, our commitment to building India's infrastructure goes beyond business. We work
closely with government entities and regulators to advise and assist them in formulating policy
and regulatory frameworks that support private investment and public-private partnerships in
infrastructure development.

6.

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 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.
Kotak Investment Banking is a leading full-service investment bank in India, offering
integrated solutions encompassing high-quality financial advisory services and financing
solutions. Our services include Equity and Debt Capital Market issuances, M&A Advisory,
Private Equity Advisory and Infrastructure Advisory & Fund Mobilization. As a specialist Indian
investment bank, our aim is to offer our expertise and strategic advice on all India-related
transactions
Kotak Investment Banking is a subsidiary of Kotak Mahindra Bank Limited, one of Indias
leading banking and financial services organizations with a consolidated net worth of Rs 17,228
crore (approx US$ 2.9 billion)

7.

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.
SBI Capital Markets Ltd. (SBICAP) is Indias largest domestic Investment Bank, offering
the entire gamut of investment banking and corporate advisory services. These services
encompass Project Advisory and Loan Syndication, Structured Debt Placement, Capital Markets,
Mergers & Acquisitions, Private Equity and Stressed Assets Resolution.
We are a complete solutions provider offering diversified financial advisory and
investment banking services, innovative ideas and unparalleled execution to our client base
across all stages of the business cycle. Our services range from venture capital advisory, project
advisory, buy and sell-side advisory, accessing financial markets to raise capital and even
restructuring advisory in their turn-around phases.

8.

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.
Tata Investment Corporation Limited (TICL) is a non-banking financial company. Earlier
named The Investment Corporation of India, the company is primarily involved in investing in
long-term investments such as equity shares and equity-related securities.
The original inspiration for launching Tata Investment Corporation Limited was to help set
up and nurture small and medium-sized enterprenuers and their companies. For many years after
its inception, the Company played a role of a catalyst in promoting long term investments in the
country and was instrumental in the promotion of projects with new Indian entrepreneurs and
foreign collaborators whilst simultaneously taking minority equity stakes in such new projects.

9.

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.
YES BANK, Indias fourth largest private sector Bank, is a high quality, customer centric,
service driven, private Indian Bank catering to the Future Businesses of India. Since its inception
in 2004, YES BANK has fructified into a Full Service Commercial Bank that has steadily
built Corporate and Institutional Banking, Financial Markets, Investment Banking, Corporate
Finance, Branch Banking, Business and Transaction Banking, and Wealth Management business
lines across the country, and is well equipped to offer a range of products and services to
corporate and retail customers.
YES BANK has adopted international best practices, the highest standards of service quality
and operational excellence, and offers comprehensive banking and financial solutions to all its
valued customers. Today, YES BANK has a widespread branch network of over 630 branches
across 375 cities, with 1150+ ATMs across all 29 states and & Union Territories in India.

10.

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.
The UTI Asset Management Company has its registered office at: UTI Tower, Gn Block,
Bandra Kurla Complex, Bandra (East), Mumbai - 400 051.It has over 70 schemes in domestic
MF space and has the largest investor base of over 9 million in the whole industry. It is present in
over 450 districts of the country and has 100 branches called UTI Financial Centres or UFCs.
About 50% of the total IFAs in the industry work for UTI in distributing its products! India
Posts, PSU Banks and all the large Private and Foreign Banks have started distributing UTI
products

List of Top 10 Investment Companies in India

Top 10 Investment Companies in India attract foreign direct investment through tie ups
with financial firms, investment markets, technical partnerships and favored allocations. The
Indian investment market is renowned for its massive workforce and diverse sectors that
generates better opportunities for both expansion and earning competence.
1. Bajaj Allianz Collaboration between Bajaj Finserv and Allianz SE, Bajaj Allianz Life
Insurance Co. Ltd.
2. HSBC Asset Management India Pvt Ltd
3. SMC Investment Solution and Services
4. Shah Financial Group
5. Stanrose Mafatlal Investment and Finance Ltd
6. Tata Investment Corporation Ltd.
7. Toss Financial Services Pvt. Ltd.
8. Veronica Financial Services Ltd
9. Indian Investment Centre
10. J.M. Capital Management Private Ltd

REGULATORY FRAMEWORK FOR INVESTMENT BANKING

Investment banking in India is regulated in its various facets under separate legislations or
guidance issued under statute. The regulatory powers are also distributed between different
regulators depending upon the constitutions & status of the investment bank. Pure investment
banks which do not presence in the lending or banking business are governed primarily by the
capital market regulator i.e. SEBI. However universal banks & NBFC investment banks are
regulated primarily by the RBI 9in their core business of banking or lending & so far as the
investment banking segment is concerned, they are also regulated by SEBI. An overview of the
regulatory framework is furnished below:1. At the constitutional level, all investment banking companies incorporated under the
Companies Act 1956 are governed by the provision of the act.
2. Investment banks that are incorporated unde4r a separate statute such as the SBI or the IDBI
are regulated by their respective statue. IDBI is in the process of being converted into
Companies Act.
3. Universal Banks are regulated by RBI of India under the RBI Act 1934 & the Banking
Regulation Act which put restrictions on the investment banking exposures to be taken by the
banks. The RBI has relaxed the exposure limits for merchant banking subsidiaries of the
commercial banks. Till now, such companies were restricting their exposure to a single entity
through the underwriting business & other fund based commitments such as standby facilities
etc. to 25% of their net owned funds. Therefore these companies are now on par with other
investment banks which can do so up to 20 times their net owned fund.

