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Project Report

Investment banking

Submitted to:

Submitted by:

Dr. Jaspal Singh

Manpreet Kaur

Meaning of investment banking
History of investment banking
Need of investment banking
Functions of investment banking
Structure of investment banking
Scope of investment banking in India
List of investment banks
Regulatory framework of investment bank of India
Types Of Players in Investment Banking
Investment banking in India
Advantages and disadvantages of investment banking
Swot analysis of investment banking in India


An investment bank is a financial institution that assists
individuals, corporations, and governments in raising capital by
underwriting or acting as the client's agent in the issuance of securities (or
both). An investment bank may also assist companies involved in mergers
and acquisitions (M&A) and provide ancillary services such as market
making, trading of derivatives and equity securities, and FICC services
(fixed income instruments, currencies, and commodities). A fully
operating investment bank is usually referred to a financial and banking
organization, which provides both financial as well as advisory banking
services to their clients. Apart from that, an investment bank even deals
with research, marketing and sales of a range of financial products like
commodities, currency, credit, equities etc.
The Dictionary of Banking and Finance defines Investment
bank as a term used in the US to mean a bank which deals with the
underwriting of new issues and advises corporations on their financial
According to Bloomberg: investment bank is a financial
intermediary that performs a variety of services, including aiding in the
sale of securities, facilitating mergers and other corporate reorganizations, acting as brokers to both the individual and the
institutional clients and trading in its own account.
According to John F. Marshall & M.E Ellis investment banking is
what investment banks do.
Investment Banking as the term suggests, is concerned with the
primary function of assisting the capital market in its function of capital

market intermediation, i.e. the movement of financial resources from

those who have them means investors, to those who need to make use of
them means issuer for generating profit. Therefore, it could be inferred
that investment banks are those institutions that are the counterparts of
banks in the capital market in the function of intermediation in resources
allocation. Investment banks carried on various activities it helps
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, as well as in providing strategic advisory services for expansion
acquisitions, mergers and other types of financial transactions. For
Ford wants to open a new car factory. It requires money to build
the factory. An investment bank will advise Ford on what type of funds to
raise , and then go to investors to raise the money.
Suppose Ford wanted to buy another car manufacturer, perhaps to
increase its exposure to Asia. An investment bank would evaluate car
manufacturers in Asia that Ford might be able to buy. It would then help
Ford decide how much to pay, because determining a companys value is


Prior to the great depression, investment banking was in its golden
era, with the industry in a prolonged bull market.

JP Morgan and

National City Bank were the market leaders, often stepping in to

influence and sustain the financial system.

JP Morgan (the man) is

personally credited with saving the country from a calamitous panic in

1907. Excess market speculation, especially by banks using Federal
Reserve loans to bolster the markets, resulted in the market crash of 1929,
sparking the great depression.
During the Great Depression, the nations banking system was in
shambles, with 40% of banks either failing or forced to merge. The GlassSteagall Act (or more specifically, the Bank Act of 1933) was enacted by
the government with the intent of rehabilitating the banking industry by
erecting a wall between commercial banking and investment banking.
Additionally, the government sought to provide the separation between
investment bankers and brokerage services in order to avoid the conflict
of interest between the desire to win investment banking business and
duty to provide fair and objective brokerage services (i.e., to prevent the
temptation by an investment bank to knowingly peddle a client
companys overvalued securities to the investing public in order to ensure
that the client company uses the investment bank for its future
underwriting and advisory needs). The regulations against such behaviour
became known as the "Chinese Wall."

