Investment Banking

M.D.
COLLEGE
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INVESTMENT BANKING
CHAPTER 1
INTRODUCTION
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 and provide
ancillary services such as market making, trading of derivatives and equity
securities, and FICC services (fixed income instruments, currencies, and
commodities).
Unlike commercial banks and retail banks, investment banks do not take
deposits. From 1933 (GlassSteagall Act) until 1999 (GrammLeachBliley
Act), the United States maintained a separation between investment banking
and commercial banks. Other industrialized countries, including G8 countries,
have historically not maintained such a separation. As part of the DoddFrank
Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act of
2010), Volcker Rule asserts full institutional separation of investment banking
services from commercial banking.
There are two main lines of business in investment banking.
The "sell side" involves trading securities for cash or for other securities
(e.g. facilitating transactions, market-making), or the promotion of
securities (e.g. underwriting, research, etc.).
The "buy side" involves the provision of advice to institutions concerned

with buying investment services. Private equity funds, mutual funds, life
insurance companies, unit trusts, and hedge funds are the most common
types of buy side entities.
B.COM(FINANCIAL MARKETS ) 1 | P a g e
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An investment bank can also be split into private and public functions with an
information barrier which separates the two to prevent information from
crossing. The private areas of the bank deal with private insider information that
may not be publicly disclosed, while the public areas such as stock analysis deal
with public information.
An advisor who provides investment banking services in the United States must
be a licensed broker-dealer and subject to Securities & Exchange Commission
(SEC) and Financial Industry Regulatory Authority (FINRA) regulation.
Sales and trading
On behalf of the bank and its clients, a large investment bank's primary function
is buying and selling products. In market making, traders will buy and sell
financial products with the goal of making money on each trade. Sales is the
term for the investment bank's sales force, whose primary job is to call on
institutional and high-net-worth investors to suggest trading ideas (on a caveat
emptor basis) and take orders. Sales desks then communicate their clients'
orders to the appropriate trading desks, which can price and execute trades, or
structure new products that fit a specific need. Structuring has been a relatively
recent activity as derivatives have come into play, with highly technical and
numerate employees working on creating complex structured products which
typically offer much greater margins and returns than underlying cash securities.
In 2010, investment banks came under pressure as a result of selling complex
derivatives contracts to local municipalities in Europe and the US. 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
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its proprietary and flow positions, the suggestions salespersons give to clients,
as well as the way structures create new products. Banks also undertake risk
through proprietary trading, performed by a special set of traders who do not
interface with clients and through "principal risk"risk undertaken by a trader
after he buys or sells a product to a client and does not hedge his total exposure.
Banks seek to maximize profitability for a given amount of risk on their balance
sheet. The necessity for numerical ability in sales and trading has created jobs
for physics, computer science, mathematics and engineering Ph.D.s who act as
quantitative analysts.
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Definition of 'Investment Banking

A specific division of banking related to the creation of capital for other
companies. Investment banks underwrite new debt and equity securities for all
types of corporations. Investment banks also provide guidance to issuers
regarding the issue and placement of stock.
Investopedia explains 'Investment Banking

In addition to the services listed above, investment banks also aid in the sale of
securities in some instances. They also help to facilitate mergers and
acquisitions, reorganizations and broker trades for both institutions and private
investors. They can also trade securities for their own accounts.
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CHAPTER 2
THE HISTORY OF INVESTMENT BANKING
JP Morgan
Undoubtedly, investment banking as an industry in the United States has come a
long way since its beginnings. Below is a brief review of the history
1896-1929
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.
1929-1970
During the Great Depression, the nations banking system was in shambles,
with 40% of banks either failing or forced to merge. The Glass-Steagall 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
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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 behavior
became known as the "Chinese Wall."
1970-1980
In light of the repeal of negotiated rates in 1975, trading commissions collapsed
and trading profitability declined. Research-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, Glass-Steagall did crumble,
but not until 1999. And the results werent nearly as disastrous as once
speculated.
1980-2007
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
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Vanities and movie-maker Oliver Stone in Wall Street focused on

investment banking for their social commentary.
Finally, as the 1990s wound down, an IPO boom dominated the perception of
investment bankers. In 1999, an eye-popping 548 IPO deals were done among
the most ever in a single year -- with most going public in the internet sector.
The enactment of the Gramm-Leach-Bliley Act (GLBA) in November 1999
effectively repealed the long-standing prohibitions on the mixing of banking
with securities or insurance businesses under the Glass-Steagall Act and thus
permitted broad banking. Since the barriers that separated banking from other
financial activities had been crumbling for some time, GLBA is better viewed
as ratifying, rather than revolutionizing, the practice of banking
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INVESTMENT BANKING HISTORY IN THE 20th CENTURY

In the mid-20th century, large investment banks were dominated by the
dealmakers. Advising clients on mergers and acquisitions and public offerings
was the main focus of major Wall Street partnerships. These bulge bracket
firms included Goldman Sachs, Morgan Stanley, Lehman Brothers, First Boston
and others.
That trend began to change in the 1980s as a new focus on trading propelled
firms such as Salomon Brothers, Merrill Lynch and Drexel Burnham Lambert
into the limelight. Investment banks earned an increasing amount of their profits
from proprietary trading. Advances in computing technology also enabled banks
to use more sophisticated model driven software to execute trades and generate
a profit on small changes in market conditions.
In the 1980s, financier Michael Milken popularized the use of high yield debt
(also known as junk bonds) in corporate finance and mergers and acquisitions.
This fueled a boom in leverage buyouts and hostile takeovers (see History of
Private Equity). Filmmaker Oliver Stone immortalized the spirit of the times
with his movie, Wall Street, in which Michael Douglas played the role of
corporate raider Gordon Gekko and epitomized corporate greed.
Investment banks profited handsomely during the boom years of the 1990s and
into the tech boom and bubble. When the tech bubble burst, it precipitated a
string of new legislation to prevent conflicts of interest within investment banks.
Investment banking research analysts had been actively promoting stocks to
investors while privately acknowledging they were not attractive investments.
In other instances, analysts gave favorable stock ratings to corporate clients in
the hopes of attracting them as investment banking clients and handling
potentially lucrative initial public offerings.
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These scandals paled by comparison to the financial crisis that has enveloped
the banking industry since 2007. The speculative bubble in housing prices along
with an overreliance on sub-prime mortgage lending trigged a cascade of crises.
Two major investment banks, Bear Stearns and Lehman Brothers, collapsed
under the weight of failed mortgage-backed securities. In March, 2008, the
Federal government began using a variety of taxpayer-funded bailout measures
to prop up other firms. The Federal Reserve offered a $30 billion line of credit
to J.P. Morgan Chase to that it could acquire Bear Sterns. Bank of America
acquired Merrill Lynch. The last two bulge bracket investment banks, Goldman
Sachs and Morgan Stanley, elected to convert to bank holding companies and
be fully regulated by the Federal Reserve.
Moving forward, the recent financial crisis has weakened both the reputation
and the dominance of U.S. investment banking organizations throughout the
world. The growth of foreign capital markets along with an increase in pools of
sovereign capital is changing the landscape of the industry.
The growing international flow of capital has also opened up opportunities for
investment banking in new financial centers around the world, including those
in developing countries such as India, China and the Middle East.
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EVOLUTION OF INVESTMENT BANKING IN INDIA