4. Investment banking companies that are constituted as non-banking financial companies are
regulated operationally by the RBI under Chapter IIIB section 45H & 45QB of the RBI Act,
1934. Under these sections RBI is empowered to issue directions in the area of resources
mobilization, accounts & administrative controls. The following directions have been issued
by the RBI so far:

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

Directions, 1998.

NBFCs prudential Norms (Reserve Bank) Directions, 1998.

5. Functionally, different aspects of investment banking are regulated under the securities &
Exchange Board of India Act, 1992 & the guidelines & regulations issued under. These are
listed below:

Merchant banking business consisting of management of public offers is a licensed &

regulated activity under the SEBI Act (Merchant Bankers), 1992.

Underwriting business is regulated under the SEBI (underwriters) Rules & Regulations,

1993.
The activity of secondary market operations including stock broking are regulated under
the relevant by-law of the stock exchange & the SEBI (stock broker & sub broker) Rules
& Regulations, 1992. Besides for restricting unethical trading practices, SEBI has issued
the SEBI (Prohibition of fraudulent & unfair trade practices relating to securities markets)

Regulations 1995& also SEBI prohibited insider trading under regulations, 1992.
The business of asset management as mutual funds is regulated under the SEBI (Mutual

Fund) Regulations, 1996.

The business of portfolio management is regulated under the SEBI (Portfolio mangers)

Rules & Regulations, 1993.

The business of venture capital & private equity by such funds that are incorporated in
India is regulated by the SEBI(venture capital) Regulations,1996 & by those that are
incorporated outside India is regulated under the SEBI ( Foreign venture capital funds)

Regulations,2000.
The business of institutional investing by foreign investment banks & other investors in
Indian Secondary markets is governed by the SEBI (Foreign Institutional Investors)
Regulations 1995.

6. Investments 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
governed in respect of the foreign investment by the Foreign Exchange Management Act,

1999& Foreign Exchange Management (Transfer or issue of a person resident outside India)
Regulations 2000 issued there under as amended from time to time through circulars issued
by the RBI.

7. Apart from the above specific regulations relating to investment banking, investment banks
are also governed by the other laws applicable to all other underwriting support on
government securities issue & participate in auctions held by the RBI.

SKILLS SUGGESTED FOR INVESTMENT BANKERS

1.

Technical Skill

Academic Background- In the early days of investment banking, not much

importance was attached to academic background. Today, the business has become
very complicated and the skill requirements have multiplied. Consequently,
investment banks find it important to recruit people with the right academic
credentials. Typically, for most of the important jobs, an MBA is a must. Investment
banks rely heavily on campus recruitments

Conceptual Soundness- One of the major benefits for a professional in an

investment bank is the learning associated with work. The financial skills of an expert
are tested to the core while handling a complicated deal. Comprehensive and in-depth
knowledge of financial and business concepts are essential to sustain business.
Multiple relationships between various factors render decision-making difficult.
Financial solutions can be provided to the clients only when the advisor is competent
to understand all or at least a majority of them. Before practical solutions emerge, the
tools for decision-making will give greater choice to the solution provider. A strong
grounding in theory and concepts facilitates this.

Product Specialization- One way to specialize in an investment bank is through

products. An expert in a particular product, say hybrid instruments, can work out
financial solutions for any client across the industries. Each client has his or her
individual risk taking ability. To cater to the client on an in basis, appropriate products
that would suit their risk profile should be identified. The clients will also feel at
home while dealing with a product specialist.

Legal Knowledge- While clear cut guidelines can be issued to the traders regarding
their market related activities that are governed by the law, the complexity multiplies
for an M&A deal. The regulators guidelines have to be strictly followed, even while
envisaging a combination. Legal knowledge is also important for structuring such
deals, which will help identify the constraints associated with proposed solution. The
situation gets more intense when the deal is a cross-border M&A proposal. Apart
from the knowledge of the inland laws, foreign laws also have to be considered. Any
regulation by the foreign government can make an otherwise desirable deal, unviable.

Knowledge of Capital Markets and Functioning- More than any other industry, it
is the investment banking industry that has a direct bearing on the way capital
markets function. Any changes in the capital market regulations affect the brokerage
side of the business, along with the trade clearing and settlement houses. The trading
personnel should be conversant with the regulations, guidelines, procedural
formalities and actual trade execution processes involved in capital market. E.g.
Trading system involves a lot of additional skills than online trading. He has to be
conversant with the codes, symbols and conventions followed by the market. Quick
signaling and accurate interpretation are of utmost significance. Any mistake in these
would lead to faulty execution of orders and might entail additional costs to the firm
in correcting the errors.