In light of the repeal of negotiated rates in 1975, trading

commissions collapsed and trading profitability declined.


focused boutiques were squeezed out and the trend of an integrated

investment bank, providing sales, trading, research, and investment
banking under one roof began to take root. In the late 70s and early 80s
saw the rise of a number of financial products such as derivatives, high
yield an structured products, which provided lucrative returns for
investment banks. Also in the late 1970s, the facilitation of corporate
mergers was being hailed as the last gold mine by investment bankers
who assumed that Glass-Steagall would someday collapse and lead to a
securities business overrun by commercial banks. Eventually, GlassSteagall did crumble, but not until 1999. And the results werent nearly as
disastrous as once speculated.
In the 1980s, investment bankers had shed their stodgy image. In
its place was a reputation for power and flair, which was enhanced by a
torrent of mega-deals during wildly prosperous times. The exploits of
investment bankers lived large even in the popular media, where author
Tom Wolfe in Bonfire of the Vanities and movie-maker Oliver Stone in
Wall Street focused on investment banking for their social commentary.
Investment Banking After the 2008 Financial Crisis
The greatest global financial crisis since the Great Depression was
triggered in 2008 by multiple factors including the collapse of the
subprime mortgage market, poor underwriting practices, overly complex
financial instruments, as well as deregulation, poor regulation, and in
some cases a complete lack of regulation.

The crisis led to a prolonged

economic recession, and the collapse of major financial institutions,

including Lehman Brothers and AIG.

Perhaps the most substantial piece of legislation that emerged from

the crisis is the Dodd-Frank Act, a bill that sought to improve the
regulatory blind spots that contributed to the crisis, by increasing capital
requirements as well as bringing hedge funds, private equity firms, and
other investment firms considered to be part of a minimally regulated
"shadow banking system."

Such entities raise capital and invest much like banks but escaped
regulation which enabled them to over-leverage and exacerbated systemwide contagion. The jury is still out on Dodd-Frank's efficacy, and the Act
has been heavily criticized by both those who argue for more regulation
and those who believe it will stifle growth.
Investment Banks like Goldman Converted to BHCS
"Pure" investment banks like Goldman Sachs and Morgan Stanley
traditionally benefited from less government regulation and no capital
requirement than their full service peers like UBS, Credit Suisse, and
During the financial crisis, however, the pure investment banks had
to transform themselves to bank holding companies (BHC) to get
government bailout money. The flip-side is that the BHC status now
subjects them to the additional oversight.
Industry Prospects after the Crisis

Investment banking advisory fees in 2010 were $84 billion

globally, the highest level since 2007, while 2011 saw a significant
decline in fees.
The future of the industry is a highly debated topic. There is no question
that the financial services industry is going through something pretty
significant post-crisis. Many banks had near-death experiences in 2008
and 2009, and remain hobbled. 2011 saw much lower profitability for
many of the largest financial institutions. This directly impacts bonuses
for even the entry level investment banker, with some pointing to smaller
fractions of ivy league graduating classes going into finance as a
harbinger of a fundamental shift.
That being said, those trying to break into the industry will find
that compensation is still high compared to other career opportunities.
Also, the job function of an M&A professional has not dramatically
changed, so the professional development opportunities haven't changed.


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),
as well as in providing strategic advisory services for mergers,
acquisitions and other types of financial transactions.
The investment bankers act as an intermediary between the
investors and capital market which consists of primary market and
secondary market. The investment bankers with their intense
research guide them to invest their money in banks/FI, Capital and
money market, foreign exchange market, commodity market, real
estate/gold etc. Proper deployment of funds will help the investors
to earn good returns with safety of their initial invested funds.
All these investments from the investors will lead to business
activity in different sectors. The funds deployed by the investors
will be utilized by the users of the deployed funds will lead
production of goods and services in the economy.