The origin of investment banking in India can be traced back to the 19 th century
when European merchant banks set-up their agency houses in the country to
assist in the setting of new projects. In the early 20 th century, large business
houses followed suit by establishing managing agencies which acted as issue
house for securities, promoters for new projects and also provided finance to
Greenfield ventures. The peculiar feature of these agencies was that their
services were restricted only to the companies of the group to which they
belonged. A few small brokers also started rendering Merchant banking
services, but theirs was limited due to their small capital base.
In 1967, ANZ Grind lays bank set - up a separate merchant banking division to
handle new capital issues. It was soon followed by Citibank, which started
rendering these services. The foreign banks monopolized merchant banking
services in the country. The banking committee, in its report in 1972, took note
of this with concern and recommended setting up of merchant banking
institutions by commercial banks and financial intuitions. State bank of India
ventured into this business by starting a merchant banking bureau in 1972. In
1972, ICICI became the first financial institution to offer merchant banking
services. JM finance was set-up by Mr. Nimesh Kampani as an exclusive
merchant bank in 1973. The growth of the industry was very slow during this
period. By 1980, the number of merchant banks rose to 33 and was set-up by
commercial banks, financial institutions and private sector. The capital market
witnessed some buoyancy in the late eighties. The advent of economic reforms
in 1991 resulted in sudden spurt in both the primary and secondary market.
Several new players entered into the field. The securities scam in may, 1992
was a major setback to the industry. Several leading merchant bankers, both in
public and private sector were found to be involved in various irregularities.
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Some of the prominent public sector players involved in the scam were Can
bank financial services, SBI capital markets, Andhra bank financial services,
etc. leading private sector players involved in the scam included Fair growth
financial services and Champaklal investments and finance (CIFCO).
The market turned bullish again in the end of 1993 after the tainted shares
problem was substantially resolved. There was a phenomenal surge of activity
in the primary market. The registration norms with the SEBI were quite liberal.
The low entry barriers coupled with lucrative opportunities lured many new
entrants into this industry. Most of the new entrants were undercapitalized with
little or no expertise in merchant banking. These players could hardly afford to
be discerning and started offering their services to all and sundry clients. The
market was soon flooded with poor quality paper issued by companies of
dubious credentials. The huge losses suffered by investors in these securities
resulted in total loss of confidence in the market. Most of the subsequent issues
started failing and companies started deferring their plans to access primary
markets. Lack of business resulted in a major shake out in the industry. Most of
the small firms exited from the business. Many foreign investment banks started
entering Indian markets. These firms had a huge capital base, global distribution
capacity and expertise. However, they were new to Indian markets and lacked
local penetration. Many of the top rung Indian merchant banks, who had string
domestic base, started entering into joint ventures with the foreign banks. This
energy resulted in synergies as their individual strength complemented each
other.
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CHAPTER 3
FUNCTIONS OF INVESTMENT BANKS
Investment bankers play an important role in the issue management process.
Lead managers (category I merchant bankers) have to ensure correctness of the
information furnished in the offer document. They have to ensure compliance
with SEBI rules and regulations as also guidelines for disclosures and investor
protection. To this effect, they are required to submit to SEBI a due diligence
certificate conforming that the disclosures made in the draft prospectus or letter
of offer are true, fair and adequate to enable the prospective investors to make a
well informed investment decision. The role of merchant bankers in performing
their due diligence functions has become even more important with the
strengthening of the disclosure requirements and with the SEBI giving up the
vetting up of prospectus. SEBIs various operational guidelines issued during the
year to merchant bankers primarily addressed the need to enhance the standard
of disclosures.
It was felt that a further strengthening of the criteria for registration of merchant
bankers was necessary, primarily through an increase in the net worth
requirements, so that the capital would be commensurate with the level of
activities undertaken by them. With this in view, the net worth requirement or
category I merchant bankers was raised in 1995-96 to Rs.5 crore. In 1996-96,
the SEBI (merchant bankers) regulations, 1992 were amended to require the
payment of fees for each letter of offer or draft prospectus that is filed with
SEBI.
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UNDERWRITERS
Underwriters are required to register with SEBI in terms of the EBI
(Underwriters) Rules and Regulations, 1993. In addition to underwriters
registered with SEBI in terms of these regulations, all registered merchant
bankers in categories I, II and III and stock brokers and mutual funds registered
with SEBI can function as underwriters.
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. An investment bank is more specialized
organization that takes in your money and after analyzing the possible risks and
economic conditions gives you advice to convert it into more money.
Typically, an investment banking group nowadays provides world-wide some or

all of the following services, either in divisions of the bank or in associated
companies within the group:
1. Mergers and Acquisition Advisory
2. Private Placement of Debt and Equity
3. Securities Underwriting
4. Management of Capital issues
5. Management of Buyback and takeovers
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6. Corporate Advisory Services
7. Project Advisory Services
8. Other services like Restructuring/Sales, Real Estate, Loan Syndication and so

on.
9. Structured finance
10. Business plan
11. Litigation Services
The core services provided by the Investment banks are in the areas of debt
market, equity market and advisory services.
MERGER AND ACQUISITION ADVISORY
The phrase mergers and acquisitions (abbreviated M&A) refers to the aspect of
corporate strategy, corporate finance and management dealing with the buying,
selling and combining of different companies that can aid, finance, or help a
growing company in a given industry grow rapidly without having to create
another
business
entity.
In business or economics a merger is a combination of two companies into one

larger company. Merger is a tool used by companies for the purpose of
expanding their operations often aiming at an increase of their long term
profitability.
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An acquisition, also known as a takeover, is the buying of one company (the

