A Detail Study On Investment Banking

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A detail study on Investment Banking
Bachelors of commerce (Accountancy and finance) (University of Mumbai)
Studocu is not sponsored or endorsed by any college or university

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UNIVERSITY OF MUMBAI
(SIXTH SEMESTER)
T.Y.B.A.F.
A PROJECT ON:
A DETAIL STUDY ON INVESTMENT BANKING
ACADEMIC YEAR
2021-2022
SUBMITED BY
VASANI JAIMIN ARUN
PROJECT GUIDE
PROF. RUSHI JAYNARAYAN
DATE OF SUBMISSION
25TH MARCH, 2022

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MALINI KISHOR SANGHVI COLLEGE OF COMMERCE
AND ECONOMICS
J.V.P.D SCHEME
VILE PARLE (WEST)
MUMBAI – 400 049

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UNIVERSITY OF MUMBAI
(SIXTH SEMESTER)
T.Y.B.A.F.
A PROJECT ON:
A DETAIL STUDY ON INVESTMENT BANKING
ACADEMIC YEAR
2021-2022
SUBMITED BY
VASANI JAIMIN ARUN
PROJECT GUIDE
PROF. RUSHI JAYNARAYAN
DATE OF SUBMISSION
25TH MARCH, 2022

lOMoARcPSD|25493517
MALINI KISHOR SANGHVI COLLEGE OF COMMERCE
AND ECONOMICS
J.V.P.D SCHEME
VILE PARLE (WEST)
MUMBAI – 400 049

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DECLARATION
I, VASANI JAIMIN ARUN of MALINI KISHOR SANGHVI COLLEGE

OF COMMERCE AND ECONOMICS, of T.Y.B.A.F. (Semester VI) declare
that I have completed this project on the “A DETAIL STUDY ON
INVESTMENT BANKING” in the academic year 2021–2022. The information
submitted is true and original to the best of my knowledge.
DATE OF SUBMISSION
25TH MARCH, 2022 SIGNATURE OF STUDENT
(VASANI JAIMIN ARUN)

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CERTIFICATE
This is to certify that VASANI JAIMIN ARUN of MALINI KISHOR

SANGHVI COLLEGE OF COMMERCE AND ECONOMICS, of
T.Y.B.A.F. (Semester VI) has completed the project on the “A DETAIL STUDY
ON INVESTMENT BANKING”, in the academic year 2021 – 2022. The
information submitted is true and original to the best of my knowledge.
____________________ ________________________
SIGNATURE OF PROJECT GUIDE SIGNATURE OF BAF CO-ORDINATOR

(PROF. RUSHI JAYNARAYAN) (PROF. DIMPLE MEHTA)
_________________________ ___________________________________
COLLEGE SEAL SIGNATURE OF EXTERNAL EXAMINER
_____________________________________
SIGNATURE OF PRINCIPAL
(DR. KESHAV GHORUDE)

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ACKNOWLEDGEMENT
It has always been my sincere desire as a management student to get an opportunity to express
my views, skills, attitude and talent in which I am proficient. A project is one such avenue
through which a student who aspires to be a future manager does something creative. This
project has given me the chance to get in touch with the practical aspects of management.
I am extremely grateful to the University of Mumbai for having prescribed this project work to
me as a part of the academic requirement in the Bachelor of Accounting and finance (BAF)
course.
I wish to appreciate the management and staff of Malini Kishor Sanghvi College, BAF for
providing the entire state of the art infrastructure and resources to enable the completion and
enrichment of my project.
I wish to extend a special thanks to my project Guide Prof. Rushi JayNarayan without whose
guidance, the project may not have taken shape.

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INDEX
PAGE
CHAPTER TITLE OF THE CHAPTER
NO.
NO.
1 INTRODUCTION
1.1 What is Investment Banking? 1
1.2 Definition 2
1.3 Evolution of Investment banking 3
1.4 Growth of Investment banking 5
1.5 Function of Investment banking 7
1.6 Types of Investment banking 13
1.7 Qualities required by Investment Banks 15
1.8 Organisation Structure of Investment Banks 16
1.9 Investment Banking Regulation in India 18
1.10 Growth of Investment Banking in India 22
1.11 Need of Investment Banking in India 23
1.12 Organizational setup of Investment bankers in
25
India
1.13 IPO Process 27
1.14 Debt Syndication 31
1.15 Buy Back of Shares 34
1.16 Mergers and Acquisition 37
1.17 Venture Capital Funding 38
2 Research and Methodology 40
3 Literature review 46
4 Data Analysis 52
5 Conclusions 66
6 Suggestions 67
7 Bibliography 68

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1. Introduction
1.1 What is Investment Banking
Investment bankers function as intermediaries in financial transactions. They are experienced

in carrying out projects that, for most companies, take place very rarely, but are critically
important. Investment banking is a multi-faceted practice area that involves structuring
financial transactions for private and public companies into developed and emerging markets.
Investment bankers identify capital opportunities, negotiate and structure deals, and execute
private and public financial transactions.
The essential function of an investment bank is to act as an intermediary between potential

investors and those who seek capital. Investors include individuals, mutual funds,
municipalities, public corporations, and private institutions. Generally, capital is raised through
the issuance of equity (stock), debt (bonds), or through a merger and acquisition (buying and
selling part of a company).
Investment bankers perform duties ranging from the preparation of disclosure documents and
marketing materials for public offerings, to analysing potential mergers and acquisitions for
boards and shareholders. Investment banks offer many different practice areas that typically
fall under broader classifications such as investment banking, investment management,
merchant banking, finance and operations, information technology, global research, fixed
income, risk management, and equities. Due to high salaries, large potential bonuses and the
drama associated with the financial markets, investment banking has become increasingly
popular. Generally, those with a degree in finance or in the field of finance choose positions in
corporate finance, M & A, structured finance, or a more technical discipline.
Of course, the paper indicated that the investment banking activity affects the objectivity of
research analysts by impacting the quality of their recommendations. I think that we should list
different circumstances when such things occur. The most usual circumstance is when the
research analyst fears to issue a negative recommendation so as not to lose a potential
investment banking contract with a firm.
Another circumstance is when the investment bank department floats a company and strives to
keep the closing price above the initial listing price. Any negative recommendation stemming

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from the research department is generally not welcome by both the issuer and the investment
banker.
1.2 Definition
An investment bank is defined as a financial institution or an organization that underwrites

corporate securities and advices such clients on issue like mergers, etc. involved be a bank,
corporate body, a firm or a proprietary concern.
In the strictest definition, Investment banking helps in the raising of funds both in debt and
equity, and the division handing this in an investment bank is often called the “Investment
Banking Division” (IBD). However, any a few small firms solely provide these services.
Almost all investment banks are heavily involved of fixed income, foreign exchange,
commodity, and equity securities.
An investment banker acts as an intermediary between the issuers and the ultimate purchasers
of securities in the primary securities market. These institutions provide guidance in raising
capital, issue management services, underwrites corporate securities and provides other
advisory services. Investment banks help companies and government (or their agencies) raise
money by issuing and selling securities in the capital markets (both equity and debt).
Almost all investment banks also offer strategies advisory services for mergers, Acquisitions,
divestiture or other financial services for clients, such as the trading of derivatives, fixed
income, foreign exchange, commodity. Trading securities for cash or the promotion of
securities or referred to as “sell side.” The “buy side” constitutes the pension funds, mutual
funds, hedge funds, and investing public who consume the products and services of the sell-
side in order to maximize their return on investment. Many firms have both buy and sell side
components.