Capital and Security Underwriting

Investment banks are middlemen between a company that wants to

issue new securities and the buying public. So when a company wants to
issue, say, new bonds to get funds to retire an older bond or to pay for an
acquisition or new project, the company hires an investment bank. The
investment bank then determines the value and riskiness of the business
in order to price, underwrite, and then sell the new bonds. Banks also
underwrite other securities (like stocks) through an initial public offering
(IPO) or any subsequent secondary (vs. initial) public offering.
When an investment bank underwrites stock or bond issues, it also
ensures that the buying public primarily institutional investors, such as
mutual funds or pension funds, commit to purchasing the issue of stocks
or bonds before it actually hits the market. In this sense, investment banks
are intermediaries between the issuers of securities and the investing
public. In practice, several investment banks will buy the new issue of
securities from the issuing company for a negotiated price and promotes
the securities to investors in a process called a road show. The company
walks away with this new supply of capital, while the investment banks
form a syndicate (group of banks) and resell the issue to their customer
base (mainly institutional investors) and the investing public.
Mergers &Acquisitions

Banks advise buyers and sellers on business valuation,

negotiation, pricing and structuring of transactions, as well as procedure
and implementation. M&A advisory and other corporate reorganisation.
Youve probably heard of the term Mergers and acquisitions or M&A.
Its an important source of fee income for investment banks as the fee
margin structure is substantially higher than most underwriting fees). This
is why M&A bankers are some of the highest paid and highest profile
bankers in the industry.
As a result of much corporate consolidation throughout the 1990s
M&A advisory became an increasingly profitable line of business for
investment banks. M&A is a cyclical business that was hurt badly during
the financial crisis of 2008-2009, but rebounded in 2010, only to dip
again in 2011. In any event, M&A will likely to continue being an
important focus for investment banks.

JP Morgan, Goldman Sachs,

Morgan Stanley, Credit Suisse, BofA /Merrill Lynch, and Citigroup, are
generally recognized leaders in M&A advisory and are usually ranked
high in M&A deal volume .
The scope of the M&A advisory services offered by investment
banks usually relates to various aspects of the acquisition and sale of
companies and assets such as business valuation, negotiation, pricing and
structuring of transactions, as well as procedure and implementation. One
of the most common analyses performed is the accretion/dilution

analysis, while an understanding of M & A accounting, for which the




significantly over the last decade is critical.

Investment banks also provide fairness opinions documents attesting

to the fairness of a transaction.
Sometimes firms interested in M&A advice will approach an
investment bank directly with a transaction in mind, while many times
investment banks will pitch ideas to potential clients.
First, terminology: When an investment bank takes on the role of
an advisor to a potential seller (target), this is called a sell-side
engagement. Conversely, when an investment bank acts as an advisor to
the buyer (acquirer), this is called a buy-side assignment. Other services
include advising clients on joint ventures, hostile takeovers, buyouts, and
takeover defence.
Sales & Trading and Equity Research:

Banks match up buyers and sellers as well as buy

and sell securities out of their own account to facilitate the
trading of securities Sales& Trading and Equity Research

Institutional investors such as pension funds, mutual funds,

university endowments, as well as hedge funds use investment banks in
order to trade securities.

banks charge commission fees.

In addition, the sales & trading arm at an inve
UBS Trading Floor
Investment banks match up buyers and sellers as well as buy and
sell securities out of their own account to facilitate the trading of
securities, thus making a market in the particular security which provides
liquidity and prices for investors. In return for these services, investment
stment bank facilitates the trading of securities underwritten by the bank
into the secondary market. Revisiting our Gillette example, once the new
securities are priced and underwritten, JP Morgan has to find buyers for
the newly issued shares.

Remember, JP Morgan has guaranteed to

Gillette the price and quantity of the new shares issued, so JP Morgan
better be confident that they can sell these shares.
The sales and trading function at an investment bank exists in part
for that very purpose. This is an integral component of the underwriting
process in order to be an effective underwriter, an investment bank must
be able to efficiently distribute the securities. To this end, the investment
banks institutional sales force is in place to build relationships with
buyers in order to convince them to buy these securities (Sales) and to
efficiently execute the trades (Trading).
A firms sales force is responsible for conveying information about
particular securities to institutional investors. So, for example, when a
stock is moving unexpectedly, or when a company makes an earnings
announcement, the investment banks sales force communicates these
developments to the portfolio managers (PM) covering that particular
stock on the buy-side (the institutional investor). The sales force also

