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5-Securities Market-Part 1 PDF

Investment banking pertains to financial advisory services provided by large financial institutions to individuals, corporations, and governments. They help companies raise capital by issuing securities in the primary market and provide advisory services for mergers, acquisitions, and other financial transactions. The key functions of investment banks include raising capital, mergers and acquisitions advisory, risk management, research, and structured financial products. Merchant banking refers to financial services related to issuing, underwriting, and trading of securities on behalf of businesses. They provide advisory services and help companies raise debt and equity financing.

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87 views

5-Securities Market-Part 1 PDF

Investment banking pertains to financial advisory services provided by large financial institutions to individuals, corporations, and governments. They help companies raise capital by issuing securities in the primary market and provide advisory services for mergers, acquisitions, and other financial transactions. The key functions of investment banks include raising capital, mergers and acquisitions advisory, risk management, research, and structured financial products. Merchant banking refers to financial services related to issuing, underwriting, and trading of securities on behalf of businesses. They provide advisory services and help companies raise debt and equity financing.

Uploaded by

Kirti Giyamalani
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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By Nadya Narsidani

INVESTMENT BANKING
Investment banking pertains to certain
activities of a financial services company
or a corporate division that consist in
advisory-based financial transactions on
behalf of individuals, corporations, and
governments
 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.
It performs the following functions

Portfolio
Raise Capital
Management

M&A Research
 IPOs
 Mergers and Acquisitions
 Risk Management
 Research
 Structuring of Derevatives
 Merchant Banking
 Investment Management
PRIMARY MARKET
ACTIVITIES
SERVICES

SECONDARY MARKET
ACTIVITIES
SERVICES
PRIMARY MARKET SECONDARY MARKET
SERVICES SERVICES

RAISING CAPITAL SECURITIES BUSINESS

ASSEST MANAGEMENT
MERGERS & ACQUISITIONS
SERVICES

GENERAL ADVISORY INVESTMENT ADVISORY OR


SERVICES WEALTH MANAGEMENT
 Front office Functions
Front office functions include M&A and
Underwriting

 Back Office Functions


Functions like risk management, financial
control, corporate treasury, corporate strategy,
compliance, operations and technology are
regarded as back office functions
 SBI was the first Indian public sector bank to
set up its investment banking division in
1972.
 SBI and IDBI 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 a investment banker.
 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 banking clients can vary from
sophisticated clients.
i.e. major corporations or large,
experienced funds to smaller
institutions like SME’s usually depending on
the size of the bank
 Some of the smaller I-banks have focuses
on either certain sectors i.e. healthcare or
technology or stage related companies i.e.
start ups,
 They also provide advice for M&A deals
and real estate deals, assess a value
The Top 10 Investment Banks in India are
 Bank of America
 Barclay’s Capital
 BNP Paribas
 Citibank
 Credit Suisse
 Deutsche Bank
 JP Morgan
 Kotak Mahindra Bank
 HSBC
 Yes Bank
MERCHANT BANKING
● As per SEBI Rules, a Merchant Banker refers to

“Any person who is engaged in the business of issue


management either by making arrangement regarding buying,
selling or subscribing to securities or acting as manager,
consultant or rendering corporate advisory services in relation
to such issue management”.

● Merchant Banks do not provide regular banking services to the


general public.
● One who is a critical link between a company wishing to raise funds and potential
investors.

● Understands the requirements of the business concern and arranges for finance with
the help of financial institutions, stock exchanges, banks and money market.

● Underwrites corporate securities and advises on issues of corporate nature, such as


mergers and acquisitions.

● A merchant banker may be in the form of a bank, a company, a firm, or even a


proprietary concern.
FUNCTIONS

Some of the services provided by Merchant Bankers are:

 Corporate Counseling
 Project Counseling
 Working Capital Finance
 Portfolio Management
 Restructuring Strategies
 Credit Syndication
 Lease Financing
 Issue Management
 Credit Acceptance and Bills Discounting
 Other Specialized Services
 Corporate Counseling:
Identifying areas of growth and diversification and guiding clients
on aspects like locational factors, organisational size, investment
decisions, etc.

 Project Counseling:
It deals with the analysis of project viability and comprises of
preparation of project reports, deciding upon the financing
pattern to meet the cost of the project and filling up of application
forms for obtaining funds from financial institutions.
 Working Capital Finance:
 Assessment of working capital requirement
 Preparing applications for the sanction of appropriate credit facilities
 Providing assistance in negotiations with banks

 Portfolio Management:
The Merchant Banker helps the investor in matters pertaining to
investment decisions. They assist in deciding the quantum, timing and
type of security to be bought and thereby help in achieving maximum
return with minimum risk by proper combination of securities.
● Restructuring Strategies:
It is a specialized service of Merchant Bankers wherein they act as
middlemen in negotiating between two companies during Mergers and
Acquisitions. They offer expert evaluation regarding identifying organisations
with matching characteristics.

● Credit Syndication:
It refers to obtaining loans from development institutions or syndicates for
project financing.
Merchant Banks help corporate clients raise syndicated loans from
commercial banks.
 Lease Financing:
It is an alternative source of financing capital outlay wherein the
lesser lets out assets on lease to the lessee for use for a specific time
period. Merchant Bankers provide advice on viability of leasing and
choice of favourable rent structure.

 Issue Management:
Merchant bankers play the role of apex financial intermediary in the
primary capital market in India acting as an ‘Issue Manager’.
They help the issuing companies in the total management of issues of
securities by transferring capital from those who own it to those who
need it.
 Credit Acceptance and Bills Discounting:
Includes activities relating to the acceptance and discounting of bills
of exchange, in addition to the advancement of loans to businesses
based on the strength of these instruments. It is imperative that
companies hold a good reputation for discounting to take place.
Hence, collecting credit information and credit rating is a part of this
function.

 Other Specialized Services:


They also provide corporate advisory services on issues like mergers
and amalgamations, tax matters, management and cost audit, etc.
They also provide Mutual Fund services to companies.
CATEGORY ROLE CAPITAL FEES
ADEQUACY CHARGED
NORMS
Issue Management
Advisor Rs. 2.5 Lakhs for first
Consultant two years.
Category I Underwriter Rs. 5 Crores Rs. 1.5 Lakhs for
Manager third year.
Portfolio Manager

Advisor Rs. 1.5 Lakhs for first


Consultant
two years.
Category II Underwriter Rs. 50 Lakhs Rs. 50,000 for third
Portfolio Manager
Co-Manager year.

Underwriter
Category III Advisor Rs. 20 Lakhs Minimum Rs. 50,000
Consultant

Advisor
Category IV Consultant Nil Minimum Rs. 50,000
ICICI SECURITIES KOTAK BANK SECURITIES CITI BANK

GOLDMAN SACHS JM FINANCIAL AXIS BANK

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