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1.3 Evolution of investment banking
The term “Investment bank” does not have a precise definition, but is generally applied to financial
houses which, starting from trading as merchants, expanded their role to financing the trading and
commercial activities of others, especially in the international market place. For many years, the British
houses were known as investment banks reflecting their origins, Investment banks have retained this
string international flavour and often have offices in many other countries, particularly in the major
financial centres.
Investment Banking in one of the most global industries, and hence continuously challenged
to respond to new development and innovation in the global financial markets. Throughout the
history of investment banking, many have theorized that all investment banking products and
services would be commoditized. New products with higher margins are constantly invented
trading know-how in new markets. However, since these can usually not be patented or
copyrighted, they are very often copied quickly by competing banks, pushing down trading
margins.
For example, trading bonds and equities for customers is now a commodity business, but
structuring and trading derivatives is highly profitable. Each OTC contract has to be uniquely
and could involve complex pay-off and risk profiles. Listed option contracts are traded through
major exchanges, and are almost as commoditized as general equity securities, products have
been commoditized.
In addition, while many products have been commoditized, an increasing amount of profit
within investment banks has come from proprietary trading, where size a positive network
benefit (since the more trades an investment bank does, the more it knows about the market
flow, allowing it to theoretically make better trades and pass on better guidance to clients).
History of Investment Banking in India
The history of investment banking in India traces back to when European merchant banks first
established trading houses in the region in the 19th century. Since then, foreign banks (non-
Indian) have dominated investment and merchant banking activities in the country. In the
1970s, the State bank of India entered the business by creating the Bureau of Merchant Banking
and ICICI Securities became the first Indian financial institution to offer merchant banking
services. By 1980, the number of merchant banks had risen to more than 30. This growth in the

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financial services industry included the rapid expansion of commercial banks and other
financial institutions.
Association of Investment Bankers of India
According to the Association of Investment Bankers of India (AIBI), the merchant banking
industry started to take off in the 1990s with over 1,500 merchant bankers registering with the
Securities and Exchange Board of India (SEBI). To regulate and govern the new wave of banks
that opened up, the Association of Investment Bankers of India (AIBI) was created to ensure
members were in compliance with banking regulations and that their activities were kept in
check. AIBI’s purpose is to ensure members institutions follow its ethical and legal practices,
as well as to promote the industry of investment banking in India and the business interests of
its members.
Vertical Integration
Another trend in Investment Banking at the dawn of the 21st century has been the vertical
integration of debt securitization. Previously, investment banks had assisted lenders in raising
more lending funds and having the ability to offer longer term fixed interest rates by converting
the lenders’ outstanding loans into bonds. For example, a mortgage lender would make a house
loan, and then use the investment bank to sell bonds to fund the debt. The money from the sale
of the bonds can be used to make new loans, while the lenders accept loan payments and passes
the payments on to the bondholders. This process is called securitization. However, lenders
have begun to securitize loans themselves, especially in the areas of mortgage loans. Because
of this, and because of the fear that this will continue, many Investment Banks have focused
on becoming lenders themselves, making loans with the goal of securitizing them. In fact, in
the areas of commercial mortgage, many Investment Banks lend at loss leader interest rates in
order to make money securitizing the loans, causing them to be a very popular financing option
for commercial property investors and developers. This vertical integration was root cause of
“SUB PRIME CRISIS”.

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1.4 Growth of Investment Banking
Investment banks will typically be concerned with several business units, including Corporate
Finance (concerned with managing the finances of corporations, including mergers,
acquisitions and disposals), often called the Investment Banking Division of the firm; Research
(concerned with investigating, valuing and making recommendations to clients-both individual
investors and larger entities such as hedge funds and mutual funds-regarding shares and
corporate and government bonds); and Equities or sales and trading (concerned with buying
and selling shares both on behalf of the bank’s clients and sometimes also for the bank
itself).Management of the bank’s own capital, or Proprietary Trading, is often one of the
biggest sources of profit; for example the banks may structure their books so the they profit
form a fall of bond yields (a rise of bonds prices).
An investment bank provides its clients expert advice, innovative solutions, outstanding
execution and comprehensive access to the world’s capital markets. Whether the clients require
investment banking, equities, fixed income or foreign exchange, investment banks have the
intelligence, markets insight and global coverage to help them to capture opportunities and
manage risk.
The global investment banking market is expected to grow from $102.84 billion in 2020 to
$111.45 billion in 2021 at a compound annual growth rate (CAGR) of 8.4%. The growth is
mainly due to the companies rearranging their operations and recovering from the COVID-19
impact, which had earlier led to restrictive containment measures involving social distancing,
remote working, and the closure of commercial activities that resulted in operational
challenges. The market is expected to reach $137.97 billion in 2025 at a CAGR of 5%.
North America was the largest region in the global investment banking market, accounting for
46% of the market in 2020. Asia Pacific was the second largest region accounting for 26% of
the global market. Eastern Europe was the smallest region in the global investment banking
market.
Investment banks across the globe are moving towards businesses requiring less regulatory
capital. In this regard, major investment banks from around the world such as Barclays,
Deutsche Bank and Credit Suisse have announced their plans to move from traditional

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underwriting business to other activities such as mergers and acquisitions advisory and
fundraising. This shift is primarily due to regulatory changes that made some investment
banking activities more expensive than the others. Although the regulations have restricted the
range of some banks, forcing them to specialize, some investment bankers, such as Citibank
and JPMorgan have continued offering a complete range of investment banking services.
The regions covered in the global investment banking market are Asia-Pacific, Western
Europe, Eastern Europe, North America, South America, Middle East, Africa. The major
players covered in the global investment banking market are Barclays, JP Morgan, Goldman
Sachs, Bank of America Meril Lynch, Morgan Stanley. The regions covered in the global
investment banking market are Asia-Pacific, Western Europe, Eastern Europe, North America,
South America, Middle East, Africa.
The major players covered in the global investment banking market are Barclays, JP Morgan,
Goldman Sachs, Bank of America Meril Lynch, Morgan Stanley.
The global investment banking market is segmented –
1) By Type: Mergers & Acquisitions Advisory, Financial

Sponsor/Syndicated Loans, Equity Capital Markets
Underwriting, Debt Capital Markets Underwriting.
2) By Enterprise Size: Large Enterprises, Medium and

Small Enterprises.
3) By End-Use Industry: Financial Services, Retail & Wholesale, Information Technology,

Manufacturing, Healthcare, Construction, Others Subsegments Covered: Mergers Advisory,
Acquisitions Advisory, Underwritten Deal, Club Deal, Best-Efforts Syndication Deal.

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1.5 Function of Investment Banks
An investment banks offers a plethora of services to its clients. These services include
providing valuable advice to the clients on the type of finance to be raised, issue management
process, corporate restructuring strategies, underwriting services, project feasibility and
planning, etc. They provide various pre-issue services to the clients.
1)Corporate Counselling
Corporate counselling denotes the advice provided by an investment banker to a corporate unit
to ensure better corporate performance in terms of image building among investors, steady
growth through good working and appreciation in wide enough to include all activities related
to investment banking such as project counselling, capital restructuring, portfolio management
and the full range of financial engineering including venture capital, public issue management,
loan syndication, working capital, fixed deposit, lease financing, acceptance credit, etc.
However, the counselling is limited to only opinions and suggestions and any detailed analysis
would from part of a specific service.
The scope of corporate counselling is restricted to the explanation of concepts, procedures and
laws to be observed by the client company. Requirement of any action to be taken or
compliance of statutory Investment Banking 14 formalities to be made for implementation of
those suggestions would mean the demand for specific type of service.
An investment banker provides valuable financial advisory to the client company. It advises
the company on the type of capital to be raised owned or owed thus the company to take
advantage of financial leverage and achieve its ultimate aim of providing maximum return to
the shareholders. It advises the company to raise fund through equity issue in the primary
market or issuing debentures or the public depending on the quantum of capital required.
2)Project Counselling
Project counselling is a very important and lucrative investment banking service. It is provided
by most of the investment bankers. However, only a few having expertise available in technical,
marketing financial area have it to provide satisfactory services. Project counselling covers
development of an idea into a project, preparation of the project report, estimation of the cost
techno-economic appraisal of projects for capital issue/financing, etc. The fee charged for

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project report preparation/ appraisal range from 0.25% to 2% of the total project cost. The fee
charged depends upon:
• Total size of the project.