are in constant communication with the firm's traders and research

analysts to provide timely, relevant market information and liquidity to
the firms clients.
Traders are the final link in the chain, buying and selling securities
on behalf of these institutional clients and for their own firm in
anticipation of changing market conditions and upon any customer
request. They oversee positions in various sectors (traders specialize,
becoming experts in particular types of stocks, fixed income securities,
derivatives, currencies, commodities, etc), and buy and sell securities to
improve those positions. Traders trade with other traders at commercial
banks, investment banks and large institutional investors.. Trading
responsibilities include: position trading, risk management, sector
analysis & capital management.
Equity Research
Traditionally, investment banks have attracted equity trading business
from institutional investors by providing them with access to equity
research analysts and the potential of being first in line for hot IPO
shares that the investment bank underwrote. As such, research has
traditionally been an essential supporting function to equity sales and
trading (and represents a significant cost of the sales & trading business).
Retail and Commercial Banking:
After the repeal of Glass- Steagall in 1999, investment banks now
offer traditionally off-limits services like commercial banking. Retail
Brokerage and Commercial Banking
From 1932 until 1999 there was a law called The Glass-Steagall
Act, which said that commercial banks can lend money, extend lines of

credit, and open checking and savings accounts, while investment banks
can underwrite securities, advise on M&A, and provide institutional
brokerage services.
Under the Glass-Stegall Act, commercial banks and investment banks had
to limit their respective activities to that which traditionally fell under
those respective labels.
Late 1999 saw the repeal of the Depression-era Glass-Steagall Act,
marking the deregulation of the financial services industry. This now
allowed commercial banks, investment banks, insurers, and securities
brokerages to offer one another's services.
As such, many investment banks now offer retail brokerage (retail
meaning the customers are individual investors rather than institutional
investors) as well as commercial lending. For example, today you can
open a checking account with JP Morgan via its Chase brand, while JP
Morgan offers investment banking services and asset management. Until
1999, one financial institution providing all of these services under one
roof was technically not allowed (although many post-enactment
loopholes basically neutered the law long before 1999).
It is not an understatement to say that deregulation has transformed
the financial services industry, with the repeal paving the way for megamergers and consolidation in the financial services industry.
In fact, many blame the repeal of the Glass-Steagall as a
contributing factor to the financial crisis in 2008-9.


Operations and technology

Front office v/s back office:

While the functions like M&A advisory are "front office," other
functions like risk management, financial control, corporate treasury,
corporate strategy, compliance, operations and technology are critical
back office functions. Investment Bank Organizational Structure

Investment banks are split up into front office, middle office, and
back office. Each sector is very different yet plays an important role in
making sure that the bank makes money, manages risk, and runs

Front Office
Think you want to be an investment banker? Chances are the role

you are imagining is a front office role. The front office generates the
banks revenue and consists of three primary divisions: investment
banking, sales & trading, and research.
Investment banking is where the bank helps clients raise money in
capital markets and also where the bank advises companies on
mergers & acquisitions. Corporate finance is the traditional aspect
of investment banks which also involves helping customers raise
funds in capital markets and giving advice on mergers and
acquisitions (M&A). This 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". A pitch book of financial information is
generated to market the bank to a potential M&A client; if the
pitch is successful, the bank arranges the deal for the client. 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, public






industrials, TMT (technology, media, and telecommunication)

and maintains relationships with corporations within the industry
to bring in business for the bank. Product coverage groups focus

