INVESTMENT BANKING

Contents:
What is IB ??? Origins of IB IB defined History of IB Goldman Sachs A global investment bank IB in India SBI Capital Markets Role of an Investment Bank Conclusion.

What is IB ???
In a very broad perspective, Investment Banking as the term suggests, is concerned with the primary function o f assisting capital market in the movement of financial resources from those who have them (investors) to those who want them (issuers).
In short, it can be said that it the process by which money is raised. This money could be in the form of debt (loans, bonds) or equity (IPOs or Private Equity placements).

What is IB ???
This money may be used for financing the working capital, capital expenditures, dividend payouts, etc.
The main activities under IB are functions,

Underwriting

Administrative

Advisory

functions,

functions and other finance related activities.

Origin in India
Grindlays bank which has now merged with Standard Chartered bank in India started the banking operations in 1967 with the license from the RBI followed by Citibank in 1970.
In India, the existence of IB can be traced to over three decades (30 yrs.) , investment banking was largely limited to merchant banking services.

Origin in India
However around 1980s most of the public sector banks were transformed into separate subsidiaries.

For example : SBI set up SBI Capital Markets Ltd. In 1986 ICICI, Indian Bank any many other created separate merchant baking entities.

IB Defined

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 affairs.

IB Defined

Bloomberg says an investment bank is a financial intermediary that performs a variety of services, including aiding in the sale of securities, facilitating mergers and other corporate re-organizations, acting as brokers to both the individual and the institutional clients and trading in its own account.

IB Defined
John F. Marshall & M.E Ellis say investment banking is what investment banks do.

History of IB
By the middle of 1800s, professional investment banks had sprung up in the US to help government raise funds for infrastructure projects and the civil war.

In the 1830s, commercial banks started adding investment banking services to their regular banking activities in the US.

Investment Banking hit a milestone in the 1870s when a syndicate of banks from Europe and US teamed up to buy $50 million worth of US Treasury Bonds for resale to public.

History of IB
Also important in the evolution of investment banking were private banks, many of which were family enterprises, and finance companies. Advising clients on mergers and acquisitions and public offerings was the main focus of major Wall Street partnerships.

Goldman Sachs, Morgan Stanley, Lehman Brothers, First Boston and others.

These firms included:

History of IB
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. In the mid-20th century, large investment banks were dominated by the dealmakers

Investment banks earned an increasing amount of their profits from proprietary trading.

Goldman Sachs A global investment bank

Goldman Sachs is a bank holding company and a leading global Investment bank, securities and investment management firm that provides a wide range of services worldwide to a substantial and diversified client base that include corporations, financial institutions, governments and high-net-worth individuals.

Goldman Sachs A global investment bank

Goldman Sachs is the successor to a commercial paper business founded in 1869 by Marcus Goldman.

On May 7, 1999, the Company converted from a partnership to a corporation and completed an initial public offering of its common stock.
On September 21, 2008, the Group became a bank holding company regulated by the Board of Governors of the Federal Reserve System under the U.S. Bank Holding Company Act of 1956 (BHC Act).

IB in India
bank began Investment Banking (Merchant Banking) in India in 1967 with RBI issuing the second license to Citibank in 1970.

Grindlays

These two banks primarily provided services which included loan syndication, equity raising and other advisory services.
Merchant banks were meant to manage investments and provide advisory services.

IB in India

was the first Indian public sector bank to set up its merchant banking division in 1972. This was followed by Bank of India, Central Bank of India, Bank of Baroda and many more.

SBI

IB in India
The categories for which merchant banking registration may be g ranted by SEBI: Category I - to carry on the activity of issue management and to act as adviser, consultant, manager, underwriter, portfolio manager. Category II - to act as adviser, consultant, co-manager, underwriter, portfolio manager. Category III - to act as underwriter, adviser or consultant to an issue Category IV to act only as adviser or consultant to an issue .

IB in India
The capital requirement depends upon the category. The minimum net worth requirement for acting as merchant banker are : -Category I Rs. 5 crores, -Category II Rs, 50 lakhs,

-Category III Rs. 20 lakhs

-Category IV Nil

SBI Capital Markets

SBI Caps is one of the leading merchant banks in India. SBI Caps has three major services to offer: Project Advisory & Structured Finance Capital Markets M and A Advisory

SBI Capital Markets

Project Advisory and Structure Finance: Capital Markets:

It performs the function of collecting funds from the international and Indian financial markets for the infrastructure sector including transportation, power, telecommunication, energy and urban infrastructure. It is entrusted with the duty of raising funds for banks, corporates, 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.

M and A 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 government.

Role of an Investment Bank

Managing public assets of businesses. Similar with that of a private brokerage house. Helps the corporations in raising capital.

Trading of securities thereby, increasing the liquidity of the securities.

It provides investment opportunities to the individuals or entities. Consulting. Offer advices on mergers and acquisitions to companies. Relevance to developing and transition economies.

Role of an Investment Bank

Tracking the market.
Brokering Privatization Focus on environmental Issues in below two circumstances: For IPO, Due diligence and disclosure process Transactions relating to environmental Service Industry Underwriting Government Bonds. Assisting the capital market in its function of capital intermediation

Top 10 Investment Bankers in India

1.Avendus Capital
2.Bajaj Capital 3.Cholamandalam Investment & Finance Company 4.ICICI Securities Ltd 5.IDFC

Top 10 Investment Bankers in India

6.Kotak Mahindra Capital Company
7.SBI Capital Markets 8.Tata Investment Corporation Limited (TICL) 9.Yes Bank 10.UTI Securities Ltd

Conclusion
Investment Banking could be termed as a relatively

American

phenomenon.

Investment banking is one of the most global industries and hence is continuously to grow with the new developments and innovations in the global financial market. The investment banks are inventing and manufacturing new products with higher margins in hope of winning over clients. Indian Investment Banking industry has still a long way to go before it catches up with its global peers.

Bibliography
www.enotes.com

www.wikipedia.org

S.Y.BMS Banking and Insurance text book

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