• The complexity of the project.
3) Loan Syndication
Loan syndication refers to the services rendered by an organization in arranging and procuring
credit from financial institutions, banks, other lending and investment companies for financing
the project or meeting lending capital requirements. The loan syndication work involves
identification of sources where from funds could be arranged. Approaching these sources with
requisite application and supporting documents and complying with all formalities involved in
the sanction and disbursal of loan. The fee charged by investment bankers for undertaking loan
syndication varies up to 1% of the loan amount.
4) Management of Capital Issues
The capital issues are managed by category- I investment bankers and constitute the most
important aspect of their services. The public issue of corporate securities involves marketing
of capital issue of new and existing companies, additional issue of existing companies
including rights issues and dilution of shares by letter of offer. The public issues are managed
by involvement of various agencies, i.e., underwriters, broker’s bankers, advertising agencies,
printers, auditors, legal advisors, registrar to the issue and investment bankers providing
specialized services to make the issue a success. However, investment bankers are the agency
at the apex level who plan, co-ordinate and control the entire issue activity and direct different
agencies to contribute to the successful marketing of securities. The procedure of managing a
public issue by investment bankers is divided into two phases.
(A) Pre-issue Management
Steps required to be taken to manage pre-activity is as follows:
(1) Obtaining stock exchange approvals to memorandum and articles of association.
(2) Taking action, a as per Exchange Regulatory guidelines.
(3) Finalizing the appointments of the following agencies:
(a) Co-managers/Advisers to the issue.

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(b) Underwriters to the issue.
(c) Brokers to the issue.
(d) Bankers to the issue and refund Banker.
(e) Advertising agency.
(f) Printers and Registrar to the issue.
(4) Advise the company to appoint auditors, legal advisers and broad base Board of Directors.
(5) Drafting of prospectus.
(6) Obtaining approvals of draft prospectus from the company’s legal advisers, underwriting
financial institutions/banks.
(7) Obtaining consent from parties and agencies acting for the issue to be enclosed with the
prospectus.
(8) Approval of prospectus from Exchange regulatory.
(9) Filing of the prospectus with Registrar of Companies (ROC).
(10) Making an application for enlistment with Stock Exchange along with copy of the
prospectus.
(11) Publicity of the issue with advertisement and conferences.
(12) Open subscription list.
(B) Post-issue management
Steps involved in post-management are:
(1) To verify and confirm that the issue is subscribed to the extent of including development
from underwriters in case of under subscription.
(2) To supervise and co-ordinate the allotment procedure of registrar to the issue as per
prescribed Stock Exchange guidelines.
(3) To ensure issue of refund order, allotment letters/ certificates within the prescribed time
limit of 10 weeks after the closure of subscription list.

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(4) To report periodically to exchange regulatory about the progress in the matters related to
allotment and refunds.
(5) To ensure the listing of securities at Stock Exchange.
(6) To attend the investors grievances regarding the public issue. The investment bankers for
managing public issue can negotiate a fee subject to a ceiling. This fee is to be shared by all
lead managers, advisers, etc.
(a) 0.5% of the number of public issues up to Rs.25 crores and
(b) investment bankers are managing the issue. Cities are done by all categories of investment
bankers except category-IV.
This activity is a good business option if due care is taken in selecting and marketing the issue
so that likely development is generated. The investment bankers are authorized to take a
maximum underwriting of 5 times its net worth at any point of time.
(7) Portfolio Management
Portfolio management involves selection of securities and constant shifting of the portfolio in
the light of varying attractiveness of the constituents of the spectrum of securities to the
portfolio based on the characteristics of an investor. Investors normally expect high returns but
they wish to avoid risk. Therefore, a scientific portfolio management is required. The objective
of portfolio management is to maximize the yield and minimize the risk along with other
objectives like stability of income, capital growth, liquidity, safety, tax incentives, etc.
The portfolio management service can be rendered by category-I and II investment bankers.
The portfolio manager pursuant to a contract or agreement with a client advices or director or
undertakes on behalf of the client the management of investment of different types of
marketable securities or investment papers ‘like shares, debentures, bonds, etc. with a view to
ensure maximum return, by such investments by minimum risk of loss of return. Portfolio
management should aim at investing in different securities and financial instruments so as to
earn best possible returns besides safety and security of invested funds. There are certain
guidelines laid down by the exchange regulatory. These guidelines pertain to the duties and
responsibilities of the portfolio manager for reprisal of grievances and penalties for non-
compliances. With more and more companies tapping the capital markets, the investor is more
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likely than non-equipped to handle the complexities of stock-trading. Portfolio management as

a concept is catching up in India.
(8) Equipment Leasing and Hire Purchase
The financial services of equipment leasing and hire-purchase are offered by most of the
investment bankers. Leasing and hire-purchase income constitute a major portion of total
income generation of present-day investment banking organizations. The rental/installments
provide returns of about 20% and in addition provide a tax shield.
(9) Dealing in secondary market-operation
The lending investment bankers also deal in sale/purchase of securities in secondary market on
their own. This activity is followed on account of availability of expertise in finance, in general
and capital markets and equity research in particular company.
(10) Merger and Acquisitions (M & A)
For investment bankers mergers and acquisitions is promising to be new business. New entrants
view mergers and acquisitions more seriously. Mergers and acquisitions are an important
additional business. M&A was not in focus till recently but now all investment bankers are
planning to the largest investment bank are in the low
thousands. Success in the Investment banking business
depends on the ability to provide whatever financial services a
client may require, and people employed need particular
qualities of flexibility, innovativeness and client handling
skills.
(11) Restructuring Services
Investment bankers assist the management of the client company to successfully restructure
various activities, which include mergers and acquisitions, divestitures, management buyouts,
joint venture among others. To help companies achieve the objectives of these restructuring
strategies, the investment bankers participate in different activities at various states which
include understanding the objectives behind the strategy (objective could be either to obtain
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financial, marketing or production benefits), and help in searching for the right partner in the
strategic decision and financial valuation of the proposal.
(12) Capital Assistance
In providing financial assistance, investment banks offer a full understanding of all facets of
the capital markets. This includes all types of debt and equity financing available from both
the domestic and international markets. An investment banker, cognizant of capital costs,
looks for the best sources of capital.
It should be understood that interest rates are not only definition of capital costs. Restrictions
on availability, prepayment terms, and operating effectiveness can often outweigh what
might appear to be inexpensive capital with low interest rates. Too often, capital includes
costs, which force an entrepreneur or a business to undertake undesirable actions. In short-
run, some actions might be necessary, but often in the long run are detrimental.
(13) Corporate Advisory Services
Investment banker’s offer customized solutions to solve the financial problems of their
clients. Advice is sought in areas off financial structuring. Merchant bankers study the
working capital practices that exist within the company and suggest alternative policies. They
also advise the company on rehabilitation and turnaround strategies, which would help
companies to recover from their current position. They also provide advice to appropriate
risk management strategies like hedging strategies.
(14) Asset Securitization
It is a process through which some inactive assets (mortgage assets) are converted into
cash/active assets. It is long – term debt financing. Here assets are converted into long – term
bonds. In this approach, the investment banker for issuance of security bonds against the
assets with a matching of time and terms between mortgage property and security bonds.
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1.6 Type of Investment Banks
With the continued developmental activities in the country as well as liberalization of the
economy the industry and trade require funds for its expansion which are in excess of that,
which is available from institutions. Thus, there is a need to collect the funds from capital
market and investment bankers are needed to help in mobilizing the funds. This factor has
contributed to the steady growth of investment banking in the country. In order to regulate
the market and check unfair trade practices on the stock Exchange, the Government of India
in 1992 passed the Securities and Exchange Board of India (SEBI) Act. SEBI for the first
time formally defined investment banking and framed rules and regulations for investment
bankers.
SEBI classified investment bankers into four categories on the basis of capital adequacy:
(1) Category-I
The capital adequacy requirement for category-I investment bankers in that net wroth should
not be less than Rs. 1-crore. The bankers should be allowed to :
(a) Carry on any activity of the issue management which will in turn consists of preparation
of prospectus and other information relating to the issue, determining financial structure, tie
up of financial, financiers and final allotment and refund of the subscription.
(b) Act as adviser, Consultant, manger, underwriter, portfolio manger.
(2) Category-II
The minimum capital adequacy requirement is a net wroth of Rs.50 lakhs. The category-II
investment banker is allowed to act only as an adviser, consultant, Co-manger, underwriter
and portfolio manager.
(3) Category-III
The Investment banker should have a minimum net wroth of Rs.20 lakhs to meet the capital
adequacy requirement. The permissible activities are to act as underwriter, adviser and
consultant to an issue.
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(4) Category-IV:
No capital adequacy requirement has been specified for category-IV investment banker. The
Investment banker is only allowed to act as an advisor or consultant to an issue.
Category Minimum Amount
I Rs.1 Crore
II Rs.50 Lakhs
III Rs.20 Lakhs
IV NIL
It is evident from the above that according to central Government, the role of investment banker
is restricted to activities related to capital market.
However, investment banking cannot be restricted to the above descriptions and cover a wide
range of activities which are fund based non-fund based financial and investment services
encompassing both capital as well as money market activities in domestic as well as
international financial markets.
Fund based and Non-Fund based Sources of Financial:
Fund based source of finance refers to those sources of finance which actually gets funds or
money in the organization e.g., secured loan, equity shares, etc.
The fund-based activities undertaken by investment bankers encompass the following:
1. Dealing in money market instruments like placement of commercial papers, fixed