on financial products such as mergers and acquisitions, leveraged

finance, public finance, asset finance and leasing, structured
finance, restructuring, equity, and high-grade debt and generally
work and collaborate with industry groups on the more intricate
and specialized needs of a client.
At a high level, sales and trading is where the bank (on behalf of
the bank and its clients) buys and sells products. Traded products
include anything from commodities to specialized derivatives.
Research is where banks review companies and write reports about
future earnings prospects. Other financial professionals buy these
reports from these banks and use the reports for their own
investment analysis. The equity research division reviews
companies and writes reports about their prospects, often with
"buy" or "sell" ratings. Investment banks typically have sell-side
analysts which cover various industries. Their sponsored funds or
proprietary trading offices will also have buy-side research. While
the research division may or may not generate revenue (based on
policies at different banks), 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 (such as institutional
investors and high net worth individuals) in the hopes that these
clients will execute suggested trade ideas through the sales and
trading division of the bank, and thereby generate revenue for the
firm. Research also covers credit research , fixed income research,
macroeconomic research, and quantitative analysis, all of which
are used internally and externally to advice clients but do not
directly affect revenue. Other potential front office divisions that

an investment bank may have include: commercial banking,

merchant banking, investment management, and global transaction

Middle Office






corporate treasury, corporate strategy, and compliance. Ultimately,

the goal of the middle office is to ensure that the investment bank doesnt
engage in certain activities that could be detrimental to the banks overall
health as a firm.

In capital raising, especially, there is significant

interaction between the front office and middle office to ensure that the
company is not taking on too much risk in underwriting certain securities.
Risk management: Risk management involves analyzing the
market and credit risk that an investment bank or its clients take onto
their balance sheet during transactions or trades.
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 via dedicated
trading desk product control teams. In the United States and United
Kingdom, a comptroller (or financial controller) is a senior position, often
reporting to the chief financial officer.
Internal corporate strategy tackling firm management and profit
strategy, unlike corporate strategy groups that advise clients, is nonrevenue regenerating yet a key functional role within investment banks.


Back office:
Typically includes operations and technology. The back office

provides the support so that the front office can do the jobs needed to
make money for the investment bank. Operations: This involves datachecking trades that have been conducted, ensuring that they are not
wrong, and transacting the required transfers. Many banks have
outsourced operations. It is, however, a critical part of the bank.
Technology: 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. Some trades are initiated by complex algorithms
for hedging purposes.


Scope for growth of investment banking in India as planning &
industrial policy of the country, envisaged the setting up of new industries
& technology, greater financial sophistication & financial service are
required . Economic development requires specialist financial skills:
saving banks to marshal individual saving; finance companies for
consumer lending and mortgage finance; insurance companies for life and
property cover; agriculture banks for rural development; and a range of
specialized government or government sponsored institution. a new units
have been set up and business is expanding , they require additional
services. A public equity or debt issue is the logical source of fund in this
situation and investment bank can tap this opportunity for growth. The
area of great scope could be:
Growth of primary market:
If the primary market grows and number of issues increases, the
scope of investment banking will be increased.
1. Entry of foreign investors: now India capital market directly taps
foreign capital through euro issues. FDI is increased in capital
market. So investment bankers are required to advice them for their
investment in India. The increasing number of joint ventures also
requires expert service of investment Bankers. If more and more
NRIs participate in capital market, there will be great demand for
investment banker services.
2. Changing policy of financial institutions: Now, the lending policies
of financial institutions are based on project orientation, so the
investment banker services will be needed by corporate enterprise
to product expert guidance.

3. Development of debt market: If the debt market is enhanced, there

will be tremendous scope for investment bankers. Now, NSE and
OTCEI are planned to raise their fund through debt instruments.
4. Corporate restructuring: Due to liberalization and globalization
companies are facing lot of competition. In order to complete, they
have to go for restructuring, merger, acquisition or disinvestments.
They may offer good opportunities to merchant bankers.
List of Major Investment Bank
Investment bank in the
Barclays capital
Blackstone group
Credit Suisse
Deutsche bank
Evercore Partners
Goldman sachs
JP Morgan
Moelis & co
Morgan Stanley
Nikko securities
Bank of America
Merrill lynch

Investment bank in India

ICICI securities
Ambit corp. Finance
SBI Capital Market
Kotak Mahindra
Merrill lynch
HSBC( Blr )
Deutsche bank(Delhi , Banglore,
Morgan Stanley
Lehman bros
Goldman Sache
Yes bank
JP Morgan (Mumbai , Banglore)
Reliance money


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 of 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 were 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 etc,


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 under 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

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.
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, 1992.6
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.