target) by another. An acquisition may be friendly or hostile. Acquisition
usually refers to a purchase of a smaller firm by a larger one.
In the former case, the companies cooperate in negotiations; in the latter case,
the takeover target is unwilling to be bought or the target's board has no prior
knowledge
of
the
offer.
Historically, Investment Banks have been closely associated with merger and
acquisition activity since a merger or acquisition is a sales opportunity for them.
Mergers and Acquisitions is one of the most admitted departments in
Investment
Banking.
It is fee-based advisory services that assist the companies in acquiring other

companies. In a merger, the key function of investment banker is the search and
identification of the other party to the deal and other critical functions relating to
preparation and circulation of the information memorandum, deal structuring
and
negotiation
with
party
to
the
deal.
In acquisitions and takeovers involving open offers, the investment banker plays
the dual role of an investment bank as well as the merchant bank. Their role is
in managing the public offer and ensuring the compliance with the SEBI
takeover code.
Investment Banker are always at the forefront of the acquisition process. They
offer strategic and tactical advice, valuation and deal structuring, valuation of
shares, etc. Investment banker is appointed by both the parties of the deal and
the plan prepared by two bankers are compared together. It helps the firm in
indentifying its strategic objectives and helps it in achieving those objectives.
Valuation of business is the most critical aspect of M&A exercise and has an
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impact on cash-flows, profitability and taxability. It helps in optimizing these

aspects. Thus, Investment Banks position themselves to act as advisors on
Mergers
and
Acquisitions.
PRIVATE PLACEMENT OF DEBT AND EQUITY

Debt is that which is owed; usually referencing assets owed. Some companies
and corporations use debt as a part of their overall corporate finance strategy.
At the start of a business, owners put some funding into the business to finance
assets. In accounting terms, ownership equity is the remaining interest in all
assets after all liabilities are paid. Equity capital is defined as the amount of
capital provided by the company's owner(s). Providing new equity (an
"issuance" of new equity) gives the firm new capital and increases owners'
equity
by
the
same
amount
and
time
needed.
The private placement market for debt securities essentially consists of medium
and the long term debt securities such as debentures and bonds being placed
privately with select investors. In India, private placement of securities is
preferred to public issue since the placement costs are lower and the investors
are mostly financial institutions.
There are three main constituents in this market-issuers, the investors and both
these are brought together the investment banker who acts as the arranger to the
Placement. The deal process starts with the issuer rolling out with the plan to
raise fund through the private placement route. The first step in this direction
would be to appoint an investment bank as an arranger to the whole placement.
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The arranger or the placement agent, as the investment banker may called, is
short-listed and the finalized usually through talks and invitation of quotation.
The issuer then furnishes a brief profile of itself and the proposed fund raising
programmed. Based on such information, the investment bank put in bids for
raising the founds quoting the fees for the same. The arranger will finalized
based on the bid and other qualitative parameters. The investment banker is to
ascertain that the company has taken the necessary approvals from its board.
The investment banker also help in obtaining the rating for the issues, to make
the allotments and receives the funds from the investors, documentation of
private placement, collect the receipt of commitment letters from the investors
and the acceptance thereof by the issuers. After receiving commitment letter, the
issue is treated as closed and issuer puts up the letter of intent for consideration
by its board of directors and the investment bankers has to scrutinize the letter
of
intent
before
it
is
put
up
to
companys
board.
The placement part of the deal itself is a limited purpose exercise that has no
road shows or publicity campaign as in the public issues. It is largely
accomplished through the network of the investment bankers and the strength of
the
relationship
with
the
investor
community.
Most of the companies, both listed and unlisted categories, make the issue of
equity shares to different shareholders without making a public offer. Such issue
can be called as the term private issue of equity. In the area of private equity
financing, the role is more transaction oriented. The value addition of the
investment banker in such a deal is in the valuation and transactions advisory.
However, there are certain caveats that the investment banker has to fully aware
of
while
raising
the
private
equity
for
the
listed
companies.
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These primarily relate to the disclosures of information to the potential

investors. However, in private equity deal, the disclosure is for the purpose of
enabling the potential investors to take an informed investment decision. In this
context, the whole process has to be handled with extreme confidentiality and
through
suitable
documentation.
The investment banker has to structure the offer literature including the
information memorandum keeping this issue in mind. The offer literature has to
captures the true value proposition of the company and provides an investor
friendly offer structure. It also provides the other services deemed to ensure a
successful outcome to this engagement. This way they are as good as publicly
issued instruments but can be placed easily saving a lot of time and floatation
costs. The engagement of investment banker in connection with a private equity
transaction
can
be
summarized
as
follows:
Identify and initiate contact with the prospective investors, represent or

accompany the company in meetings, presentations and ensuring negotiation
with prospective investors, Assists the company in coordinating due diligence
program, Review and advise on proposals/offers from investors and provide
necessary services deemed to ensure a successful outcomes to this engagement.
Therefore, as far as issuers are concerned, private placement is more convenient
and an efficient way of raising finance and the investment bank play a major
role in this regards.
FAIRNESS OPINIONS
The need for independent financial advice at the board level never has been
greater. Conflicted investment bankers with contingent fee arrangements,
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related-party transactions, and the lack of market-clearing mechanisms in

certain deals all elevate board member scrutiny. An independent fairness
analysis and opinion is a critical component of the board deliberation process.
At Duff & Phelps, fairness opinions are not an add-on service but a core
practice. The vast majority of our opinions are rendered in situations where Duff
& Phelps is not the banker, and we are comfortable rendering opinions
involving minority interests, debt securities, and limited market checks. With a
reputation built over decades, Duff & Phelps Fairness Opinion Practice
delivers high quality financial advice and opinions that withstand the most
rigorous
scrutiny.
As published in Thomson Reuters Full Year 2013 Mergers and Acquisitions

Review, Duff & Phelps ranked first for number of announced fairness opinions
in the Americas in 2013. This is the second year in a row Duff & Phelps
achieved first place. Duff & Phelps also tied for second place in announced
global fairness opinions for 2013. Duff & Phelps is a globally recognized leader
in fairness opinions. Since 2005, Duff & Phelps has rendered over 430 fairness
opinions for transactions with an aggregate deal value of nearly $129 billion.
FAIRNESS ADVISORY SERVICES