deposits, treasury bills, etc.
2. Equipment leasing / Hire Purchase.
3. Dealing in secondary market operations.
4. Inter-corporate placement of funds.
5. Venture capital/fund.
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Non-fund-based source of finance refers to those sources of finance which only assure the
supply of fund but does not get the fund in real terms.
The non- fund-based activities consist of the following:
(1) Capital issue related activities and private placement of equity.
(2) Consultancy and advisory services including corporate and project counselling.
(3) Loan / credit / Fund syndication.

(4) Portfolio management
(5) Management of mergers and amalgamations.
(6) Management of Buy-ins and Buy-outs.
(7) Financial engineering or capital restructuring.
(8) Underwriting of equity, bonds and debentures in new issues.
1.7 Qualities Required by an Investment Bank
(a) Research: An Investment bank must have quality data available as per the needs of Client
Company in order to provide advisory services. It must have update information about market
on-goings. The data collected should be authentic and from reliable sources.
(b) Analysis: The data available should be analyzed to make decisions. Data analysis is an
important tool in decision making. Accurate data analysis will help provide advisory service
to the client to take advantage of the current market situation.
(c) Pro-active approach: It is important to analyse and interpret market trends in order take
advantage of a particular situation.
(d) Aggressive action: Investment bankers are always looking for new business
opportunities. On locating a business opportunity and after obtaining the assignment from
the clients, an investment banker has to be prompt in grasping from the client’s problems
and to provide a better choice amongst alternative solutions. A good investment banker in
one who does not allow his clients to think anything outside except what has been advised
and thus holding the client’s interest for the present as well as for the future.
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(e) Co-operation and Friendliness: Co-operation and friendliness coupled with

persuasiveness must flow as natural traits in the investment banker in order to win over the
trust of their clients just like a doctor or a lawyer who retains their clients permanently. A
good investment banker has to share the thoughts of his clients with sympathetic gestures
and offer suggestions without any greed or favors.
(f) Contacts: An Investment banking business mainly depends upon the sociable nature and
wider contacts. The scope of contract of an investment banker covers his own organization,
central and state Government Offices, Banks etc. Investment bankers have to widen the
contacts and continue to maintain them by meeting people in person, in special gatherings
and through writing to them.
(g) Attitude towards problem solving: A good quality of an investment banker is to be skilled
in human relations particularly in the interpersonal and intra-personal behavior. An
investment banker should have a positive approach to understand the difficulties, adverse
circumstances and the viewpoints of others. Effective communication and proper feedback
are the pre-requisites for creating a positive attitude towards problems solving which could
be gained partly through the learning process and partly as an inborn personality trait.
1.8 Organization Structure

An investment bank is split into the so-called Front office, Middle Office and Back Office. The
individual activities are described below:
Organization
Structure
Middle
Front Office Back Office
Office
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Front Office
Investment Banking is the traditional aspect of investment banks which involves helping
customers raise fund in the Capital markets and advising on mergers and acquisitions.
Investment bankers prepare idea pitches that they bring to meetings with their clients, with
the expectation that their effort will be rewarded with mandate when the client is ready to
undertake a transaction. Once mandate, an investment bank is responsible for preparing all
materials necessary for the transaction as well as the execution of the deal, which may
bidders, or negotiating with a merger target. Others terms for the investment banking division
includes merger & acquisition (M&A) and corporate Finance. Financial Markets is split into
four key divisions: Sales, Trading, Research and Structuring.
Sales and Trading is often the most profitable area of an investment bank, responsible for
the majority of revenue of most investment banks. In the process of market making, traders
will buy and sell financial products with the goal of marketing 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, which can price and execute trades, or structure new products new that fit a specific
need.
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 trades in trading, the sales force in suggesting ideas to customers,
and investment bankers by covering their clients. In recent years the relationship between
investment banking and research has become highly regulated, reducing its importance to
the investment bank.
Structuring has been a relatively recent division 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.
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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 ‘bed’ trades having a detrimental effort to 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 “optional risk” and the assurance Middle Office provide now include measures to
address this risk. When this assurance is not place, market and credit risk analysis can
unreliable and open to deliberate manipulation.
Back Office
Operations involves data-checking trades that have been conducted, ensuring that they are
not erroneous, and transacting the required transfers. Whilst it provides the greatest job
security of the divisions within an investment bank, it is a critical part of the bank that
involves managing the financial information of the bank and ensures efficient capital markets
through the financial reporting function. The staff in these are often highly qualified and
need to understand in depth the deals and transaction that occur across
all the division of the bank.
1.9 Investment Banking Regulation in India
Investment banking in the country has come to be primarily associated with the capital
markets. With the de-regulation of the Indian economy since 1991, there are several new
sectors open to private investment which have consequently created an opportunity for
private financing.
The need for this banking was not met, by either commercial banks or the financial
institutions and hence there was a huge gap which needed to be filled. This gap could be met
through capital markets or a range of finance products and hence a good scope existed for
the various services offered by an investment 1992 heralded an era free market pricing of
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equity shares. Investment bankers in particular have been assigned a greater responsibility
in the fixation of issue price and premium, if any. In the CCI regime investment bankers had
restricted role to play in that regard. Their role was confined mainly to getting clearances
from the CCI and ensuring the success of capital issues through their marketing efforts.
There were also no disclosure norms. Investment bankers were seldom held accountable for
the correctness of the information disclosed in the prospectus and letter of offer. But with
the issuance of comprehensive guidelines for free market pricing, code of conduct for
investment Bankers, etc. by SEBI the role of investment bankers has considerably increased.
An outstanding development in history of Indian capital market was opening up in 1992 by

allowing financial institutions to invest in the primary and secondary markets and also
permitting Indian companies to directly tap foreign capital markets through foreign currency
issues. This resulted in increased total inflow of foreign capital through these routes. Though,
at the initial stage, the Indian investment bankers have played only supportive role as almost
all of the foreign currency issue have been led managed by foreign investment bankers, but
in future they may play a major role by their increasing participation as managers/lead
managers.
Foreign Direct Investment (FDI) as also investment by NRIs have risen considerable due to
number of incentives offered to them. They need the services of investment bankers to advise
them for their investment in India. Further, increasing investments in joint Ventures abroad
by Indian Corporations also require expert services of investment bankers. For the first time
in India the concept of debt market has set to work through NSE and OTCEL. Experts feel
that of the estimated capital issue a good portion may be raised through debt instruments.
The Following are the SEBI guidelines for investment banks-
(1) Authorization: Any person or body proposing to engage in the business of

investment banking would need authorized by the Securities and Exchange Board of India
(SEBI) in their prescribed format. This will also apply to those presently engaged in
investment banking activity, including as mangers, consultants, or advisers to issue of
management, which inter-alias will consist of preparation of prospectus.
(2) Authorized activities: Issue & other information relating to the issues, determining
final other information relating to the issue, determining financing structure, tie-up of
financiers & final allotment & for refund of subscription, Corporate advisory services relating
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to the issue, Underwriting, Portfolio management services, Managers, consultant or adviser in

