Investment banks perform various services including facilitating capital raising activities for corporations through public offerings and private placements, advising on mergers and acquisitions, and making markets for securities. They earn fees from underwriting securities, providing financial advisory services, and engaging in proprietary trading. Research divisions within investment banks analyze companies and publish reports to assist internal and external clients. Regulations governing investment banking activities are established by government entities like the SEC in the US and SEBI in India.

2.  Financial Intermediary
 Performing a variety of service
 IB have retail operations that serve small and
individual customers
 Investment banking has two facets to it:
1. buy-side 2. sell-side
* In its allied businesses, it works from buy - side
* When the investment banking is an issue manager
it is on the sell – side, based on the nature of
business.

3.  The primary market intermediaries are the
merchant bankers, underwriters to issues and
brokers to issues. The merchant bankers are the
issue manages who bring the issues to the primary
market investors.
 Issue management is an onerous job and is closely
regulated by SEBI in order to ensure strict discipline
among merchant bankers so as to be careful in
bringing only quality issues to the market.
 Therefore, the regulators in many countries enforce
a licensing mechanism for issue managers.
 Issue management is a fee-based service and one
of the prime functions of an investment bank.

4.  Underwriters provide the much-needed safety net for issuers
bringing their issues to the market. Underwriting is a fund-
based service provided by a market intermediary, which
consists of taking a contingent obligation to subscribe to an
agreed number to securities in an issue, if such securities are
not subscribed to by the intended investors.
 If the issue is fully subscribed by the investors, the
underwriter has no fund obligation to the issue but collects
the underwriting fee.
 However, if the investors do not subscribe to the issue fully,
the obligation devolves on the underwriter to the extent of
the unsubscribed portion of the issue. Underwriting, however,
has different forms in other countries based on the regulatory
framework and methodology of offers.

5.  Brokers to an issue are appointed specially by the issuer to
market the issue on its behalf with the investors. Brokers are
registered trading members of a stock exchange whose
primary activity is to trade on behalf of clients in the
secondary market. By appointing them specifically to market
a public issue, the issuer ensures that there is adequate
marketing support to promote the issue.
 Unlike underwriter, pure brokers to an issue do not earn
anything and neither do they have any guarantee obligation
like the underwriters. Brokers usually have many sub-brokers
working for them through whom they market an issue and
share the brokerage they earn from the issuer with them. The
activities of brokers and sub-brokers in India are regulated
by the SEBI.

6. Core Investment Banking
• Public Offer in Equities and Bonds
• Domestic offers, foreign listing on domestic
markets such as Wall Street, Sponsored
ADR/GDR programs, underwriting, sales &
distribution
• Private Placement, Private Equity Advisory
• M & A transaction advisory, tender offers
• M & A financing, Structured Products Sales

7. Allied Businesses
• Asset Management & Wealth Management -
Mutual Funds, Hedger Funds, Private Equity,
Venture Capital, Buy – out Funds, Fund of Funds
• Securities Business – Broking, Investment
advisory, derivative trading, prime brokerage
• Proprietary trading, investment in the
secondary market, Forex trading, risk advisory
• Services of Settlement ,Lending, Allied, Capital
• It is understood inter-dependence &
complementary existence of these bus. segment

8.  Venture capital firms invest in start ups with
high growth potential. It is a type of private
equity, a form of financing that is provided by
funds to small, early – stage, emerging firms
of high growth potential in terms of number
of employees, annual revenue etc.
 Private equity firms mostly buy 100%
ownership of the companies in which they
invest. As a result, the companies are in total
control of the firm after the buyout

9.  Fund of Funds (FOF) is an investment strategy
of holding a portfolio of other investment
funds rather than investing directly in stocks,
bonds or other securities
 This type of investment is often referred to as
multi – manager investment
 Buyout is the acquisition of a controlling
interest in a company. In finance, a buyout is
an investment transaction by which the
ownership equity of a company is acquired.

10.  IB is concerned with the primary function of
assisting the capital market in its function of
capital intermediation i.e. the movement of
financial resources from the investors to
those who need to make use of them for
generating GDP ( the Issuers)
 At the macro level banks and financial
institutions on one hand and the capital
market on the other, are the two broad
platforms of institutional intermediation for
capital flows in the economy

11.  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
 In UK the such function as Issue House
 It captures the core activity of an investment
bank pertaining to capital market floatation's
and financial advisory service to corporations

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

13.  According to John F. Marshall and Ellis,
“Investment Bank is what investment banks do.”
This definition can be explained in the context of
how investment banks have evolved in their
functionality and how history and regulatory
interventions have shaped such evolution.
 American investment banks have been leaders in
the American and Euro markets as well. The term
investment banking can arguably be said to be of
American origin.