Duff & Phelps advises boards of directors, special committees, trustees and
other fiduciaries on fairness issues in a variety of corporate transactions. In
addition to providing fairness opinions on M&A transactions, we are experts in
advising and opining on transactions absent a market-clearing mechanism.
Representative situations include:
Sell-side/buy-side mergers & acquisitions
Spin-offs, split-ups, divestitures

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Going-private transactions
Related-party transactions
Down-round financing, minority investments, and other financing

transactions
Requirements pursuant to certain bond indentures and credit agreements
Any transaction requiring a shareholder vote
ESOP/ERISA transactions
SOLVENCY OPINIONS
State laws impose certain duties on boards of directors with respect to

dividends, distributions and other transfers. Dividends must be paid from
surplus, and cannot leave the company insolvent or with insufficient capital. A
solvency analysis and opinion helps companies and their boards of directors
steer clear of fraudulent transfers and illegal dividends or distributions.
A solvency opinion makes determinations as to whether, after giving effect to a

transaction:
The companys assets exceed its debts;
The company should be able to pay its debts as they come due;
The company is not left with unreasonably small assets or capital; and
There is sufficient surplus to effect a distribution.
These determinations arise from fraudulent transfer statutes and dividend

prerequisites in state laws. Solvency analysis also provides a board and
company management with valuable insight as to the equity and cash flow
cushion
with
respect
to
its
ongoing
business.
Duff & Phelps is a globally recognized leader in solvency opinions. Since 2005,
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Duff & Phelps has rendered over 230 solvency opinions in transactions,
aggregating
to
more
than
$1.1
trillion
in
deal
value.
SOLVENCY ADVISORY SERVICES
A solvency analysis and opinion can enhance the companys or boards analysis
of any leveraged transaction or contemplated distribution. The types of
applicable transactions include:
Spin-offs and split-offs
Dividend recapitalizations
Leveraged buyouts
Debt refinancing
Intercompany restructurings
Large stock buybacks
COMMERCIALLY
REASONABLE
DEBT
OPINIONS
Duff & Phelps helps clients structure and issues opinions regarding the
commercial reasonableness of debt that companies issue to related parties for
various types of transactions.
Boards of directors and trustees of income funds as well as tax attorneys and
other tax advisors have relied on Duff & Phelps' opinions to assist in supporting
their view that a debt should be characterized as such for income tax purposes.
Duff & Phelps offers debt opinions for intercompany and other related party
transactions, including:
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Acquisitions
Recapitalizations
Canadian Income Fund transactions
Income security offerings, such as IDS, IPS and EIS issuances
ESOP AND ERISA ADVISORY

Duff & Phelps ESOP/ERISA practice, with over 25 years experience, is a
leading valuation and corporate finance advisor to companies and ERISA
fiduciaries.
Broad and deep experience advising private and public companies makes Duff
& Phelps the firm of choice for structuring and raising financing as well as
valuing stock in employee stock ownership plan (ESOP) transactions and
nonpublic assets, including employer securities held by ESOPs and ERISA
pension plans. A pioneer in ESOP planning and transaction execution, Duff &
Phelps guides principals, companies and fiduciaries through the complex
financial and valuation implications of the financial, regulatory and tax aspects
of these transactions.
ESOP and ERISA Advisory services include:
Transaction Design, Structuring, and Financing
Fairness Opinions
Feasibility Studies
Valuations
Sustainability Consulting
Mergers & Acquisitions
Valuations of Illiquid Assets held in ERISA Plans
Assisting Fiduciaries in Monitoring Investments
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Advising ERISA Fiduciaries in Transactions, including IPOs
Capital
Raising
is
provided
by
Duff
&
Phelps
Securities,
LLC.
EXPERTISE
Advanced Valuation Topics at the ESOP Associations National Conference
Elyse Bluth, Managing Director at Duff & Phelps, spoke at the ESOP
Associations National conference held in Washington DC on May 10, 2012.
Her presentation Advanced Valuation Topics, Not the Basics addressed
challenges in annual valuations, second stage transactions and valuation
nuances of selling an ESOP company. Elyse explained in detail many of the
nuances of ESOP valuation. Read the summary.
STRUCTURED FINANCE
Structured finance is a broad term used to describe a sector of finance that
was created to help transfer risk using complex legal and corporate entities. This
transfer of risk, as applied to the securitization of various financial assets
(mortgages, credit card receivables, auto loans, etc.), has helped provide
increased liquidity or funding sources to markets like housing and to transfer
risk to buyers of structured products; it also permits financial institutions to
remove certain assets from their balance sheets as well as provides a means for
investors to gain access to diversified asset classes.[1] However, it arguably
contributed to the degradation in underwriting standards for these financial
assets, which helped give rise to both the inflationary credit bubble of the mid2000s and the credit crash and financial crisis of 20079
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Securitization
Securitization is the method utilized by participants of structured finance to
create the pools of assets that are used in the creation of the end product
financial instruments.
Reasons for securitization
Better utilization of available capital
Alternative funding
Cheaper source of funding, especially for lower-rated originators
Reducing credit concentration
Risk management interest rates and liquidity
Risk transfer
Tranching
Tranching, which refers to the creation of different classes of securities
(typically with different credit ratings) from the same pool of assets, is an
important concept in structured finance because it is the system used to create
different investment classes for the securities created. Tranching allows the cash
flow from the underlying asset to be diverted to various investor groups. The
Committee on the Global Financial System explains tranching as follows: "A
key goal of the tranching process is to create at least one class of securities
whose rating is higher than the average rating of the underlying collateral pool
or to create rated securities from a pool of unrated assets. This is accomplished
through the use of credit support (enhancement), such as prioritization of
payments to the different tranches."
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Credit enhancement
Credit enhancement is key in creating a security that has a higher rating than the
underlying asset pool. Credit enhancement can be created, for example, by
issuing subordinate bonds. The subordinate bonds are allocated any losses from
the collateral before losses are allocated to the senior bonds, thus giving senior
bonds a credit enhancement. As a result, it is possible for defaults to occur in
repayment of the underlying assets without affecting payments to holders of the
senior bonds. Also, many deals, typically those involving riskier collateral, such
as subprime and Alt-A mortgages, use over-collateralization as well as
subordination. In over-collateralization, the balance of the underlying assets
(e.g., loans) is greater than the balance of the bonds, thus creating excess
interest in the deal which acts as a "cushion" against reduction in value of the
underlying assets. Excess interest can be used to offset collateral losses before
losses are allocated to bondholders, thus providing another credit enhancement.
A further credit enhancement involves the use of derivatives such as swap
transactions, which effectively provide insurance, for a set fee, against a
decrease in value.
Monoline insurers play a critical role in modern day Credit Enhancements; they
are more effective in (a) off-balance-sheet models creating synthetic collateral,
(b) sovereign ratings' enhancement with built-in asset derivatives and (c) cross
border loans with receivables and counterparties in the domain and jurisdiction
of the monoline insurer. The decision whether to use a monoline insurer or not
often depends upon the cost of such cover vis-a-vis the improvement in pricing
for the loan or bond issue by virtue of such credit enhancement.
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Credit ratings
Ratings play an important role in structured finance for instruments that are
meant to be sold to investors. Many mutual funds, governments, and private
investors only buy instruments that have been rated by a known agency, like
Moody's or Standard & Poor's. New rules in the U.S. and Europe have tightened
the requirements for ratings agencies (perhaps in light of previous credit crises).
These are reflected in Europe by a body of regulations relating to the use of
credit agencies
BUSINESS PLAN
A business plan is a formal statement of a set of business goals, the reasons
they are believed attainable, and the plan for reaching those goals. It may also
contain background information about the organization or team attempting to
reach those goals.
Business plans may also target changes in perception and branding by the
customer, client, taxpayer, or larger community. When the existing business is
to assume a major change or when planning a new venture, a 3 to 5 year
business plan is required, since investors will look for their annual return in that
timeframe
LITIGATION SERVICES
The essential goal of litigation support is to organize, analyze, and present case
materials through computer systems. In federal criminal defense cases, there are
three primary ways that litigation support is used by Federal Defender Office
(FDO) staff and Criminal Justice Act (CJA) panel attorneys. One is in
conducting electronic courtroom presentations. Another is management and
analysis of paper documents and their electronic equivalents. The third is the
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identification, collection, preservation, processing, review, analysis and