the issue.
(3) Authorization Criteria: All investment bankers are expected to perfume with high
standards of integrity & fairness in all their dealings. A code of conduct for investment
bankers will be prescribed by SEBI. Within this context, SEBI’s authorization criteria would
take into account mainly the following Professional competence, Personnel, their adequacy
& quality, & other infrastructure, Capital adequacy, Past track record, experience, general
reputation & fairness in all their transaction.
(4) Terms of Authorization:
1) All investment bankers, including the existing ones, must obtained the authorization
from SEBI within three months from the issue of these guidelines. SEBI may extend
this period at its discretion by a maximum of three more months.
2) All investment bankers must have a minimum net wroth of RS 1 crore.
3) The authorization will be for a initial period of 3 years.
4) SEBI may collect from the investment bankers an initial authorization fee, an annual
fee & a renewal fee.
5) All issue must be managed by at least one authorized banker functioning as the sole or
lead manager. Ordinarily not more than two investment bankers should be associated
as lead managers, advisers or consultant to a public issue.
6) The specific responsibilities of each lead manager must be submitted to SEBI prior to
the issue.
7) While directors, promoters & every person who authorizes the issue of prospectus shall
bear full responsibility for the contents of the prospectus, investment the contents of
prospectus & reasonableness of the views expressed therein.
8) Lead managers/investment bankers would be responsible for ensuring timely refunds
and allotment of securities to the investors.
9) The investment banker shall make available to SEBI such information, documents,
returns as may be prescribed & called for.
10) SEBI shall prepare & prescribed a code of conduct for investment bankers which they
should adhere to.
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11) The involvement of this investment bankers in an issue should continue at least till the
completion of essential follow-up steps, which must include the listing of the
instrument, dispatch of certificates
12) SEBI may suspend/cancel the authorization of investment bankers for a suitable
duration in case of violations of the guidelines.
Regulation with respect to the code of conduct
An investment banker will be deemed to be guilty of misconduct or unprofessional conduct

if he violates intentionally or otherwise any of the following provisions of the Code of
Conduct: -
1) An Investment banker in the conduct of his business shall observe high standards of
integrity and fairness in all his dealing with his client and other investment bankers.
2) An Investment banker shall render at all times high standards of service, exercise due
diligence, ensure proper care and exercise independent professional judgments.
3) He shall wherever necessary, disclose to the client possible sources of conflict of

duties and interests, while providing unbiased services.
4) An investment banker shall not make any statement or become privy to any act,
practice unfair competition, which is likely to be harmful.
• To the interests of other investment bankers or
• Is likely to place such other investment bankers in a disadvantageous position in
relation to the investment banker, while competing for or executing any assignment.
5) An Investment banker shall not make any exaggerated statement, whether oral or
written, to the client either about the qualification or the capability to render certain
services or his achievements in regard to services rendered to other clients.
6) An Investment banker shall abide by provisions of the Act, Rules and Regulations,
Notifications, Guidelines, etc. which may be applicable and relevant to the activates
carried on by the investment banker.
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7) An Investment banker shall not:

• Divulge to other clients, press or any other party any confidential information
about his client, which has come to his knowledge; and
• Deal in securities of any client company without making disclosure to the Board
as required under the regulations and also to the Board of Directors of the
company.
8) An investment banker shall endeavour to ensure that:

• The investors are provided with true and adequate information without making
any misguiding or exaggerated claims and are made aware of attendant risks
before any investment decision is taken by them
• Copies of prospectus, memorandum and related literature are made available to
the investors;
• Adequate steps are taken for fair allotment of securities and refund of application
money without delay; and
• Complaints from investors are adequately dealt with.
9) An Investment banker shall not generally and particularly in respect of issue of any
securities be party to:
• Creation of false market;
• Price rigging or manipulation;
• Passing of price sensitive information to brokers, members of the stock
exchanges and other players in the capital market or take any other action which
is unethical or unfair to the investors.
1.10 Growth of Investment Banking in India

Investment banking activates in India originated in 1969 with the investment banking
division set up by the Grind lay’s Bank, the largest foreign bank in the country, at that time.
The main service offered to the corporate enterprises by the investment bank included
management of public issues and financial consultancy. Other foreign banks like Citibank,
Chartered Bank also assumed the investment banking activity in India. State Bank of India
started investment banking in 1973 followed by ICICI in 1974. Both emerged as leaders in
investment banking with significant business during the period of 1974-1985 in comparison
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to foreign banks. Mid-seventies witnessed a growth of investment bank organizations in the

country with various commercial banks, financial institutions, broker firms entering into the
field of investment banking.
The growth in investment banking business during the early seventies was due to Foreign
Exchange Regulation Act, 1973 (FERA) where in a large number of foreign companies
operating in India were required to dilute their foreign holding in order to continue business
in the country. This resulted in expansion of capital markets providing enough in India
economy opened new doors for investment banking business to enter in the diversified area
of activities, but at the same time this has brought competition in the investment banking
sector. This sector has traditionally been dominated by financial institution, banks and their
subsidiaries.
Now, various private sector investment bankers have emerged and some of them are having
international reputations.
1.11 Need of Investment Banking in India
Important reasons for the growth of investment Banks in India has been development
activities throughout the country, exerting excess demand on the sources of funds for ever
expanding industries and trade, thus leaving a widening gap un-bridged between the supply
and demand of investible funds. All India Financial Institution had experienced constraint of
resources to meet ever increasing demands for funds from the corporate sector enterprises.
In such circumstances corporate sectors had the only alternative to avail of the capital market
service for meeting their long-term financial requirements through capital issue of equity
shares and debenture.
Growing demand for finds put pressure on capital market that enthused commercial bank,
share brokers and financial consultancy firms to enter into the field of investment banking
and share the growing capital market. As a result, all the commercial banks in nationalized
and public sector as well as in private sector including foreign banks in India have opened
their investment banking and are competing in this field.
Need for investment banking is felt in the wake of huge public savings lying untapped.
Investment bankers can play highly significant role in mobilizing funds of savers to
investible channels assuring promising returns on investment and thus can assist in meeting
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the widening demand for investible funds for economic activity. With growth private and
public sectors would be able to raise required amount of funds annually from the capital
market to meet the growing requirement for funds for establishment for funds for
establishing new enterprises undertaking expansion, modernization, diversification of the
existing enterprises. This reinforces the need for a vigorous role to be played by investment
banking. In view of multitude of enactments rules and regulations, guidelines and offshoot
press release instructions brought out by the government from time to time imposing
statutory obligations upon the corporate sectors to comply with all those requirements
prescribed therein the need of a skilled agency existed which could provide counseling in
these matters in a package from. Investment bankers with their skills updated units and advise
them on such requirements to be enactments viz. Companies Act, Income tax Act, Foreign
Exchange Management Act, and Securities Contracts (Regulation) Act, SEBI Act and
various corporate laws and regulations.
Investment Bank advise the investors of the incentives available in the form of tax relief’s,
other statutory relaxations, good return on investment and capital appreciation in such
investment to motivation them to invest their savings in securities of the corporate sector.
Thus, investment banks help industries and trade to raise funds and the investors to invest
their saved money in sound and healthy concerns with confidence, safety and expectations
for higher yields. Finance is the backbone of business activities. Investment Banks make
available finance for business enterprises acting as intermediaries between them raising
demand for funds and the supplies of funds besides rendering various other services.
The following are some of the reasons why specialist investment banks have a crucial role
to play in India:
(a) Growing industrial and increase of technologically advanced industries.
(b) Need for encouragement of small and medium industrialists, who require specialist
services.
(c) Growing complexity in rules and procedures of the government.
(d) Need to develop backward areas and states which require different criteria.
(e) Exploring the possibility of joint venture abroad and foreign markets.
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(f) Promoting the role of new issue marketing mobilizing savings from the public.
Steps for Setting up Investment Banks:
(1) Formation of the business organization.
(2) Adoption of a viable business plan.
(3) Seeking SEBI registration as an investment banker.
(4) Essentials for commencement of business.
1.12 Organization set up of Investment Bankers in India

In India, a common organizational startup of investment bankers to operate is in the form of
division of India foreign banks and financial institution, subsidiary companies established
by bankers like SBI, Canara Bank, Punjab National Bank, Bank of India, etc. Some firms
are also organized by financial and technical consultants and professionals. Securities and
Exchange Board of India has divided the investment bankers into four categories based on
their capital adequacy. Each category is authorized to perform certain functions. From the
point of organizational set up, India’s Investment banking organizations can be categorized
into four groups on the basis of their linkage with parent activity. They are:
(a) Institutional Base:

