“Strategic Analysis on Investment Banking”

Submitted in partial fulfilment of the requirements for the award if

Degree of BBM (Professional)

Summer Internship Project Report

By

Ashley Geo Thodukayil

Reg No. 132603009

(October, 2015)

Under the Guidance of

Mr. Adithya Shetty

Assistant Professor

Department of Commerce,Manipal University, Manipal-576104

Acknowledgment

Project is a milestone in every student’s life. I hereby take privilege to acknowledge management for providing an opportunity to study in their esteemed institution.

I wish to place on report my grateful thanks to Mr. Sandeep Shenoy, HOD, Department of Commerce, BBM, Manipal University, for providing me with continuous encouragement and support.

I express my sincere thanks to Mrs. E Geetha, Assitant Professor & Project Co-ordinator, for her motivating support.

I would also like to express my sincere thanks to my project guide Mr. Adithya Shetty, for his suggestions and co-operation.

Finally, I would like to thank all teaching and non-teaching staff of department of commerce BBM, Manipal University, friends, parents and those who either directly or indirectly helped me by providing useful suggestions which gave me new ideas.

Declaration

I, Ashley Geo Thodukayil (132603009), Department of Commerce, Manipal University, declare that the Project Report entitled “Strategic Analysis on Investment Banking”, being submitted to the Department of Commerce, Manipal University, in partial fulfillment of the requirements for the award of degree o BBM (Professional), is my original work and the same is/was not earlier submitted to any other Degree, Diploma, Fellowship or any other similar title or prizes.

Signature:

Index

1 Executive Summary2 Objectives3 Research Methodology4 Data Collection5 Introduction6 Definition7 Registration of Investment Banks8 Registration Charges9 Code of Conduct10 Offering & Services of Investment Banks11 Functions of IB

12 Organization Structure

13 Skills Suggested for Investment Bankers

14 Evolution of Investment Banking in India

15 SWOT Analysis

16 Top Ten Investment Banks

17 Conclusion

Executive Summary

The project on “Strategic Analysis of Investment Banking “ has been undertaken

with a view to study the overall investment banking industries in India and their

products offering, services , operations , client management systems and other

part of the industry.

In the above study, I have highlighted the key regulatory parameters regarding

Investment banks like Definition of Investment Banks, Registration of Investment

Banks, Code of Conducts for Investment Banks, Registration Charges & Function

of Investment Banks.

Objectives

The main objectives of the project are to:

Study the overall view of the Indian Investment Banks.

Study the Regulatory Requirement for Registration of Investment

Banks.

To analyze the strengths and weakness of investment banks

Research Methodology

The research methodology used for the project report is descriptive and research

is based on secondary data sources. This include “Top Ten Investment Banks.” As

far as other information is concerned I had personally visited various websites

including SEBI and RBI.

Data Collection

The objective of this exercise is to get the overview of the Investment Banking

Structures in India. I have collected the data from following data sources.

Data related to Registration, Functions, Code of Conducts of Investment

Banks taken from the SEBI Website and Investment Banking book of R

Machiraju.

Introduction

Investment banks play a significant role in the financial services sector. However,

Investment banking, as advisory financial services, emerged rather late. Formal

Investment banking service in India originated with the setting up of the

Investment banking division by the Grind lays Bank in 1969 for undertaking

management of public issue and financial consultancy, followed by other foreign

banks.

Pursuant to the recommendations of the Banking Commission (1972), State Bank

of India started Investment banking service in 1973. The ICICI Ltd was the first

development finance institution to initiate such service in 1974. The period

following the mid-seventies witnessed a boom in the growth of Investment

banking organizations in the country which were sponsored by banks, financial

institutions, NBFCs Brokers and so on. This led to diversification into the scope of

these activities such as loan syndication, portfolio management, corporate

counseling, project counseling, debenture trusteeship, mergers, Amalgamations &

takeovers and so on.