Knowledge of Regulatory Bodies involved in the Various Operations- It is

necessary for an investment banker to be aware of all the regulatory bodies that
govern the activities in which he/she is involved. A thorough knowledge of all such
bodies is absolutely essential to perform extraordinarily. In India, the SEBI & central
bank acts as a watchdog and regulator of market related activities.

Knowledge of International Business Scenario and Economic Trends:-Though a

researcher is primarily involved in economic and business cycle studies, it is the duty
of all the investment bankers to have a general overview of these affairs.
Salespersons, who also act as financial consultants/advisors, should essentially be

aware with economic and business cycles, lest they lose the respect and trust of the
client. The requirement for global perspective and international exposure is becoming
increasingly important. The firm should offer services across the national borders to
the corporate clients and informed services are possible only when the employee is
well-equipped with international business information.

Knowledge of Software Tools, Developments in the Field of Information

Technology- One of the most important technical skills is the usage of computers,
tools and internet technologies. Marketing, brokerage, research and capital
mobilization have all undergone sweeping changes owing to technology.

The securities trader has changed into a tech-savvy professional, executing online orders &
maintaining databases. The technology helps management and other departmental
professionals and even the clients to disseminate such data in negligible time. Asset managers
have now complicated tools for scientific and in-depth valuation of portfolios. Comp
frameworks can be solved with minimum effort using technology.

2.

Communication Skills

Ability to Cater to the Audience According to its Awareness LevelsCommunication skills include both the means of communication written and oral.
However, the audiences vary extensively, and hence, the requisite communication
skills also differ widely. A marketer handling individual investors will necessarily
have to keep the content very simple and express t in laymans terms. Usage of
financial terms & jargons will not fetch results. Cash flows, the characteristics of the
instruments & the risk class to which the investment belongs to must be explained in
simple & easily understandable terms.

Negotiation Skills- Negotiation skills is important at a variety of places. Institutional

clients have to be convinced about the prospects of the investments that are solicited

by the firm. Investors in syndicated debt must be satisfied with the payment streams
and interest rate terms. M&A transactions are the toughest assignments for
negotiations. Even a friendly transaction would be difficult if not for patient and
mutually negotiations. The common issues that pertain to negotiation are terms of
offer, offer price, post merger integration, organization and reporting structure,
business lines to be developed above all dealing with the overlapping functions.
While negotiating, the banker should always keep the prime object in the mind &
quickly evaluate the various counter offers & suggestions made by other party.

Personality Traits- Personality Traits plays an important role in developing the skill
set of an investment banker. Creativity is an important feature. It comes in use while
handling prospectus, clients & team members. It is essential when solutions are to be
identified for complex problem. Innovations & creativity are required structure deals.

3. Other Skills

Marketing Skills- The marketing skills would be an application of skills mentioned

above. One of the important marketing skill would be relationship management.
Unlike most other industries where relationship plays a facilitating role in conducting
business, it is fundamental issue in the investment banking industry. An attitude for
creating, establishing & maintaining relationships, during boom & down period, is of
utmost importance in getting mandates.

Inter-Personal Skills-Inter-personal skills are basically blended from communication

skills, and personality traits. They include interactions with superiors, subordinates,
colleagues, clients, competitors, team members and even politicians and public office
bearers. Inter-personal skills come to the fore during team exercises where diplomacy
and manners become essential. Team exercises can also include dealing with
members from other departments or even with other firms. Such situations call for
greater application of team skills and an element of mutual respect towards each
other.

Networking Skills- Networking refers to the process of developing a web of contacts

and acquaintances. Some of the special attributes required to develop networking
abilities would include:

Knowledge of human psychology;

Presence of mind to apply the appropriate skills as situation demands;
Approaching through proper channels that would lend credibility respectability to contacts;
Persuasion skills;
Highest standards of professionalism.

Challenges:
Investment banking is one of the most global industries and is hence continuously
challenged to respond to new developments and innovation in the global financial markets.
Throughout the history of investment banking, it is only known that many have theorized that all
investment banking products and services would be commoditized. New products with higher
margins are constantly invented and manufactured by bankers in hopes of winning over clients
and developing trading know-how in new markets. However, since these can usually not be
patented or copyrighted, they are very often copied quickly by competing banks, pushing down
trading margins.
For example, trading bonds and equities for customers is now a commodity business
structuring and trading derivatives retains higher margins in good times - and the risk of large
losses in difficult market conditions, such as the credit crunch that begin in 2007. Each over-thecounter contract has to be uniquely structured and could involve complex pay-off and risk
profiles.
In addition, while many products have been commoditized, an increasing amount of
profit within investment banks has come from proprietary trading, where size creates a positive
network benefit. The fastest growing segments of the investment banking industry are private

investments into public companies. Such transactions are privately negotiated between
companies and accredited investors.

The Future of Investment Banking Services in India:

Investment banking India has always been very crucial for the smooth flow of market
transactions between various investors, companies, firms and the government. These banks will
have a role to play even in the future, irrespective of the economic conditions in the country.

Conclusion:
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.
Investment banking is a particular form of banking which finances capital requirements
of an enterprise. Investment banking assists as it performs IPOs, private placement and bond
offerings, acts as broker and carries through mergers and acquisitions.