Investment banks help companies take new stock issues or new bond
issues to the financial market, and generally mediate between the
investors and the issuers. These banks may buy all the shares available
at an agreed preset price; they then will sell the same to the public
making profit thereby. Alternatively, the banks act as intermediary for
the issuers taking commission from them for the selling of the
securities they want to sell.
For corporations raising its capital. It facilitates the trading of
securities thereby, increasing the liquidity of the securities.
For Individuals It provides investment opportunities to the individuals
or entities. Most of the corporations get advisory services from the
investment banks regarding the mergers, acquisitions and divestiture.
Investment banks can also help the company in preparing their
prospectus and provide their vital data which becomes greatly
beneficial to the company as well to those who intend to invest in it.
The banks also partake in the sale of big blocks of securities (bonds
and stocks) which were issued earlier, like the companies involved in
mutual funds, and sell to institutional investors.
In brief, an investment bank does not take any deposit. It is precisely a
financial intermediary and provides various services which concern
only investment. The services may include intermediation between
investing public and securities issuers, underwriting, acting as a broker
on behalf of institutional investors, corporate reorganization and
Some advantages of investment in such banks include availability of a
wide range of functions pertaining to finances, the stock issuance can

be controlled and its sale to the public regulated; the best advantage is
that there is no limitations to the income.
An investment bank is a financial entity that assists individuals and
companies in raising capital through making investments and
engaging in the stock exchange. They enable business professionals
and entities to find the most profitable investments, as well as
maintaining them in the long term
Disadvantages of Investment Banking
Diversification towards Capitals Markets: 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
No Proper System of Investment Banking
Lack of Institutional Financing


SBI was the first Indian public sector bank to set up its investment
banking division in 1972. SBI Caps and IDBI Caps are two prime
examples of investment banks in India today. Currently, there are 300
investment banks registered with SEBI. Currently, without holding a
certificate of registration granted by the Securities and Exchange Board
of India, no person can act as an investment banker. SBI Capital Markets
(SBICAPS) is an investment bank founded in August 1986. It is a wholly
owned subsidiary of State Bank of India (SBI).The Central Bureau of
Investigation (CBI) started an investigation but no evidence was found
and the closure report was filed on MS Shoes Case in Sept., 1998 which
was finally closed by the concerned court. In January 1997 the Asian
Development Bank acquired a 13.84% equity stake in SBICAPS. This
share was repurchased by State Bank of India in March 2010.In January
2006 SBICAP and the international investment banking group CLSA
announced a two-year partnership to work on large joint deals in equity
capital and mergers & acquisitions. In September 2006 SBI Caps
announced that it had set up a $100 million venture fund in partnership
with the venture capital division of SBI Holdings of Japan.
Air India ran into serious financial difficulties, and in July 2009
SBICAPS was asked by Civil aviation minister Praful Patel to prepare a
road map to bring the carrier back into profitability. SBI Capital was
appointed the mandated firm to restructure Kingfisher Airlines loans
during the Kingfisher Airlines financial crisis, starting in 2010. In
February 2012 SBSCAP and other bank lenders were insisting that
commissions paid to promoters be reversed before they would consider
providing further funding to the still-troubled airline.