Investment banking is a particular form of banking which finances capital

requirements of an enterprise. Investment banking assists as it performs IPOs,

private placement and bond offerings, acts as broker and carries through mergers

and acquisitions.

But the scope of such services was neither defined nor was a set of rules and

regulations governing them in place. The formation of SEBI in 1992 was a

landmark in the evolution of Investment banking as a professional service in the

country. Investment banking organizations have to be mandatorily registered with

SEBI. While Investment bankers are currently providing a variety of services,

registration with SEBI is required for (i) Capital issues related activities : both pre-

issued and post-issue, (ii) mergers and acquisitions, and (iii) Portfolio

Management.

Definition

“An Investment banker is any who is engaged in the business of issue

management either by making arrangements regarding selling, buying or

subscribing to securities or acting as manager/consultant / advisors or rendering

corporate advisory service in relation to such issue management.”

Registration of Investment Bank

Compulsory Registration:

Investment bankers require compulsory registration with the SEBI to

carry out their activities. They fall under four Registration categories

Category I – Investment bankers can carry on any activity related to

issue management, that is , the preparation of prospectus and other

information relating to the issue, determining the financial structure,

tie up of financiers, final allotment of securities, refund of the

subscription and also act as advisors, consultants, managers,

underwriters or portfolio Managers.

Category II – Investment bankers can act as advisors, consultants , co-

managers, underwriters and portfolio Mangers.

Category III – Investment bankers can act as underwriters, advisors and

consultants to an issue.

Category IV – Investment bankers can act only as adviser or consultant

to an issue.

Thus, only category I Investment bankers could act as lead managers to

an issue. With effect from December 9, 1997, however, only Category I

Investment bankers are registered by the SEBI. To carry on activities as

portfolio managers, they have to obtain separate certificate of

registration from the SEBI.

Net worth requirement for Registration is as follow:

Category I : Rs. 5,00,00,000

Category II : Rs. 50, 00, 000

Category III :Rs. 20, 00, 000

Category IV : Nil

Registration Charges

An Investment banker has to pay to the SEBI

1. Application fee of Rs.25,000;

2. Registration , Rs. 10 Lakhs and

3. Renewal fee of Rs. 5 lakhs every three years from the fourth year from the

date of initial registration.

Code of Conduct

1. Make all efforts to protect the interest of investors.

2. Maintain high standards of integrity, dignity and fairness in the conduct of

its business.

3. Fulfill its obligations in a prompt, ethical and professional manner.

4. At all times exercise due diligence, ensure proper care and exercise

independent professional judgments

5. Endeavour to ensure that (a) inquiries from investors are adequately dealt

with; (b) grievances of investors are redressed in a timely and appropriate

manner ;(c) where a complaint is not remedied promptly, the investor is

advised of any further steps which may be available to him under the

regulatory system.

6. Ensure that adequate disclosures are made to the investors in a timely

manner in accordance with the applicable regulations and guidelines so as

to enable them to make a balanced and informed decision.

7. Endeavour to ensure that the investors are provide with true and adequate

information without making any misleading or exaggerated claims or any

misrepresentation and are made aware of the attendant risk before taking

any investment decision.

8. Endeavour to ensure that copies of the prospectus, offer document, letter

of offer or any other related literature is made available to the investors at

the time of issue or the offer.

9. Not discriminate amongst its clients, save and except on ethical and

commercial considerations.

10. Not make any statement, either oral or written, which would misrepresent

the services that the Investment banker is capable of performing for any

client or has rendered to any client.

11. Avoid conflict of interest and make adequate disclosure of its interest.

12. Put in place a mechanism to resolve any conflict of interest situation that

may arise in the conduct of its business or where any conflict of interest

arises, should take reasonable steps to resolve the same in an equitable

manner.

13. Make appropriate disclosure to the client of its possible source or potential

areas of conflict of duties and interest while acting as Investment banker

which would impair its ability to render fair, objective and unbiased

services.

14. Always endeavor to render the best possible advice to the clients having

regards to their needs.