production of electronically stored information (ESI).
Litigation support is the marriage of project management and technology. We
believe that while every district is different and every case is unique, there are
certain standards to follow in order to ensure that the data involved in a case is
handled in a cost effective and time efficient manner allowing for good
organization, easy retrieval and effective client representation.
Both federal defender offices and CJA panel attorneys are often faced with the
challenge of limited resources and staffing. Litigation support technology can
help to make up that deficit by allowing data to be intelligently collected,
processed, organized, reviewed, analyzed and presented.
While there may not be a single piece of technology to address all the
challenges you face, the National Litigation Support Team can help you to
navigate through the process of evaluating your choices and in deciding what
solutions best meet the needs of your case.
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CHAPTER 4
CORE INVESTMENT BANKING ACTIVITIES
Investment banking has changed over the years, beginning as a partnership form
focused on underwriting security issuance, i.e. initial public offerings (IPOs)
and secondary offerings, brokerage, and mergers and acquisitions, and evolving
into a "full-service" range including securities research, proprietary trading, and
investment management. In the modern 21st century, the SEC filings of the
major independent investment banks such as Goldman Sachs and Morgan
Stanley reflect three product segments:
(1) Investment banking (fees for M&A advisory services and securities
underwriting);
(2) Asset management (fees for sponsored investment funds), and
(3) Trading and principal investments (broker-dealer activities including
proprietary trading ("dealer" transactions) and brokerage trading ("broker"
transactions).
In the United States, commercial banking and investment banking were
separated by the GlassSteagall Act, which was repealed in 1999. The repeal
led to more "universal banks" offering an even greater range of services. Many
large commercial banks have therefore developed investment banking divisions
through acquisitions and hiring. Notable large banks with significant investment
banks include JPMorgan Chase, Bank of America, Credit Suisse, Deutsche
Bank, Barclays, and Wells Fargo. After the financial crisis of 20072008 and
the subsequent passage of the Dodd-Frank Act of 2010, regulations have limited
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certain investment banking operations, notably with the Volcker Rule's

restrictions on proprietary trading.
The traditional service of underwriting security issues has declined as a
percentage of revenue. As far back as 1960, 70% of Merrill Lynch's revenue
was derived from transaction commissions while "traditional investment
banking" services accounted for 5%. However, Merrill Lynch was a relatively
"retail-focused" firm with a large brokerage network.
FRONT OFFICE
Front office is generally described as a revenue generating role.
There are two main areas within front office:
Investment Banking and Markets, which includes: Sales; Trading; Research;
Structuring. Investment Banking involves advising the world's largest
organizations on mergers, acquisitions, as well as a wide array of fund raising
strategies. This is, on average, the most prestigious and highest paid department
in the bank with first year analysts typically making 60,000 upwards
(depending on individual, team and firm performance).
Markets are then split into further divisions; sales, trading, some research and
also structuring. Though the average investment banker will make considerably
more than the average trader, the best trader will make significantly more than
the best investment banker.
INVESTMENT BANKING
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
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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 finance (governments), FIG (financial
institutions
group),
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. The Wall Street Journal, in
partnership with Dialogic, publishes figures on investment banking revenue
such as M&A in its Investment Banking Scorecard.
SALES AND TRADING
On behalf of the bank and its clients, a large investment bank's primary function
is buying and selling products. In market making, traders will buy and sell
financial products with the goal of making money on each trade. Sales is the
term for the investment bank's sales force, whose primary job is to call on
institutional and high-net-worth investors to suggest trading ideas (on a caveat
emptor basis) and take orders. Sales desks then communicate their clients'
orders to the appropriate trading desks, which can price and execute trades, or
structure new products that fit a specific need. Structuring has been a relatively
recent activity as derivatives have come into play, with highly technical and
numerate employees working on creating complex structured products which
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typically offer much greater margins and returns than underlying cash securities.
In 2010, investment banks came under pressure as a result of selling complex
derivatives contracts to local municipalities in Europe and the US. 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. Banks also undertake risk
through proprietary trading, performed by a special set of traders who do not
interface with clients and through "principal risk"risk undertaken by a trader
after he buys or sells a product to a client and does not hedge his total exposure.
Banks seek to maximize profitability for a given amount of risk on their balance
sheet. The necessity for numerical ability in sales and trading has created jobs
for physics, computer science, mathematics and engineering Ph.D.s who act as
quantitative analysts.
RESEARCH
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,
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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 advise clients but do not directly
affect revenue. All research groups, nonetheless, provide a key service in terms
of advisory and strategy. There is a potential conflict of interest between the
investment bank and its analysis, in that published analysis can affect the bank's
profits.
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. Credit risk focuses around capital markets activities, such as loan
syndication, bond issuance, restructuring, and leveraged finance. Market risk
conducts review of sales and trading activities utilizing the VaR model and
provides hedge-fund solutions to portfolio managers. Other risk groups include
country risk, operational risk, and counterparty risks which may or may not
exist on a bank to bank basis. Credit risk solutions are key part of capital market
transactions, involving debt structuring, exit financing, loan amendment, project
finance, leveraged buy-outs, and sometimes portfolio hedging. Front office
market risk activities provide service to investors via derivative solutions,
portfolio management, portfolio consulting, and risk advisory. Well-known risk
groups in JPMorgan Chase, Goldman Sachs and Barclays engage in revenuegenerating activities involving debt structuring, restructuring, loan syndication,
and securitization for clients such as corporates, governments, and hedge funds.
J.P. Morgan IB Risk works with investment banking to execute transactions and
advise investors, although its Finance & Operation risk groups focus on middle
office functions involving internal, non-revenue generating, operational risk
controls. Credit default swap, for instance, is a famous credit risk hedging
solution for clients invented by J.P. Morgan's Blythe Masters during the 1990s.
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The Loan Risk Solutions group within Barclays' investment banking division
and Risk Management and Financing group housed in Goldman Sach's
securities division are client-driven franchises. However, risk management
groups such as operational risk, internal risk control, legal risk, and the one at
Morgan Stanley are restrained to internal business functions including firm
balance-sheet risk analysis and assigning trading cap that are independent of
client needs, even though these groups may be responsible for deal approval
that directly affects capital market activities. Risk management is a broad area,
and like research, its roles can be client-facing or internal.
MIDDLE OFFICE
This area of the bank includes treasury management, internal controls, and
internal corporate strategy.
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 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 non-revenue regenerating yet a
key functional role within investment banks.
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This list is not a comprehensive summary of all middle-office functions within