14.  Large & Complex financial transactions
 Acting as intermediaries between a securities
issuer and investing public
 Facilitating mergers & other Corporate
reorganisation
 Acting as broker or financial Advisor for
institutional clients

15.  J P Morgan Chase US Based
 Goldman Sachs US Based
 Morgan Stanley US Based
 Citigroup US Based
 Bank of America US Based
 Credit Suisse - Swiss multi-national Invt. Bk.
 Deutsche Bank- German multi – national Invt.Bk.
 Barclays Bank (UK), HSBC (British multinational
banking & Financial Services holding Co., 7th
largest bank in the world by 2018 and largest in
Europe and UBS (Switzerland Based)

16.  The Investment Banking crisis in the US in
2008 triggered a global financial crisis
 Closure and bail out of several banks
quantitative easing of trillions of dollars by
US Federal Reserve, the Bank of England and
ECB (External Commercial Borrowing)
 Creation of a global recessionary phase for
several years and led thereafter, resulting in
lower employment generation & GDP growth

17.  Crisis was unarguably in the US financial
system
 In 1980s and 1990s – The emergence of a
powerful Wall Street with tremendous
influence on US regulators and policy makers
 The de-regulation and subsequent repeal of
the Glass Steagall Act meant a free regime
both for investment banks and commercial
banks

18.  Advisory division of an IB is paid a fee
 Trading division experiences profit or loss
based on its market performance
 Professionals as financial advisors, traders
 Sales people

19.  Financial Intermediation
 Helping facilitate issue new shares of stock in
an IPO & Publishing Prospectus
 Helping Corporates obtain debt financing by
finding investors for Corporate Bonds
 Pre – underwriting Counselling
 Distribution of Securities in the form of
Advice
 Examine the Co. Fin. Statements for accuracy

20.  Corporations
 Pension funds
 Financial Institutions
 Governments
 Hedge Fund

21.  Hedge Fund is an alternative investment that
is designed to protect investment portfolios
from market uncertainty, while generating
positive returns in both up and down markets
 Investors have looked for ways to maximise
profits & minimising risk
 They are called hedge funds because
investing in one of them is a hedge against
something else

22.  Hedge funds are of recent origin in the Indian
Capital market and therefore, home grown hedge
funds are yet to be heard of.
 The few foreign hedge funds that have found an
entry have mostly been investors under the FDI
or FPI route & therefore, their presence in a
minor part of the overall institutional investment.
 Globally hedge funds have been around for about
75 yrs old. The first hedge fund started by Alfred
W. Jones started operations on the New York
Stock Exchange on January 1, 1949

23.  Regulation of global hedge funds continues
to pose a challenge to regulators across the
world, though presently, there are country
specific regulations in each jurisdiction
 Hedge fund advisers are required to be
registered with the local securities market
and commodity market regulators
 US Regulation: The regulation of hedge
funds were tightened in the US with the
passage of the Dodd – Frank Act in 2010

24.  The existing framework of securities Law
under the Securities Act, 1933, Securities
Exchange Act, 1934 and Investment company
Act, 1940 was amended to provide for the
heightened regulation
 European Regulation: Similar framework
was introduced in the EU in the wake of the
global financial crisis of 2008.
 Some of these provisions provide for
heightened regulation of hedge funds

25.  In 2010, the EU approved the Directive on
alternative Investment Fund Managers
(AIFMD), the first ever EU regulation focussed
specifically on Alternative Investment Fund
Managers
 AIFMD has adopted as law by EU member
countries by passing legislation in 2013
 The European Securities & Markets Authority
and the European Commission were
entrusted with the responsibility of framing
rules & guidance to give effect to the AIFMD

26.  Size is an asset for investment banks
 The more connections the bank has within
the market, the more likely it is to profit by
matching buyers & sellers for unique
transactions
 The largest investment banks have a greater
opportunities with clients around the globe
 IBs have external clients, but also trade their
own accounts, a conflict of interest can occur
* IB facilitating Ultra – High Net Worth Investor
(UHNI) and High Net Worth Investor (HNI)

27.  Financial Advisors
 The job of an investment bank is to act as a
trusted partner that delivers strategic advice
on a variety of financial matters
 Thorough understanding of their clients’
objectives, industry and global market with
strategic vision trained to spot and evaluate
short and long – term opportunities and
challenges facing their clients

28.  Handling mergers and acquisitions is key
element of an investment bank’s work
 The main contributions of an investment
bank in a merger or acquisition is evaluating
the worth of a possible acquisition and
helping parties arrive at a fair price
 Assisting in structuring and facilitating the
acquisition in order to make the deal go as
smoothly as possible

29. Merger
A merger occurs when two separate entities combine
forces to create a new, joint organisation. Merger
requires two companies to consolidate into a new
entity with a new ownership and management
structure. Merger require no cash to complete but
dilute each company’s individual power.
Acquisition
An acquisition refers to the takeover of one entity by
another.
M & A may be completed to expand a company’s
reach or gain market share in an attempt to create
shareholder value.