15. Not divulge to anybody either or in writing, directly or indirectly , any

confidential information about its clients which has come to its knowledge,

without taking prior permission of its clients, except where such disclosures

are required to be made in compliance with any law for the time being in

force

16. Ensure that any change in registration status / any penal action taken by

the SEBI or any material change in the Investment bankers’ financial status,

which may adversely affect the interests of clients / investors, is promptly

informed to the clients and any business remaining outstanding is

transferred to another registered intermediary in accordance with any

instructions of the affected clients.

17. Not indulge in any unfair competition, such as weaning away the clients on

assurance of higher premium or advantageous offer price or which is likely

to harm the interests of other Investment bankers or investors or is likely to

place such other Investment bankers in a disadvantageous position which

competing for or executing any assignment.

18. Maintain arms length relationship between its Investment banking activity

and any other activity.

19. Have internal control procedures and financial and operational capabilities

which can be reasonably expected to protect its operations, its clients,

investors and other registered entities from financial loss arising from theft,

fraud, and other dishonest acts, professional misconduct or omissions.

20. Not make untrue statement or suppress any material fact in any

documents, reports or information furnished to the SEBI.

21. Maintain an appropriate level of knowledge and competence and abide by

the provisions of the SEBI Act / regulations / circulars and guidelines, which

may be applicable and relevant to the activities carried on by it.

22. Ensure that the SEBI is promptly informed about any action, legal

proceedings, etc, initiated against it in respect of material breach or non-

compliance by it, of any law , rules, regulations , directions of the SEBI or of

any other regulatory body.

23. (a) Not render, directly or indirectly, any investment advice about any

security in any publicly accessible media, whether real-time or non real-

time , unless a disclosure of his interest including a long or short position, in

the security has been made, while rendering such advice; (b) In the event of

an employee of the Investment banker rendering such advice, the

Investment banker should ensure that such employee should also disclose

the interests, if any, of himself , his dependent family members and the

employer Investment banker, including their long or short position in the

security , while rendering such advice.

24. Demarcate the responsibilities of the various intermediaries appointed by it

clearly so as to avoid any conflict or confusion in their job description.

25. Provide adequate freedom and powers of its compliance officer for the

effective discharge of his duties.

26. Develop its own internal code of conduct its internal operations and laying

down its standards of appropriate conduct for its employee and officers in

carrying out their duties. Such a code may extend to the maintenance of

professional excellence and standards, integrity, confidentiality, objectivity,

avoidance or resolution of conflict of interest, disclosure of shareholding

and interest etc.

27. Ensure that good corporate policies and corporate governance are in place.

28. Ensure that any person it employees or appoints to conduct business is fit

and proper and otherwise qualified to act in the capacity so employed or

appointed.

29. Ensure that it has adequate resources to supervise diligently and does

supervise diligently persons employed or appointed by it in the conduct of

its business, in respect of dealings in securities market.

30. That the senior management, particularly decision makers have access to

all relevant information about the business on a timely basis.

31. Not be a party to or instrument for (a) creation of false market ;(b) price

rigging or manipulation or; (c) passing of unpublished price sensitive

information in respect of securities which are listed and proposed to be

listed in any stock exchange to any person or intermediary in the securities

market.

Offering & Services of Investment Banks

• Project Counseling:

Project counseling includes preparation of project reports, deciding upon the

financing pattern to finance the cost of the project and appraising the project

report with the financial institutions or banks. It also includes filling up of

application forms ` relevant information for obtaining funds from financial

institutions and obtaining government approval.

• Issue Management:

Management of issue involves marketing of corporate securities viz. equity

shares, preference shares and debentures or bonds by offering them to public.

Investment banks act as an intermediary whose main job is to transfer capital

from those who own it to those who need it. After taking action as per SEBI

guidelines, the Investment banker arranges a meeting with company

representatives and advertising agents to finalize arrangements relating to date of

opening and closing of issue, registration of prospectus, launching publicity

campaign and fixing date of board meeting to approve and sign prospectus and

pass the necessary resolutions. Pricing of issues is done by the companies in

consultant with the Investment bankers.