Here Investment banks function as an independent wing or as subsidiary of various
private, Central Governments, and State Government financial institutions. Most of the
financial institutions in India are in public sector and therefore such set up plays a role
on the lines of governmental priorities and policies.
(b) Banker Base:

These investment bankers function as division/subsidiary of banking organization. The
parent banks are either nationalized commercial banks, private sector banks or the
foreign banks operating in India. These organization have brought professionalism in
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investment banking sector and they help their parent organization to make a presence in
capital market.
(c) Broker Base:

In the recent past, there has been an inflow of qualified and professionally skilled
brokers in various Stock Exchange of India. These brokers undertake investment
banking related operations also like providing investment and portfolio management
services.
(d) Private Base:

These investment banking firms are originated in private sector. These organization are
the outcome of opportunities and scope in investment banking business and they are
providing skill oriented specialized services to their independently or through some
collaboration with their Indian counterparts. Private sector investment banking firms
have come up either as sole proprietorship, partnership, private limited or public limited
companies. Many of these firms were in existence for quite some times before they added
a new activity in the form of investment banking services by opening few divisions on
lines of commercial banks and All India Financial Institutions.
IMPORTANT ACTIVICTIES UNDERTAKEN

An investment bank through its various services provided, help customers reap benefits
of hiring their services. An investment bank provides apt and services to the clients.
The services provided by these organization range from raising capital from the market,
corporate restructuring to instrument designing or pricing (debt or equity). Financial
engineering issue management, designing and publishing the issue prospectus, marketing
& advertising, Loan syndication, etc. are other specialized service provided by the
institutions.
It is different for a company to manage these activities independently without the advice
of such specialized organizations. At the same time it mat not prove to be cost effective
to carry out such services by the company itself.
Specialized Services:
Investment banks provide specialized services to their client. It is the professional
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approach in decision making that help their client to reap benefits of hiring the services
of such companies.
Advisory Services:
Investment banks provide valuable advisory services to their clients on various areas.
They have the expertise to advise client in decision making and make profits thereof.
To understand the importance of Investment banks, it is necessary to have a look at the
services provided by them to the Corporates. These services as of now of Investment
bankers in India are primarily restricted to Finance Procurement.
Therefore, in this section we propose to throw light on the following most important
activities undertaken by an Investment Banker.
1. IPO Process
2. Debt Syndication
3. Buy Back of Share
4. Mergers & Acquisition
5. Venture Capital Funding
Before we move on the activities undertaken, it is essential to understand a few basic
terminologies, which make understanding the above cases easier: SEBI: Securities &
Exchange Board of India
MANDATE LETTER: This is a document issued by the client company to an investment
banker. This letter contains a confirmation from the client company to the Investment
Bank as regards their appointment and also the details of the Services, terms and
conditions, etc. required to be fulfilled by investment hint Banks are contained.
1.13 IPO Process
In Modern times IPO is considered as a major source for raising equity finance by the
companies. The Public Offerings are of 2 types. The process of an IPO is in one way or
the other similar to the process of an FTO.
The process of IPO:

Fixed Price Issue: A fixed price issue is where the issuing price of the share id fixed in
advance before the opening date of the issue.
Book Build Issue: In this type of issue, the issue of the share is stated in terms of a range
/ price band. The final issuing price can be anything in between this range. E.g. A Price
Band of Rs.100 to 110.
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STEP 1
The first step includes all activities prior to the IPO. The process followed in this step are
as follows:
Offer: An Investment Bank is approached by a company, offering it to become the Lead
Manger to the Issue.
Acceptance: After the offer by the Client Company, the Investment Bank before
accepting the offer conducts a Due Diligence of the client. They look at the past record
of this company and decide whether to take up the IPO or not.
Mandate Letter: Once the Investment Bank agrees to act as the Lead Manger to the Issue,
they are issued a Mandate Letter by the Client. This is the official permission by the
company to the merchant bank to act as the Lead Manager.
IPO Team & Various Appointments: In this case the Investment Banker and the Client
Company constitutes a dedicated IPO Team. This team works together towards the
execution is made of the company. This presentation contains a past performance of the
company. Now various agencies such as Banks, Registrars, PR agency, Syndicate
members, Legal Advisory team, etc. are invited for a meeting and shown the
presentation. Here also an offer is made to various agencies to partner in the IPO for the
completion of different activities. It is also possible that all the agencies may be directly
appointed by the company or the Investment Banker, as the case may be.
Preparation of DRHP: Draft red herring prospectus has to be filed with the SEBI, before
the official announcement of the IPO. This is the most important document of the entire
IPO process, as the permission for an IPO depends on this document. It is very lengthy
process and has to be drafted very carefully. It has different sections. The various
agencies appointed above are asked to prepare their relevant sections of DRHP, which is
then compiled.
Here apt attention should be paid to the financials of the company. Every bit of
information mentioned in the DRHP should be true to the fullest extent; otherwise, it
may attract heavy penalty. The contents of DRHP should be signed by the relevant
agencies.
The Investment Banker has to not only assisted in compiling information, but also has to
prepare the sections of the DRHP falling under his scope of activity such as the financial,
the valuation of shares, etc.
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Completion of Preliminary Formalities: This is the crucial aspects of an IPO. Here the
Investment Banks assume of an advisory role. They advise the company as regards the
capital structure to be met for the listing requirements of the stock exchanges, modify
and amend articles through proper resolution to meet the legal requirement of the
company law board, etc.
Other advisory services provided by the Investment banks are as under:
a) Conduct and service on legal and financial due – diligence advised by the legal
council.
b) Discussion with the auditor for the final reporting requirement to SEBI.
c) Drafting and finalization of the DRHP for filling with SEBI.
d) Initiate the process of connectivity with depositories in co-ordination with
Registrations. NSDL, CSDL.
e) Finalize communication strategy, corporate advertisement strategy and issue
advertisement strategy.
The last step in this section is filing the DRHP with SEBI, application for listing of shares
with the stock exchange.
STEP 2
Before we move on to the step of pre- issue marketing, it is necessary to understand the
types of investors. Shown above are the different categories of investors targeted by the
company for subscription of the issue.
Pre-issue Marketing Comprises the Following activities:
(a)Preparation of a detailed research report on the company and the industry. This report is
always based on the past performance of the company and does not include future projection.
(b)Circulation of this report to the Institutional Investors.
(c) Hold a meeting with the institutional investors. In this meeting they are spoken to and
convinced to buy the shares of the company. Also, their advice is taken on various issues
such as the valuation of shares, etc.
MARKETING PRIOR TO FILING DRHP WITH THE SEBI

In this step the company primarily targets the Qffi’s. This is due to the following reasons:
(a) They purchase shares in bulk.
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(b) In a book building issue, they are the ones who buy at the highest price.
(c) Also, there is stability and lesser speculation if shares are purchased by Qffi’s as they do
not speculate with the market changes.
STEP 3
Prior to the commencement of this step the following activities have been completed.
(a) DRHP field with SEBI and comments and feedback have been received.
(b)Reply to the comments provided through the red herring prospectus.
(c) Permission obtained from SEBI for commencement with the Issue.
ISSUE MARKETING:
This is relatively the most important step, which might ensure the success or failure of the
issue. In this step the entire issue is marketed to the various investors. The following are the
major activities:
a) Statutory Advertisements are given in the newspapers.
b) Marketing done through TV Commercial and hoardings.
c) Meeting with the Brokers, analysts and the press. This is by far one of the most important
meeting in this stage. It is a confidence building move by the company, in which the above
3 parties are made presentation about the company.
d) The Investment Bankers also organize Road Shows. Under them the Promoters of the
company and the company and the representatives go to meet various agencies, institutional
bidders, appear on TV and speak about the issue.
STEP 4:
Before the start of this step, the Issue has been opened, subscribed to and also closed. During
the issue, the Investment Banks have no major work. The only activity that they undertake
during that period is supervision as to the collection of subscription money and make sure
everything is being carried out smoothly.
They oversee the accounting aspects of the issue. In case the issue is subscribed or
oversubscribed, they proceed with the following steps. However, in case the issue is
undersubscribed, then underwriting agreements are enforced and shares are allotted to
underwriters, and after that the following activities are carried out:
POST – ISSUE OBLICATIONS:
(a) Issue –price advertisement: Under this the merchant bankers announce the final issue
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price. This is the price at which the shares allotted to the investors.
(b)Prepare a consolidated report applications received, publicize the performance of the issue
and decided the basis of allotment depending upon the response from the formalities.
(c) Updating the prospectus for the prices, issue size, the basis of allotment and other
statutory formalities.
(d)File the updated prospectus and the underwriting agreement with SEBI.
(e) Submit the 3day report to SEBI.
(f) Announce dates of allotment of shares, transfer of money from the Escrow account to the
public issue account.
(g)Allotment of shares to the general public in co-ordination with the registrar, Stock
Exchange and the public Representatives.
(h)Announcement of Allotment of shares, basis of allotment of shares and the expected date
of delivery of shares in the DEMAT A/c. and transfer of money or dispatch of refund order
as the case may be to the public.
(i) Obtain listing permission and listing of shares on the stock Exchanges.
(j) Transfer of shares in the DEMAT A/c. Passing of ECS for refund in coordination with
bankers and dispatch of refund orders if any.
(k)Filing of the VS Day report with SEBI.
(l) Obtain trading permission from SEBI and the Stock Exchange.
(m)During the entire IPO process, investment Banks have to comply with many Rules and
Regulations.
1.14 Debt Syndication