an investment bank, as specific desks within front and back offices may
participate in internal functions.
BACK OFFICE
OPERATIONS
This involves data-checking 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.
Firms are responsible for compliance with government regulations and internal
regulations.
OTHER BUSINESSES
Global transaction banking is the division which provides cash

management, custody services, lending, and securities brokerage services
to institutions. Prime brokerage with hedge funds has been an especially
profitable business, as well as risky, as seen in the "run on the bank" with
Bear Stearns in 2008.
Investment management is the professional management of various

securities (shares, bonds, etc.) and other assets (e.g., real estate), to meet
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specified investment goals for the benefit of investors. Investors may be

institutions (insurance companies, pension funds, corporations etc.) or
private investors (both directly via investment contracts and more
commonly via collective investment schemes e.g., mutual funds). The
investment management division of an investment bank is generally
divided into separate groups, often known as private wealth management
and private client services.
Merchant banking can be called "very personal banking"; merchant

banks offer capital in exchange for share ownership rather than loans, and
offer advice on management and strategy. Merchant banking is also a
name used to describe the private equity side of a firm. Current examples
include Defoe Fournier & Cie. and JPMorgan's One Equity Partners and
the original J.P. Morgan & Co. Rothschilds, Barings, Warburgs and
Morgans were all merchant banks. (Originally, "merchant bank" was the
British English term for an investment bank.)
ORGANIZATIONAL STRUCTURE
Investment banking is split into front office, middle office, and back
office activities. While large service investment banks offer all lines of
business, both "sell side" and "buy side", smaller sell-side investment
firms such as boutique investment banks and small broker-dealers 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 securities on the open
market, an activity very important to an investment bank's reputation.
Therefore, investment bankers play a very important role in issuing new
security offerings
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CHAPTER 5
INDUSTRY PROFILE
There are various trade associations throughout the world which represent the
industry in lobbying, facilitate industry standards, and publish statistics. The
International Council of Securities Associations (ICSA) is a global group of
trade associations.
In the United States, the Securities Industry and Financial Markets Association
(SIFMA) is likely the most significant; however, several of the large investment
banks are members of the American Bankers Association Securities Association
(ABASA)[13] while small investment banks are members of the National
Investment Banking Association (NIBA).
In Europe, the European Forum of Securities Associations was formed in 2007
by various European trade associations. Several European trade associations
(principally the London Investment Banking Association and the European
SIFMA affiliate) combined in 2009 to form Association for Financial Markets
in Europe (AFME).
In the securities industry in China (particularly mainland China), the Securities
Association of China is a self-regulatory organization whose members are
largely investment banks.
GLOBAL SIZE AND REVENUE MIX
Global investment banking revenue increased for the fifth year running in 2007,
to a record US$84.3 billion, which was up 22% on the previous year and more
than double the level in 2003. Subsequent to their exposure to United States
sub-prime securities investments, many investment banks have experienced
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losses. As of late 2012, global revenues for investment banks were estimated at
$240 billion, down about a third from 2009, as companies pursued less deals
and traded less. Differences in total revenue are likely due to different ways of
classifying investment banking revenue, such as subtracting proprietary trading
revenue.
In terms of total revenue, SEC filings of the major independent investment
banks in the United States show that investment banking (defined as M&A
advisory services and security underwriting) only made up about 15-20% of
total revenue for these banks from 1996 to 2006, with the majority of revenue
(60+% in some years) brought in by "trading" which includes brokerage
commissions and proprietary trading; the proprietary trading is estimated to
provide a significant portion of this revenue.
The United States generated 46% of global revenue in 2009, down from 56% in
1999. Europe (with Middle East and Africa) generated about a third while Asian
countries generated the remaining 21%. The industry is heavily concentrated in
a small number of major financial centers, including City of London, New York
City, Frankfurt, Hong Kong and Tokyo.
According to estimates published by the International Financial Services
London, for the decade prior to the financial crisis in 2008, M&A was a primary
source of investment banking revenue, often accounting for 40% of such
revenue, but dropped during and after the financial crisis. Equity underwriting
revenue ranged from 30% to 38% and fixed-income underwriting accounted for
the remaining revenue.
Revenues have been affected by the introduction of new products with higher
margins; however, these innovations are often copied quickly by competing
banks, pushing down trading margins. For example, brokerages commissions
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for bond and equity trading is a commodity business but structuring and trading
derivatives has higher margins because each over-the-counter contract has to be
uniquely structured and could involve complex pay-off and risk profiles. One
growth area is private investment in public equity (PIPEs, otherwise known as
Regulation D or Regulation S). Such transactions are privately negotiated
between companies and accredited investors.
Banks also earned revenue by securitizing debt, particularly mortgage debt prior
to the financial crisis. Investment banks have become concerned that lenders are
securitizing in-house, driving the investment banks to pursue vertical integration
by becoming lenders, which is allowed in the United States since the repeal of
the Glass-Steagall Act in 1999
TOP 10 BANKS
List of investment banks
The ten largest investment banks as of December 31, 2013, are as follows (by
total fees from all advisory). The list is just a ranking of the advisory arm of
each bank and does not include the generally much larger portion of revenues
from sales and trading and asset management.
Rank Company
Fees ($m)
1.
J.P. Morgan & Co.
6,271.74
2.
Bank of America Merrill Lynch 5,685.59
3.
Goldman Sachs
5,053.21
4.
Morgan Stanley
4,452.88
5.
Citigroup
3,952.09
6.
Deutsche Bank
3,616.12
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Credit Suisse
3,545.45
8.
Barclays
3,454.73
9.
Wells Fargo
2,277.88
10.
RBC Capital Markets
2,041.80
World's biggest banks are ranked for M&A advisory, syndicated loans, equity
capital markets and debt capital markets.
The Financial Times, The Wall Street Journal and Bloomberg often cover
mergers and acquisitions and capital markets. League tables are also available:
Investment Banking Review, The Financial Times.
Investment Banking Scorecard, The Wall Street Journal.
Global M&A Financial Advisory Rankings, Bloomberg.
Global Capital Markets League Tables, Bloomberg.
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CHAPTER 6
FINANCIAL CRISIS OF 2008
The 2008 financial credit crisis led to the notable collapse of several banks,
notably including the bankruptcy of large investment bank Lehman Brothers
and the hurried sale of Merrill Lynch and the much smaller Bear Stearns to
banks which effectively rescued them from bankruptcy. The entire financial
services industry, including numerous investment banks, was rescued by
government loans through the Troubled Asset Relief Program (TARP).
Surviving U.S. investment banks such as Goldman Sachs and Morgan Stanley
converted to traditional bank holding companies to accept TARP relief. Similar
situations occurred across the globe with countries rescuing their banking
industry. Initially, banks received part of a $700 billion TARP intended to
stabilize the economy and thaw the frozen credit markets. Eventually, taxpayer
assistance to banks reached nearly $13 trillion, most without much scrutiny,
lending did not increase and credit markets remained frozen.
The crisis led to questioning of the business model of the investment bank
without the regulation imposed on it by Glass-Steagall. Once Robert Rubin, a
former co-chairman of Goldman Sachs, became part of the Clinton
administration and deregulated banks, the previous
conservatism of
underwriting established companies and seeking long-term gains was replaced