• Underwriting of Public Issue:

Underwriting is a guarantee given by the underwriter that in the event of under

subscription, the amount underwritten would be subscribed by him.

Banks/Investment banking subsidiaries cannot underwrite more than 15% of any

issue.

• Managers, Consultants or Advisers to the Issue:

The managers to the issue assist in the drafting of prospectus, application forms

and completion of formalities under the Companies Act, appointment of Registrar

for dealing with share applications and transfer and listing of shares of the

company on the stock exchange. Companies can appoint one or more agencies as

managers to the issue.

• Portfolio Management:

Portfolio refers to investment in different kinds of securities such as shares,

debentures or bonds issued by different companies and government securities.

Portfolio management refers to maintaining proper combinations of securities in

a manner that they give maximum return with minimum risk.

• Advisory Service Relating to Mergers and Takeovers:

A merger is a combination of two companies into a single company where one

survives and other loses its corporate existence. A takeover is the purchase by

one company acquiring controlling interest in the share capital of another existing

company. Investment bankers are the middlemen in setting negotiation between

the two companies.

• Off Shore Finance:

The Investment bankers help their clients in the following areas involving foreign

currency.

(a) Long term foreign currency loans

(b) Joint Ventures abroad

(c) Financing exports and imports

(d) Foreign collaboration arrangements

• Non-resident Investment:

The services of Investment banker includes investment advisory services to NRI in

terms of identification of investment opportunities, selection of securities,

investment management, and operational services like purchase and sale of

securities.

• Loan Syndication:

Loan syndication refers to assistance rendered by Investment bankers to get

mainly term loans for projects. Such loans may be obtained from a single

development finance institution or a syndicate or consortium. Investment bankers

help corporate clients to raise syndicated loans from banks or financial

institutions.

• Corporate Counseling:

Corporate counseling covers the entire field of Investment banking activities viz.

project counseling, capital restructuring, public issue management, loan

syndication, working capital, fixed deposit, lease financing acceptance credit, etc.

Organizational Structure

Front Office Middle Office Back Office

- Investment Banking - Risk - Operations

- Sales & Trading - Finance - Technology

- Research - Compliance

- Custodian

- Investment Mgmt

Main activities and units

An investment bank is split into the so-called front office, middle office, and back

office. Investment banks offer security to both corporations issuing securities and

investors buying securities. In the case of corporations, investment bankers offer

information on when and how to place their securities in the market. The

corporations do not have to spend on resources with which it is not equipped. To

the investor, the responsible investment banker offers protection against unsafe

securities. The offering of a few bad issues can cause serious loss to its reputation,

and hence loss of business. Therefore, investment bankers play a very important

role in issuing new security offerings

Front office

Investment banking is the traditional aspect of the investment banks which also

involves helping customers raise funds in the capital markets and advise on

mergers and acquisitions. Investment banking may involve subscribing investors

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

target. Another term for the investment banking division is corporate finance, and

its advisory group is often termed mergers and acquisitions (M&A). The

investment banking division (IBD) is generally divided into industry coverage and

product coverage groups. Industry coverage groups focus on a specific industry

such as healthcare, industrials, or technology, and maintain relationships with

corporations within the industry to bring in business for a bank. Product coverage

groups focus on financial products, such as mergers and acquisitions, leveraged

finance, equity, and high-grade debt and generally work and collaborate with

industry groups in the more intricate and specialized needs of a client.

Sales and trading: On behalf of the bank and its clients, the primary function of a

large investment bank is buying and selling products. In market making, traders

will buy and sell financial products with the goal of making an incremental

amount of money on each trade. Sales is the term for the investment banks sales

force, whose primary job is to call on institutional and high-net-worth investors to

suggest trading ideas (on caveat emptor basis) and take orders. Sales desks then

communicate their clients' orders to the appropriate trading desks, who 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. 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, done 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 and math P.H.D.s who act as quantitative

analysts.

