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.
This is different from a commercial bank,
which specializes in deposits and
investment banking include investment
trusts,loan and finance companies.
How It works:-
Investment banks mediate between companies
that issue securities and the individuals or entities
wishing to purchase them. In this respect,
investment banks operate along two main lines: a
"buy" side and a "sell" side.
"Buy" side operations include services
such as securities trading and portfolio management.
"Sell" side activities
include underwriting new lines of stock, marketing
financial products, and publishing financial research.
Investment Banking Services
When companies seek out an investment
banking relationship, they are interested in a
financial partner that can guide them through
the complicated landscape related to
financing a business and managing its assets.
Investment bankers offer executives strategic
planning advice. They often advise company
executives about the best times to make a
public offering or on asset management
DIVISION OF INVESTMENT BANKING:-
• Mergers and Acquisitions (M&A) - advisory on sale, merger
and purchase of companies
• Leveraged Finance (LevFin) - issuance of high-yield debt to
firms to finance acquisitions and other corporate activities
• Equity Capital Markets (ECM) - advice on equity and
equity-derived products (IPOs, shares, capital raises,
secondary offerings etc.)
• Debt Capital Markets (DCM) - advice on raising and
structuring of debt to finance acquisitions and other
• Restructuring – improving the structures of a company to
make it more profitable or efficient
Importance of Investment Banking:-
• 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.
Why It Matters:-
Investment banks bring investors together with
companies that issue securities
and broker securities.
Investment banks are also beneficial to
security-issuing companies because while they
broker the securities a company may issue, they
can help raise capital funds for such companies
through underwriting new stock offerings.
Problems Of Investment Banking in
• Diversification Towards Capitals Markets
• No Proper System Of Investment Banking In
• Lack Of Institutional Financing
EXAMPLE OF INVESTMENT BANK:-
• Life Insurance Corporation of India (LIC) is the largest insurance
group and investment company in India. The life insurance business was
nationalised on 19th January, 1956 and the Life Insurance Corporation of India
came into being on 1st September, 1956 to carry on life business in India with
capital of Rs.5 crores contributed by the Central Government.
The functions of the Corporation shall be to carry on and develop life
insurance business to the best advantage of the community.
• The Corporation shall have power –
- to acquire, hold and dispose of any property for the purpose of its business.
- to advance or lend money upon the security of any movable or immovable
property or otherwise.
- to borrow or raise any money in such manner and upon such security as the
Corporation may think fit
Industrial Development Bank of India
The IDBI was established to provide credit for major financial facilities to
assist with the industrial development of India. It was established in 1964
by RBI, and was transferred to the government of India in 1976.
• Direct assistance: helps the industrial sector by granting project loans,
underwriting of and direct subscription to the industrial securities (shares
and debentures), and technical development funds.
• Coordinating functions: coordinates the functions of financial institutions
such as ICICI, IFCI, LIC and GIC, with respect to industrial development.
• Indirect assistance to small and medium enterprises by granting loans. It
also refinances industrial loans of the SFC's, SIDCs, commercial banks and
RRBs, along with the billing related to the sale of the indigenous
• Raising funds from the international money markets.
• HDFC Bank Limited is an Indian financial services company based
in Mumbai, Maharashtra that was incorporated in August 1994. HDFC
Bank is the fifth largest bank in India by assets and the largest bank
by market capitalization as of 1 November 2012. The bank was promoted
by the Housing Development Finance Corporation, a premier housing
finance company (set up in 1977) of India.