by lower standards and short-term profit. Formerly, the guidelines said that in
order to take a company public, it had to be in business for a minimum of five
years and it had to show profitability for three consecutive years. After
deregulation, those standards were gone, but small investors did not grasp the
full impact of the change.
A number of former Goldman-Sachs top executives, such as Henry Paulson and
Ed Liddy were in high-level positions in government and oversaw the
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controversial taxpayer-funded bank bailout. The TARP Oversight Report

released by the Congressional Oversight Panel found that the bailout tended to
encourage risky behavior and "corrupted the fundamental tenets of a market
economy".
Under threat of a subpoena, Goldman Sachs revealed that it received $12.9
billion in taxpayer aid, $4.3 billion of which was then paid out to 32 entities,
including many overseas banks, hedge funds and pensions. The same year it
received $10 billion in aid from the government, it also paid out multi-million
dollar bonuses; the total paid in bonuses was $4.82 billion. Similarly, Morgan
Stanley received $10 billion in TARP funds and paid out $4.475 billion in
bonuses.
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CHAPTER 7
MAJOR INVESTMENT BANKS IN INDIA
An investment bank is a financial institution that assists individuals,
Corporations and governments in raising capital by underwriting and/or acting
as the clients agent in the issuance of securities eg: IPO/ FPO work is handled
by investment banks. An investment bank also assist companies in mergers and
acquisitions, and provide ancillary services such as market making, trading of
derivatives, fixed income instruments, foreign exchange, commodities, and
equity securities.
The following is the list of major indian investment banks based out of India.
Avendus
Avendus is an investment bank based in India with offices in Mumbai and
Bangalore. The firm was founded in 1999 by three investment bankers Ranu
Vohra, Gaurav Deepak and Kaushal Kumar, 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
connection.
Website url : http://www.avendus.com
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
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the country.
Website url : http://www.bajajcapital.com
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
countries.
web site url : http://www.barclays.in
Cholamandalam Investment & Finance Company

Cholamandalam Investment & Finance Company Limited is the financial
services arm of the USD 880 million Murugappa Group. Incorporated in 1978,
it is one of the leading Financial Services Company in the country. The products
and services include vehicle finance, capital market finance, mutual funds,
securities broking, depository services, and insurance and distribution services.
web site url : http://www.cholamandalam.com/
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.
Website url : http://www.icicisecurities.com/
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ICRA Limited
ICRA Limited (an Associate of Moodys Investors Service) was incorporated in
1991 as an independent and professional company. ICRA is a leading provider
of investment information and credit rating services in India. ICRAs major
shareholders include Moodys Investors Service and leading Indian financial
institutions and banks.
Website url : http://www.icra.in
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.
Website url : http://www.idfc.com/
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.
web site url : http://www.idfcpe.com/
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Industrial Development Bank of India

The Industrial 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. Following amendment to IDBI
Act in October 1994 to permit public ownership up to 49% of its issued capital,
IDBI went in for a public issue in July 1995. The shareholding of Government
of
India
in
IDBI
currently
stands
at
58.47%.
web site url : http://www.idbi.com/
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.
web site url : http://www.ifciltd.com/
Kotak Investing Banking

Kotak Mahindra Capital Company (KMCC) helps leading Indian corporations,
banks, financial institutions and government companies access domestic and
international capital markets. KMCC has the most current understanding of
investor appetite, having been the leading book runner/lead manager in public
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equity offerings in the period FY 2002-06.

web site url : http://www.kmcc.co.in
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.
web site url : http://www.kmcc.co.in/
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.
web site url : http://www.sbicaps.com/
S.E Investments Limited