Research is the division which reviews companies and writes reports about their

prospects, often with "buy" or "sell" ratings. While the research division generates

no revenue, its resources are used to assist traders in trading, the sales force in

suggesting ideas to customers, and investment bankers by covering their clients.

There is a potential conflict of interest between the investment bank and its

analysis in that published analysis can affect the profits of the bank. Therefore in

recent years the relationship between investment banking and research has

become highly regulated requiring a Chinese wall between public and private

functions.

Custody and agency services: is the division which provides cash management,

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 specified

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

(insurance companies, pension funds, corporations etc.) or private investors (both

directly via investment contracts and more commonly via collective investment

schemes eg. 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.

Middle office

Risk management involves analyzing the market and credit risk that traders are

taking onto the balance sheet in conducting their daily trades, and setting limits

on the amount of capital that they are able to trade in order to prevent 'bad'

trades having a detrimental effect to a desk overall. Another key Middle Office

role is to ensure that the above mentioned economic risks are captured

accurately (as per agreement of commercial terms with the counterparty),

correctly (as per standardized booking models in the most appropriate systems)

and on time (typically within 30 minutes of trade execution). In recent years the

risk of errors has become known as "operational risk" and the assurance Middle

Offices provide now includes measures to address this risk. When this assurance is

not in place, market and credit risk analysis can be unreliable and open to

deliberate manipulation.

Finance areas are responsible for an investment bank's capital management and

risk monitoring. By tracking and analyzing 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. In the United States and United

Kingdom, a Financial Controller is a senior position, often reporting to the Chief

Financial Officer. Corporate strategy often falls under the finance division as well.

Compliance areas are responsible for an investment bank's daily operations'

compliance with government regulations and internal regulations. Often also

considered a back-office division.

Back office

Operations involve data-checking trades that have been conducted, ensuring that

they are not erroneous, and transacting the required transfers. While some

believe that operations provides the greatest job security and the bleakest career

prospects of any division within an investment bank, many banks have

outsourced operations. It is, however, a critical part of the bank. Due to increased

competition in finance related careers, college degrees are now mandatory at

most Tier 1 investment banks. A finance degree has proved significant in

understanding the depth of the deals and transactions that occur across all the

divisions of the bank.

Technology refers to the information technology department. Every major

investment bank has considerable amounts of in-house software, created by the

technology team, who are also responsible for technical support. Technology has

changed considerably in the last few years as more sales and trading desks are

using electronic trading. Some trades are initiated by complex algorithms for

hedging purpose.

Skills Suggested for Investment Bankers

Technical Skill

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

importance was attached to academic background. Today, the business has

become very complicated and the skill requirements have multiplied.

Consequently, investment banks find it important to recruit people with the

right academic credentials. Typically, for most of the important jobs, an MBA is

a must. Investment banks rely heavily on campus recruitments

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

investment bank is the learning associated with work. The financial skills of an

Academic BackgroundConceptual SoundnessProduct SpecializationLegal KnowledgeKnowledge of Capital Markets and FunctioningKnowledge of Regulatory Bodies involved in the Various OperationsKnowledge of International Business Scenario and Economic TrendsKnowledge of Software Tools, Developments in the Field of Information Technology

Technical Skill

Ability to Cater to the Audience According to its Awareness Levels- Negotiation SkillsPersonality Traits

Communication Skills

Marketing SkillsInter-Personal SkillsNetworking Skills

Other Skills

expert are tested to the core while handling a complicated deal.

Comprehensive and in-depth knowledge of financial and business concepts are

essential to sustain business. Multiple relationships between various factors

render decision-making difficult. Financial solutions can be provided to the

clients only when the advisor is competent to understand all or at least a

majority of them. Before practical solutions emerge, the tools for decision-

making will give greater choice to the solution provider. A strong grounding in

theory and concepts facilitates this.

