investment banking chapter 1

8/13/2019 Investment Banking Chapter 1

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INVESTMENTBANKING


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

Contents:


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What is IB ???In a very broad perspective, Investment Bankingas the term suggests, is concerned with theprimary function o f assisting capital market inthe movement of financial resources from thosewho have them (investors) to those who want them(issuers).

In short, it can be said that it the process bywhich money is raised.

This money could be in the form of debt(loans, bonds) or equity (IPOs or Private Equityplacements).


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This money may be used for financing theworking capital, capital expenditures,dividend payouts, etc.The main activities under IB are Advisory

functions, Administrative functions,Underwriting functions and other financerelated activities.

What is IB ???


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In India, the existence of IB can betraced to over three decades (30 yrs.) ,investment banking was largely limited tomerchant banking services.

Grindlays bank which has now merged withStandard Chartered bank in India startedthe banking operations in 1967 with thelicense from the RBI followed by Citibank in1970.

Origin in India


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Origin in India

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

However around 1980s most of thepublic sector banks were transformedinto separate subsidiaries.


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IB Defined

The Dictionary of Banking and Finance definesInvestment 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.


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Bloombergsays aninvestment bank is a financial intermediary that

performs a variety of services, including aiding in thesale of securities, facilitating mergers and other

corporate re-organizations, acting as brokers to boththe individual and the institutional clients and

trading in its own account.

IB Defined


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John F Marshall &M E Ellis say investment banking is what

investment banks do.

IB Defined


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History of IB By the middle of 1800s professionalinvestment banks had sprung up in the US tohelp government raise funds for infrastructureprojects and the civil war.

In the 1830s commercial banks startedadding investment banking services to theirregular banking activities in the US. Investment Banking hit a milestone in the1870s when a syndicate of banks from Europeand US teamed up to buy 50 million worth of

US Treasury Bonds for resale to public.


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Also important in the evolution of investmentbanking were private banks, many of whichwere family enterprises, and finance companies. Advising clients on mergers and acquisitionsand public offerings was the main focus of majorWall Street partnerships.

These firms included:Goldman Sachs, Morgan Stanley, LehmanBrothers, First Boston and others.

History of IB


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That trend began to change in the 1980s as anew focus on trading propelled firms such asSalomon Brothers, Merrill Lynch and DrexelBurnham Lambert into the limelight. In the mid-20th century, large investmentbanks were dominated by the dealmakers Investment banks earned an increasingamount of their profits from proprietarytrading.

History of IB


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Goldman Sachs is a bank holding companyand a leading global Investment bank, securitiesand investment management firm that provides awide range of services worldwide to a substantialand diversified client base that includecorporations, financial institutions, governments andhigh-net-worth individuals.

Goldman SachsA global investment bank


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Goldman Sachs is the successor to acommercial paper business founded in1869 by Marcus Goldman.

On September 21, 2008, the Group becamea bank holding company regulated by theBoard of Governors of the Federal ReserveSystem under the U.S. Bank Holding CompanyAct of 1956 (BHC Act).

Goldman SachsA global investment bank

On May 7, 1999, the Companyconverted from a partnership to acorporation and completed an initialpublic offering of its common stock.


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

IB in India


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The categories for which merchant bankingregistration may be g ranted by SEBI: Category I - to carry on the activity ofissue 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


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The minimum net worth requirement for actingas merchant banker are :-Category I Rs. 5 crores,-Category II Rs, 50 lakhs,-Category III Rs. 20 lakhs-Category IV Nil

IB in India The capital requirement depends upon thecategory.


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SBI Capital Markets

SBI Caps has three major services to offer: Project Advisory & Structured Finance Capital Markets M and A Advisory

SBI Caps is one of the leading merchant banksin India.


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Project Advisory and Structure Finance:It performs the functioof collecting funds from the international and Indian financial marketsfor the infrastructure sector including transportation, power,

telecommunication, energy and urban infrastructure.

Capital Markets: It is entrusted with the duty of raising fundsfor banks, corporates, PSUs, financial institutions andundertakings of state governments. In the last five years, SBICAPhas mobilized more than Rs. 16000 billion as funds through rightsissues, 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 successfullyworked out many privatization deals with the central and

state government.

SBI Capital Markets


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Managing public assets of businesses.

Role of anInvestment Bank

Similar with that of a private brokerage house. Helps the corporations in raising capital. Trading of securities thereby, increasing theliquidity of the securities.

It provides investment opportunities to theindividuals or entities. Consulting. Offer advices on mergers andacquisitions to companies. Relevance to developing and transition

economies.


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Tracking the market. Brokering Privatization Focus on environmental Issues in below twocircumstances:

For IPO, Due diligence and disclosure process Transactions relating to environmental ServiceIndustry Underwriting Government Bonds. Assisting the capital market in its function of

capital intermediation

Role of anInvestment Bank


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Top 1 InvestmentBankers in India

1.Avendus Capital2.Bajaj Capital3.CholamandalamInvestment &Finance Company

4.ICICI Securities Ltd5.IDFC


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10.UTI Securities Ltd

Top 1 InvestmentBankers in India

6.Kotak MahindraCapital Company

7.SBI Capital Markets8.Tata InvestmentCorporation Limited(TICL)

9.Yes Bank


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Conclusion Investment Banking could be termed as a relativelyAmerican phenomenon.

Indian Investment Banking industry has still along way to go before it catches up with itsglobal peers.

The investment banks are inventing andmanufacturing new products with higher marginsin hope of winning over clients.

Investment banking is one of the most globalindustries and hence is continuously to grow withthe new developments and innovations in the globalfinancial market.


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Bibliographywww.enotes.com

www.wikipedia.org

S.Y.BMS

Banking and Insurance text book


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THANK

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investment banking chapter 1

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