30. Equity Capital Market
Raising Equity Capital for companies through
public offers, underwriting support, market
making, private equity placements, equity
broking, proprietary trading, equity derivatives
trading, equity research and support services

31. Debt Capital Markets
Raising Debt Capital through bond issues and
placement, bond underwriting, proprietary
bond trading, market making, debt market
derivatives, debt broking, debt market research
and support services

32. Mergers and Acquisition ( M&A)
M & A advisory, arranging acquisition finance,
merchant banking, co-investing, white
knighting, LBOs ( Leveraged Buyouts), due
diligence, valuation and support services
LBOs is a financial transaction in which a
company is purchased with a combination of
equity and debt, such that the company’s cash
flow is the collateral used to secure & repay the
borrowed money

33.  The research divisions of investment banks
review companies and author reports about
their prospects, often with “buyer”, “hold” or
“sell” ratings
 Research may not generate revenue
 To assist traders and sales
 Research provides investment advice to
outside clients

34.  Clients will take their advice & complete a
trade through the trading desk of the bank
 Generate revenue for the banks
 Research maintains an investment bank’s
institutional knowledge on credit research,
fixed income research, macroeconomic
research, quantitative analysis, all of which
are used internally and externally to advise
clients

35.  Research is considered as the backbone of
the entire securities business, especially for
institutional sales, dealing and trading
 Most full – service investment banks have full
– fledged research departments spread across
all segments – equities, fixed income
securities and derivatives
 Research analysts generate different types of
products such as sectoral reports, company
reports, economic analysis and specific stock
 recommendations

36.  They provide a lot of back office support,
especially for traders in looking for evidence
of market imperfection in stocks, under –
valuations and mispricing
 In investment banks, research departments
such as value investing or dividend stripping
 Research Department are large and divided
into specific segments
 They have around 50 research analysts, but
big banks like Goldman Sachs, Morgan
Stanley have more than 100 analysts usually

37.  Investment Banking in India is regulated in its
various facets under separate legislations
 Pure investment banks that do not have
presence in the lending or banking business
are governed primarily by the capital market
regulator (SEBI)
 Universal banks and NBFC investment banks
are regulated primarily by the RBI in their
core business of banking and lending under
the RBI Act,1934 & the BR Act,1949 &
investment banking segment by SEBI

38.  Investment banking companies that are
constituted as non-banking financial companies
are regulated operationally by the RBI under
Chapter IIIB (Sections 45H to 45QB) of the RBI Act
 RBI is empowered to issue directions in the area
of resource mobilisation, accounts and
administrative controls
 Merchant banking business consisting of
management of public offers is regulated activity
under 21A of the SEBI ( Merchant Bankers),
Regulation, 1992

39.  The business of asset management as mutual
funds is regulated under the SEBI ( Mutual
Funds) Regulations, 1996
 The business of portfolio management is
regulated under the SEBI ( Portfolio Managers)
Regulations, 1993
 The business of venture capital by such funds
that are incorporated in India is regulated by
the SEBI (Investment Funds) Regulations,
2012

40.  Business of institutional investing by foreign
investment banks and other investors in
Indian Secondary Markets is governed by SEBI
 Investments banks that are set up in India
with foreign direct investment are governed
in respect of the foreign investment by the
FEMA,1999 and FEMA Regulation, 2000
 Investment banks are governed by other laws
as tax law, contract law, property law, local
state laws, arbitration law applicable in India

41.  Deutsche Equities ( India ) Pvt. Ltd
 Credit Suisse Securities ( India ) Pvt. Ltd
 Barclays Bank PLC
 HDFC Bank Ltd
 Axis Capital Ltd
 Axis Bank Ltd
 A.K. Capital Service Ltd
 Ashika Capital Pvt. Ltd
 Avendus Capital Pvt. Ltd
Some are pursuing Personal Banking, Corporate
Banking, Wealth & Investment Management

42.  Investment advisory services for making
investment recommendations to clients and
helping them in making investment
 Investment advisory services are meant for
HNI clients known sometimes as pvt. Banking
 Fundamental difference in the manner in
which wealth management through portfolio
management services or other forms of asset
management differ from investment advisory
services

43.  In Asset management – Funds are removed
from the investor’s books and pooled
separately into a different entity or on the
books of the asset manager
 In Investment advisory – Funds are not
removed from their books of the investors.
 Advisor makes recommendations from time
to time on suitable investment options
looking at the profile of the investor

44.  In the Indian Capital Market, both investment
advisors and portfolio managers are
regulated.
 Investment advisors require stipulated
minimum qualification and should adhere to
a code of conduct so as to prevent investors
from getting misled by sub-standard advice
or service quality
 Investment advisory relies heavily on the
research department of good advices to
prepare financial plans for individual clients

45. Investing Banking Commercial Banking
1. It refers to Financial Institution
offering services like under –
writing of securities, brokage
service & so on
2. Customers Specific Service
3. Performance of Financial Market
4. Few hundred Customer only
5. Banker to Individual, Govt. and
Corporation
6. Income based on fees, profit or
commissions on trading market
1. It provides services like
accepting deposits, lending
money, payment on standing
order & many more services
2. Standardized service
3. Nation’s Economic Growth &
demand for Credit
4. Millions
5. All Citizens
6. Fees and Interest Income

46. THANKING YOU
FOR
WATCHING !!!