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

products. An expert in a particular product, say hybrid instruments, can work

out financial solutions for any client across the industries. Each client has his or

her individual risk taking ability. To cater to the client on an in basis,

appropriate products that would suit their risk profile should be identified. The

clients will also feel at home while dealing with a product specialist.

Legal Knowledge: While clear cut guidelines can be issued to the traders

regarding their market related activities that are governed by the law, the

complexity multiplies for an M&A deal. The regulators’ guidelines have to be

strictly followed, even while envisaging a combination. Legal knowledge is also

important for structuring such deals, which will help identify the constraints

associated with proposed solution. The situation gets more intense when the

deal is a cross-border M&A proposal. Apart from the knowledge of the inland

laws, foreign laws also have to be considered. Any regulation by the foreign

government can make an otherwise desirable deal, unviable.

Knowledge of Capital Markets and Functioning: More than any other

industry, it is the investment banking industry that has a direct bearing on the

way capital markets function. Any changes in the capital market regulations

affect the brokerage side of the business, along with the trade clearing and

settlement houses. The trading personnel should be conversant with the

regulations, guidelines, procedural formalities and actual trade execution

processes involved in capital market. E.g. Trading system involves a lot of

additional skills than online trading. He has to be conversant with the codes,

symbols and conventions followed by the market. Quick signaling and accurate

interpretation are of utmost significance. Any mistake in these would lead to

faulty execution of orders and might entail additional costs to the firm in

correcting the errors.

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

necessary for an investment banker to be aware of all the regulatory bodies

that govern the activities in which he/she is involved. A thorough knowledge of

all such bodies is absolutely essential to perform extraordinarily. In India, the

SEBI & central bank acts as a watchdog and regulator of market related

activities.

Knowledge of International Business Scenario and Economic Trends:Though a

researcher is primarily involved in economic and business cycle studies, it is

the duty of all the investment bankers to have a general overview of these

affairs. Salespersons, who also act as financial consultants/advisors, should

essentially be aware with economic and business cycles, lest they lose the

respect and trust of the client. The requirement for global perspective and

international exposure is becoming increasingly important. The firm should

offer services across the national borders to the corporate clients and

informed services are possible only when the employee is well-equipped with

international business information.

Knowledge of Software Tools, Developments in the Field of Information

Technology: One of the most important technical skills is the usage of

computers, tools and internet technologies. Marketing, brokerage, research

and capital mobilization have all undergone sweeping changes owing to

technology.

The securities trader has changed into a tech-savvy professional, executing

online orders & maintaining databases. The technology helps management

and other departmental professionals and even the clients to disseminate such

data in negligible time. Asset managers have now complicated tools for

scientific and in-depth valuation of portfolios. Comp frameworks can be solved

with minimum effort using technology.

Communication Skills

Ability to Cater to the Audience According to its Awareness Levels:

Communication skills include both the means of communication — written and

oral. However, the audiences vary extensively, and hence, the requisite

communication skills also differ widely. A marketer handling individual

investors will necessarily have to keep the content very simple and express t in

layman’s terms. Usage of financial terms & jargons will not fetch results. Cash

flows, the characteristics of the instruments & the risk class to which the

investment belongs to must be explained in simple & easily understandable

terms.

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

Institutional clients have to be convinced about the prospects of the

investments that are solicited by the firm. Investors in syndicated debt must

be satisfied with the payment streams and interest rate terms. M&A

transactions are the toughest assignments for negotiations. Even a friendly

transaction would be difficult if not for patient and mutually negotiations. The

common issues that pertain to negotiation are — terms of offer, offer price,

post merger integration, organization and reporting structure, business lines to

be developed above all dealing with the overlapping functions. While

negotiating, the banker should always keep the prime object in the mind &

quickly evaluate the various counter offers & suggestions made by other party.

Personality Traits- Personality Traits plays an important role in developing the

skill set of an investment banker. Creativity is an important feature. It comes in

use while handling prospectus, clients & team members. It is essential when

solutions are to be identified for complex problem. Innovations & creativity are

required structure deals.