SEILs philosophy on corporate governance envisages commitment to ensure
customer satisfaction through better services. The company is committed to
good corporate governance & continuously reviews various relationship
measures with a view to enhance shareholders value. SEILprovides detailed
information on various issues concerning the companys business and financial
performance. SEIL respects the rights of its share holders to information on
performance of the company and believes that the best corporate governance
promotes transparency and helps mitigate the risks associated with the business.
web site url : http://www.seil.in
M.D.COLLEGE
TYFM
INVESTMENT BANKING
Small Industries Development Bank of India

Small Industries Development Bank of India (SIDBI) was established in April
1990 under an Act of Indian Parliament. SIDBI has completed 12 years of
service to the small scale sector. Consequent upon, amendment in the SIDBI
Act, the Bank has been delinked from SIDBI with effect from March 27, 2000.
The SIDBI (Amendment) Act, 2000 has changed the provisions relating to
capital structure, share holding pattern, management, business, borrowings, etc.
The amended Act provides for divesting of 51% of the equity share capital of
Rs.4.5 billion Subscribed and held by IDBI in favour of Life Insurance
Corporation of India, General Insurance Corporation of India, Public Sector
Banks and other Institutions owned or controlled by the Government of India.
web site url : http://www.sidbi.com/
SSKI Group
SSKI is a leading India-based financial services group that offers Institutional
Equities and Investment Banking services. SSKI Investment Banking is a fullservice 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.
web site url : http://www.sski.co.in/
Tata Investment Corporation Limited (TICL)

TICL is a non-banking 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
M.D.COLLEGE
TYFM
INVESTMENT BANKING
major sources of income for the company consist of dividend income and profit
on sale of investments.
web site url : http://www.tata.com/tata_investment/
UTI Securities Ltd

UTI Securities Ltd., was promoted as an independant professional entity in June
1994. With the repealing of Unit Trust of India (UTI) Act, the entire share
capital of UTISEL is now held by Administrator of specified undertaking of
Unit Trust of India since 1st February 2003. UTISEL has been providing all
kinds of Investment related activities which include investment banking and
corporate advisory services.
web site url : http://www.usectrade.com/
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.
M.D.COLLEGE
TYFM
INVESTMENT BANKING
CHAPTER 8
CONCLUSION
The investment banker plays a vital role in channelizing the financial surplus of
the society into productive investment avenues. Hence before selecting a
investment banker, one must decide what the services for which he is being
approached are. Selecting the right Intermediary who has the necessary skills to
meet the requirements of the client will ensure success.
It can be said that this project helped me to understand every details about
Investment Banking and in future how its going to get emerged in the Indian
economy. Hence, Investment Banking can be considered as essential financial
body in Indian financial system.
Market development is predicated on a sound, fair and transparent regulatory

framework. To sustain the growth of the market and crystallize the growing
awareness and interest into a committed, discerning and growing awareness and
interest into an essential to remove the trading malpractice and structural
inadequacies prevailing in the market, and provide the investors an organized,
well regulated market place in future.
M.D.COLLEGE
TYFM
INVESTMENT BANKING
CHAPTER 9
BIBLIOGRAPHY
PRINCIPLES OF INVESTMENT VIPUL PRAKASHAN
WEBILOGRAPHY
www.economictimes.com
www.wikipedia.com
www.sebi.com
www.managementparadise.com
www.scribd.com
www.indiastat.com
www.jpmorgan.com
www.wallstreetprep.com/knowledge/about-investment-banking
www.investopedia.com
www.morganstanley.com

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M.D.

The "buy side" involves the provision of advice to institutions concerned

Definition of 'Investment Banking

Investopedia explains 'Investment Banking

services (i.e., to prevent the temptation by an investment bank to knowingly

Vanities and movie-maker Oliver Stone in Wall Street focused on

INVESTMENT BANKING HISTORY IN THE 20th CENTURY

EVOLUTION OF INVESTMENT BANKING IN INDIA

Typically, an investment banking group nowadays provides world-wide some or

1. Mergers and Acquisition Advisory

2. Private Placement of Debt and Equity

4. Management of Capital issues

5. Management of Buyback and takeovers

6. Corporate Advisory Services

7. Project Advisory Services

8. Other services like Restructuring/Sales, Real Estate, Loan Syndication and so

10. Business plan

11. Litigation Services

MERGER AND ACQUISITION ADVISORY

In business or economics a merger is a combination of two companies into one

An acquisition, also known as a takeover, is the buying of one company (the

It is fee-based advisory services that assist the companies in acquiring other

impact on cash-flows, profitability and taxability. It helps in optimizing these

PRIVATE PLACEMENT OF DEBT AND EQUITY

These primarily relate to the disclosures of information to the potential

Identify and initiate contact with the prospective investors, represent or

related-party transactions, and the lack of market-clearing mechanisms in

As published in Thomson Reuters Full Year 2013 Mergers and Acquisitions

FAIRNESS ADVISORY SERVICES

Sell-side/buy-side mergers & acquisitions

Spin-offs, split-ups, divestitures

Down-round financing, minority investments, and other financing

Requirements pursuant to certain bond indentures and credit agreements

Any transaction requiring a shareholder vote

State laws impose certain duties on boards of directors with respect to

A solvency opinion makes determinations as to whether, after giving effect to a

The companys assets exceed its debts;

There is sufficient surplus to effect a distribution.

These determinations arise from fraudulent transfer statutes and dividend

SOLVENCY ADVISORY SERVICES

Spin-offs and split-offs

Large stock buybacks

Canadian Income Fund transactions

Income security offerings, such as IDS, IPS and EIS issuances

ESOP AND ERISA ADVISORY

Transaction Design, Structuring, and Financing

Mergers & Acquisitions

Valuations of Illiquid Assets held in ERISA Plans

Assisting Fiduciaries in Monitoring Investments

Advising ERISA Fiduciaries in Transactions, including IPOs

Better utilization of available capital

Cheaper source of funding, especially for lower-rated originators

Reducing credit concentration

Risk management interest rates and liquidity

identification, collection, preservation, processing, review, analysis and

certain investment banking operations, notably with the Volcker Rule's

security issuance, coordinating with bidders, or negotiating with a merger

telecommunication) and maintains relationships with corporations within the

This list is not a comprehensive summary of all middle-office functions within

Global transaction banking is the division which provides cash

Investment management is the professional management of various

specified investment goals for the benefit of investors. Investors may be

Merchant banking can be called "very personal banking"; merchant

Investment banks offer services to both corporations issuing securities