In October 2006 R. Sridharan was appointed managing director

and CEO of SBI Capital. In July 2009 SBICAPS announced that S.
Vishvanathan had replaced A.P. Verma as MD & CEO. Vishvanathan had
joined SBI in 1976, had helped set up SBI's New York branch, and had
been chief general manager of SBIs North Eastern operations.
SBI Capital Markets Limited (SBICAP) offers expertise in
structuring investments to enhance enterprise value and build long term
mutually beneficial partnerships. The team has been painstakingly built
over the years. At SBICAP we offer:
Project Advisory and Structure Finance: It performs the
function of collecting funds from the international and Indian







transportation, power, telecommunication, energy and urban

infrastructure. We offer seamless investment banking advice in
buying or selling other businesses, or executing capital market
deals, thereby helping our clients grow and achieve their strategic
business objectives.
FINANCING ASSISTANCE: We act as a key ally for both the
Government and Private Sector in their endeavours towards
infrastructure development.

It is entrusted with the

duty of raising funds for banks, corporate, PSUs, financial

institutions and undertakings of state governments. In the last five
years, SBICAP has mobilized more than Rs. 16000 billion as funds
through rights issues, public issues and private placements.
INNOVATION: We develop innovative fund raising solutions both
for domestic and international fundraising in debt, equity and

Merger and Acquisition Advisory: It was formed in 1990 with the

aim of taking part in the privatization business. It has successfully
worked out many privatization deals with the central and state


Avendus: Avendus is an investment bank based in India with
offices in Mumbai and Bangalore. The firm was founded in 1999
by who had worked for large global financial institutions and
wanted to offer knowledge and research oriented capital raising
and M&A solutions to international firms with a strong India

Bajaj Capital: Bajaj Capitals Investment Banking Service is a

step ahead in that direction. Bajaj Capital offers you unparalleled
capital raising solutions for your business. With over 120 offices in
50 cities all over the country and a network of over 10,000 Advisor
Associates, we can connect you to potential investors all over the

Barclays India: Barclays unveiled its Global Retail and

Commercial Banking division in India over the past year as part of
its plan to be a leading global bank. In a very short time, Barclays
is already making waves in one of the worlds fastest growing

ICICI Securities Ltd: A subsidiary of ICICI Bank the largest

and most recognized private bank in India ICICI Securities Ltd is
premier Indian Investment Bank, with a dominant position in its
core segments of its operations Corporate Finance including
Equity Capital Markets Advisory Services, Institutional Equities,
Retail and Financial Product Distribution.

IDFC: IDFCs mission is to be the financier and advisor of choice

for infrastructure in India. IDFC is positioned as a special financial

institution which is focused on project finance and investment

banking activities in infrastructure. Going forward, IDFC will
focus on establishing stable fee revenues from innovative
infrastructure initiatives in financial markets, asset management,
project development and advisory along with growing its balance
sheet at a significant pace.
IDFC Private Equity: IDFC Private Equity (IDFC PE) was set up
in 2002 as a 100% subsidiary of the Infrastructure Development
Finance Company (IDFC). IDFC PE manages two funds with a
current corpus of INR 1,734 crore (USD 400 million). India
Development Fund and IDFC Private Equity Fund II. Both these
funds provide growth capital to promising enterprises in the area of
infrastructure in India.







Development Bank of India (IDBI) was established in 1964 under

an Act of Parliament. It was initially set up as a wholly owned
subsidiary of the Reserve Bank of India (RBI) with a mandate of
providing credit and other facilities for balanced industrial
development. In 1976, the ownership of IDBI was transferred to
the Government of India and it was accorded the status of principal
financial institution in the country for co-ordinating the working of
institutions, engaged in financing, promoting and developing
industry, and also assisting in the development of such
institutions. Direct assistance: helps the industrial sector by
granting project loans, underwriting of and direct subscription to
the industrial securities (shares and debentures), and technical
development funds.