Other Skills

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

mentioned above. One of the important marketing skill would be relationship

management. Unlike most other industries where relationship plays a

facilitating role in conducting business, it is fundamental issue in the

investment banking industry. An attitude for creating, establishing &

maintaining relationships, during boom & down period, is of utmost

importance in getting mandates.

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

communication skills, and personality traits. They include interactions with

superiors, subordinates, colleagues, clients, competitors, team members and

even politicians and public office bearers. Inter-personal skills come to the fore

during team exercises where diplomacy and manners become essential. Team

exercises can also include dealing with members from other departments or

even with other firms. Such situations call for greater application of team skills

and an element of mutual respect towards each other.

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

contacts and acquaintances. Some of the special attributes required to

develop networking abilities would include:

• Knowledge of human psychology;

• Presence of mind to apply the appropriate skills as situation demands;

Approaching through proper channels that would lend credibility

respectability to contacts;

• Persuasion skills;

• Highest standards of professionalism.

Evolution of Investment banking in India

The origin of investment banking in India can be traced back to the 19th century

when European merchant banks set-up their agency houses in the country to

assist in the setting of new projects. In the early 20th 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 Grindlays 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. 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 Fairgrowth 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.

SWOT ANALYSIS

Strengths:

a) Breadth of Financial Services Offerings: investment banking provides various

types of services such as trading, private equity, venture capital, M&A, joint

venture, and project finance etc.

b) Proficient Employees: the major strength of any sector is its employees. In

investment banking all the workings are done by professionals because it requires

deft and proficient personnel.

c)Technological Advancement: Due to technical advancement, working efficiency

has been increased and works are done quickly and easily.

d) Advance Infrastructure: The country is equipped with all the latest and

advances amenities such as better telecommunication, transportation, potable

water, internet, land etc.

Weaknesses:

a) Unawareness of Investors: the major weakness is the unawareness of its

services among investors, due to which after 40 years of odyssey it could not

reach to the level where It should have been.

b) Excessive Dependence on Trading Sectors: As per the data collected by the

team and experiences shared by Sr. managers, it is quite apparent that investors

are more dependent on the trading sector for their investments rather than any

other field.

Opportunities:

a) Growing demand for Investment Banking: The knowledge of investment

banking is increasing among investors and they are diversifying their investment

into many sectors besides trading. It can be seen by looking at the number of

mergers and acquisitions, various projects in the countries and the level of Sensex

in the country.

b) Removal of International Trade Barrier: 1991 reform policy and recent

amendments in international trade have widened the area and scope of

investment banking in India.

c) Financially Attractive Country: India is a financially attractive country. Recent

experience of ‘Recession’ shows that, India is among the few countries (China,

Brazil and India) that not only survived in this difficult era but shows the path to

developed countries to overcome this calamity.

Threats:

a) Increasing competition: competition in investment banking is increasing day by

day. New players are foraying to the market due to this market share of each

existing company is getting affected and profit as well.

b) Decentralized management: each branch manager in a company is given the

authority of taking decisions in their respective branches. The decisions made by

different managers are diverse and any wrong decision may lead to heavy losses

to the company.

TOP TEN INVESTMENT BANKS

According to the Financial Times, in terms of total advisory fees for the whole of

2014, the top ten investment banks were.

Rank Company Fees ($m)

1. J.P. Morgan & Co. 6,398.67

2. Bank of America Merrill Lynch 5,693.77

3. Goldman Sachs 5,556.45

4. Morgan Stanley 5,310.17

5. Citigroup 4,489.64

6. Deutsche Bank 4,263.81

7. Credit Suisse 3,768.46

8. Barclays 3,706.22

9. Wells Fargo 2,367.32

10. UBS 2,219.69

The above list is just a ranking of the advisory arm (M&A advisory, syndicated

loans, equity capital markets and debt capital markets) of each bank and does not

include the generally much larger portion of revenues from sales and

trading and asset management.

Conclusion