Before we move on understanding the process of debt syndication let us understand what
debt syndication is all about?
In modern time business many companies require financial resources to carry out their
expansion / development activity, etc. there can be 2 ways of finance, Debt & Equity. Above
we saw one of the methods of raising equity capital. Now we shall have a look at a method
of raising borrowed funds / Debt Capital.
Debt in company’s capital structure has its advantages as well as disadvantages. The main
reason for the companies to prefer to use debt as a source of finance is due to its easy
availability and low procurement cost.
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When the requirement of funds is small / the amount to be raised via debt is small, then it is
possible to take the entire amount form one bank. However, when the requirement of loan is
huge. Which cannot be financed by one bank, then there is need for one or more banks join
together and collectively provide the required loan. The second phenomenon is called debt
syndication and this will be the crux of discussion in this case study.
Debt syndication in not an easy activity. It is very lengthy and a time-consuming activity.
The entire activity from the start to end takes 2 months of time. The compliance of the legal
formalities is what makes the entire procedure lengthy.
DEBT SYNDICATION PROCESS:
STEP 1: BUSINESS OPPORTUNITY IDENTIFICATION

Under this step, the business opportunity is identified. This business opportunity may arise
when the Investment Bank approaches the client company or the client company approaches
the Investment Bank. In majority of the cases, latter happens. The Client company
approaches the Investment Bank with an offer letter / proposal to raise a loan for them.
STEP 2: DUE DILIGENCE
After the receipt of the letter, before confirmation the Investment bank carries out internal
due diligence from its end. Here the task of the Investment Bank becomes relatively simple
if the client is an Already existing one. However, in the case of a new client, proper credit
rating needs to be done. For this purpose, various credit rating agencies are approached,
information is found out from other sources. After the analysis of this information, if the
company is found be worthy, then the offer is accepted. The entire due diligence process is
carried out by the credit rating committee of JM Financial, which is a Board Level
Committee.
STEP 3: MANDATE LETTER
This is a confirmation letter by the company as regard the appointment of the Investment
Bank. In this letter the company also mention the amount of loan required, the desirable
interest rate, fees of the Merchant Banks, etc. the entire procedure up to the receipt of
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Mandate Letter Takes 2-3 Working days. Please take note that it is not necessary that
Investment Banks has to be a soul Investment banks to the syndication. There can also be
co- Investment Bank to the syndication process. However, this does not make any different
to the process of syndication.
STEP 4:
After the receipt of the appointment Letter / Mandate, the following are the activities
undertaken by the Merchant Bank:
(a) The bank based on the requirement of the company decide the kind of loan to be raised.
In India there are 2 loan Markets. Rated and non-rated Markets. Rated markets are the bond
market, whereas the nonrated market is the Banks Loan Market. The former is not very
popular in the country. Bank loan market is the one which is widely used the various
companies. One of the biggest reasons as to why companies prefer non- rated market, is due
to the case of availability of loan at lower rate of interest compared to the rated market. Also,
the rules and regulations in the non-rated market are far less compared to the rated market.
This is the reasons why the client company as well as the Investment Banks, both prefer the
non- rated market.
(b) After deciding the type of market, the investment bank now proceeds to find out whether
the Balance sheet and the financial statements can support the amount of loan required by
the company. Here the investment bank undertakes a detailed study of the past performance
of the company and compares it with the present performance. The financial statements of
the company are the most important tool used to find out this information.
(c) After determining the quantum of loan that can be supported by the company as per its
statement of accounts, the Merchant banks proceed to find out the possible banks that would
be interested in funding the requirements. For this purpose, they may approach the banks
which the client companies may specify in case of no specification, they approach the banks
that have a direct dealing with them. The banks are given various details about the nature of
company, amount of loan, expected rate of interest, etc.
(d) After the banks have been approached, the work of investment banks is more or less
complete. Now onwards they would merely act as communicating links between the lending
bank and the client company.
I. The books take approximately 40-45 days to give their acceptance of the loan. During this
time in co-ordination with the Merchant bank, the lending bank words out the Credit
worthiness of the company. Various statistics of the financial performance of the company.
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This gathered about financial performance of the company. This information is deeply
studied and various ratios are found out, sensitivity testes are conducted, etc. also one of the
most important aspect is the valuation of the borrowing company, assessment of the
repayment capacity based on the revenues, etc.
II. All this while the Investment Bank is in constant co-ordination with the lending bank and
the borrowing company. They make available to the lender all the information required by it
and try their best make sure that the loan is granted.
III. After the bank is satisfied that the company is worthy of the loan, the bank proceeds
with the legal formalities. It is made sure that the entire loan is secured by collaterals,
guaranteed and everything company through the merchant bank.
IV. The company gets the documents scrutinized form its end, with the help of solicitors,
etc. if the terms and conditions of the banks such as interest rates, repayment period are
acceptable, then the company givers its conformation.
V. Thereafter forms are filled, papers are signed and the loan is finally disbursed.
VI. After the completion of all the formalities, the Investment bank is paid the fees. This is
a percentage of the total loan disbursed. Investment generally undertakes debt syndication
for Tier II companies, because these are the companies who are not blessed with the
procedures, formalities and contacts to get loans raised.
Generally, the tier I companies prefer to undertake debt syndication or raising of borrowed
capital by the internal departments which consists of personnel specializing in this field.
1.15 Buy Back of Shares

Before we move on to see the buyback process and services of Investment banks in the
buyback process, let first understand what buy back of shares means?
Buy back is a phenomenon under which the company’s purchase back the shares it has
previously sold to the public. In order to fund this activity, the company makes use of the
free- serves and the surplus with itself. There are a lot of rules and regulation enacted by
SEBI to make sure that there is no manipulation in the buyback process and investor’s rights
are protected. Therefore, a lot of responsibility is assigned to an investment bank in initiating
the entire buy back process. Let us move on to see the role of a Merchant Bank in the Buy
Back process:
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STEP 1: BUSINESS OPPORTUNITY INDENTIFICATION This step is the same as in the