Industrial Finance Corporation of India (IFCI): IFCI, the first

Development Finance Institution in India, was set up in 1948, as a
Statutory Corporation, to pioneer institutional credit to medium and
large industries IFCI was also the first institution in the financial
sector to be converted into a Public Limited Company. IFCIs
record of performance has broadly run parallel to the course of
industrial and economic development of the nation. IFCIs
principal operations include Project financing, financial services
& Comprehensive corporate advisory services.
Kotak Mahindra Capital Company: As a full service Investment
Bank, Kotak Investment Bankings core business areas include
Equity Issuances, Mergers & Acquisitions, Advisory Services and
Fixed Income Securities and Principal Business.
SBI Capital Markets: SBI Capital Markets Ltd. is amongst the
oldest players in the Indian Capital Market, offering an entire range
of Investment Banking Services. With strong fund mobilization
strengths, we are one of the leading players in the areas of fund
raising through Capital Market Issues / Private Placement.
SSKI Group: SSKI is a leading India-based financial services
group that offers Institutional Equities and Investment Banking
services. SSKI Investment Banking is a full-service investment
bank with a strong research bias. Our team members bring deep
domain knowledge, spanning a number of sectors, that we are able
to leverage to meet the varied corporate finance needs of our
clients. We provide a full range of services, from private
placements of equity and debt, public offerings, project advisory to
mergers and acquisitions.

Tata Investment Corporation Limited (TICL): TICL is a nonbanking financial company (NBFC) registered with the Reserve
Bank of India under the Investment Company category. The
companys activities comprise primarily of investing in long-term
investments in equity shares and other securities of companies in a
wide range of industries. The major sources of income for the
company consist of dividend income and profit on sale of
providing all kinds of Investment related activities which include
investment banking and corporate advisory services.
Yes Bank: Yes Banks Investment Banking group is involved in the
identification, structuring and execution of transactions for our
clients in diverse industries and geographies. Some of the typical
transactions include mergers & acquisitions, divestitures, private
equity syndication and IPO advisory.


a. Breadth of financial services offerings: investment banking
provides various types of services such as trading, private equity,
venture capital, M&A, joint venture, project finance etc.
b. Proficient Employees: the major strength of any sector is its
employees. In investment banking all the workings are done by
professionals because it requires deft and proficient personnel.

Technological advancement: due to technological advancement,

working efficiency has been increased and works are done quickly
and easily.

d. Advance infrastructure: the country is equipped with all the latest

and advances amenities such as better telecommunication,
transportation, potable water, internet, land etc.
a. Unawareness of investors: the major weakness is the unawareness
of its services among investors, due to which after 40 yrs of
odyssey it could not reach to the level where it should have been.
b. Excessive dependence on trading sectors: as per the data collected
by the team and experiences shared by managers, it is quite
apparent that investors are more dependent on the trading sector for
their investments rather than any other field.
a. Growing demand for investment banking: the knowledge of
investment banking is increasing among investors and they are
diversifying their investment into many sectors besides trading. It

can be seen by looking at the number of mergers and acquisitions,

various projects in the countries and the level of sensex in the
b. Removal of international trade barrier: 1991 reform policy and
recent amendments in international trade have widened the area
and scope of investment banking in India.
c. Financially attractive country: India is a financially attractive
country. Recent experience of recession show that India is among
the few countries (china, Brazil and India), who not only survived
in this difficult era but shows the path to developed countries to
overcome this calamity.
a. Increasing Competition: competition in investment banking is
increasing day by day. New players are foraying to the market
due to this market share of each existing company is getting
affected and profit as well.
b. Decentralized management: each branch manager in a company
is given the authority of taking decisions in their respective
branches. The decisions made by different managers are diverse
and by wrong decisions may lead to heavy
losses to the company.

Investment banking provides a platform for investors to build and
maintain their investments as they have teams of experienced
professionals who offer knowledgeable insights into the stock exchange.
Additionally, they have the expertise in terms of investing in the most
profitable areas in different industries. Therefore, individuals and
companies are advised to seek the services of an investment bank as they
can benefit from up-to-date and expert insights in investing money and
raising capital.