previous case study where the capital client company approaches the Investment bank asking
for assistance and advice in completing the buyback process.
STEP 2: WORKING OUT FINANCIALS Here the Investment bank after receipt of the
Mandate starts its work. It determines the exact amount of shares the company can buy back
from the public. Decides the rates at which they can bought back and check whether the
financial statements of the company and various SEBI rules regarding the buy Back permit
Buy Back, otherwise the company is likely to attract heavy penalty.
STEP 3: PREPARING OFFER LETTER Once all the financial are worked out and the
buyback price decided, The Investment bank proceed with drafting the letter of offer. Before
the drafting can be started, the company and the investment Bankers have to get a resolution
passed by the Board and Shareholders in an EGM. Thereafter decided the buyback date buy
back period. After completing all these formalities, they can start with the drafting of LOF.
STEP 4: FILING OF LOF WITH SEBI Once the LOF is drafted, it has to be field with the
SEBI within the prescribed time period after the passing of the resolution in the EGM and
the Board Meeting.
STEP 5: MODIFICATIONS IN LOF Once the LOF is filed with the SEBI, it gives its
comments and modification on the same. Within twenty-one days from the date of
submission of the draft letter of offer, SEBI specifies modifications, if any, in the draft letter
of offer. The investment banker and the company shall carry out such modifications before
the letter of offer is dispatched to the shareholders.
STEP 6: DESPATCH OF LOF After the official nod is received from SEBI, the company
and Merchant Banks proceed to dispatch the OLF to the shareholders.
STEP 7: STATUTORY ADVERTISEMENT After dispatching the LOF to the shareholders,
the company and the Merchant Banks due to the statutory advertisement to provide
information to the shareholder about the buy back.
STEP 8: OFFER PROCEDURE The offer for buy back shall remain open to the members
for a period not less than fifteen days and not exceeding thirty days. The date of the opening
of the offer shall not be earlier than seven days or letter than thirty days after the specified
date. The letter of offer shall be sent to shareholders so as to reach them before the opening
of the offer. In case the number of shares offered by the shareholders is more than the total
number of shares to be bought back by the company, the acceptances per share holder shall
be equal to the acceptances tendered by the shareholders dividend by the total acceptances
received and multiplied by the total number of shares to be bought back. The company shall
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complete the verifications of the offers received within fifteen days of the closure of the offer
and the shares lodged shall be deemed to be accepted unless a communication of rejection is
made within fifteen days from the closure of the offer.
STEP 9: MAINTAING ESCROW ACCOUNT An Escrow account is the mechanism put in
by SEBI to protect the shareholders and hive them security. The company shall by way of
security for performance of its obligations, on or before the opening of the offer, deposit in
an escrow account a sum equivalent to the total buy back amount.
The escrow account shall consist of:
(a) Cash deposited with a scheduled commercial bank or;
(b) Bank guarantee in favor of the merchant banker; or
(c) Deposit of acceptable securities with appropriate margin, with the merchant banker, or
(d)A combination of above mentioned three points.
The SEBI in the interest of the shareholders may in case of non-fulfillment of obligations
under the regulations by the company, forfeit the escrow account either in full or in part. The
amount forfeited may be distributed pro rata amongst the shareholders who accepted the
offer and balance, if any shall be utilized for investor protection.
STEP 10: PAYMENT TO SHAREHOLDERS The company shall immediately after the date
of closure of the offer open a special account with a bankers and deposit therein, such sum
as would, together with the amount lying in the escrow account make-up the entire sum due
and payable as consideration for buyback and for this purpose, may transfer the funds from
the escrow account. The company shall within seven days of time make payment of
consideration in cash those shareholders whose offer has been accepted or return the share
certificates to the security holders.
STEP 11: EXTINGUISHMENTS OF CERTIFICATE The company shall extinguish and
physically destroy the security certificates so bought back in the presence of a Registrar or
the investment banker, and the statutory auditor within seven days from the date of
acceptance of the securities. The securities offered for buyback if already dematerialized
shall be extinguished and destroyed in the manner specified under securities and exchange
board of India (Depositories and Participants) Regulations, 1996 and the bye laws framed
three under. The company shall furnish a certificate to the SEBI duly verified by
a) The registrar and whenever there is no registrar through the merchant banker;
b) Two whole-time Directors including the Managing Director and;
c) The statutory auditor of the company, and compliance within seven days of
extinguishment and destruction of the certificates.
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The particulars of the share certificates extinguished and destroyed shall be furnished to the
stock exchange where the shares of the company are listed, within seven days of
extinguishments and destruction of the certificates. The company shall maintain a record of
the share certificates, which have been can celled and destroyed.
1.16 Mergers and Acquisitions

Mergers and Acquisitions, commonly referred to as M & A, are 2 separate and distinct
activities. Many people confuse them to be synonymous, however they are distinct from 1
another. Merger happens when 2 companies come join together and from a separate entity.
This could be a company with a new brand name, new business, etc. Acquisition happens
when one company has been taken over by another company. This means that the acquiring
company after the takeover controls the management of the acquired company, whereas this
is not the case in mergers. In case of mergers and acquisition, investment bankers may act
from the sell side or the buy side. The investment bankers collect data on various companies,
which are looking for mergers. They also identify potential targets of takeover / acquisition,
which could benefit their client. The main role of an investment banker in an M & A is to
make sure that his client is not cheated. The investment banker through various analyses
finds out the minimum amount that his client should get. Thus, an investment banker tries to
protect the interest of his client from the other party.
In brief the M & A process can be as follows:
Step 1: Business Opportunity Identification
Step 2: Receipt of Appointment Mandate.
Step 3: identify the potential targets for merger or acquisition as the case may be.
Step 4: Due Diligence of the 2nd party.
Step 5: Proposal on behalf of the client for merger or acquisition as the case may be.
Step 6: Receipt of confirmation from the 2nd party for regards merger or acquisition.
Step 7: Valuation of the client company as well as the 2nd company.
Step 8: Drafting the agreement
Step 9: meeting of the client with the second company.
Step 10: Negotiation between both the parties and try to reach a conclusion.
Step 11: Make changes in the agreement, prepare final agreement and get it signed.
Step 12: Assist in the formation of a new entry in case of merger and assist in the process of
investment in the case of acquisition.
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This is how an investment banker helps in the M & A process. Due to shortage of time, only
the above-mentioned information could be gathered for M & A.
1.17 Venture Capital Funding
It is popularly believed that venture capitalists fund only established players and proven
products. There is a lot of cynicism amongst many about all type that private equity and
venture capital is getting in India of late. The national venture capital association defines
venture capital as: “Money provided by professionals who invest alongside management in
young, rapidly growing companies that have the potential to develop into significant
economic contributors.” Investment bankers provide not only financial, but also, managerial
(technical, marketing and HR), support to achieve success. This support is lent in many forms
by private funding and incubation organizations such as venture capitalists. Clients looking
for setting up a venture capital fund take help and advice of the investment banker on the
various issue from selecting a business proposal to legal framework, rule and regulations.
What investment bankers look for while funding a business The following paragraphs
broadly the various steps of the evaluation process.
Initial Screening
Investment bankers are in the business of making more the then average returns for their
clients interested in venture capital funding and only the proposals which can match or
exceed the VCs expectation will get an attention from them. Thus, initial screening is a step
in which the venture capitalist reaches an initial decision to investigate the investment (or
not) The initial screen is a cursory glance at the business plan determine whether or not the
proposal fits within the client’s areas of expertise. Investment bankers carry out initial
screening of all projects on the basis of some broad criteria. For example, the screening
process may limit projects to areas with which the venture capitalist is familiar in terms of
product, technology or market scope. The size of investment, stage of financing and
geographical location could be as the broad screening criteria.
Detailed Business Plan

If the plan manages to clear the initial screening round, then the investment bankers call for
the detailed business plan from the entrepreneur. This business plan is the main tool with the
help of which client would make up his mind. Thus, the entrepreneur should present clarity
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of thinking about the business in the plan as the “Surprises can be great for parties, but
potentially could be fatal for businesses.”
In the next and the help most important phase, due diligence is conducted by the client with
help from investment bankers to verify the accuracy of the statements made by the
entrepreneur. The two main types of due diligence conducted are business and legal.
The legal due diligence involves verification of the documents by the lawyers of the VC.
These documents include Memorandum and Articles of the Association, important contracts,
patents, copyrights, et cetera.
Business due diligence involves looking at the quality of people, quality of business and the
quality of investment. Quality of people is one of the most important criteria. There is
unanimity among theorists that venture capitalists prefer a grade A team with a grade B idea
to a grade B team with a grade A idea. However, how the quality of team is evaluated is a
source of controversy.
Many feel that the integrity of the team members is the most important criterion. Past
research shows that trustworthiness, enthusiasm and expertise of the entrepreneur are the
most important factors considered by the VCs. It has also been that about 50-60 per cent of
the projects which are seriously considered for financing but are ultimately rejected is due to
the factors related to the entrepreneur.
The other major consideration is quality of business. Some investment bankers, specially the
early-stage ones, may not give a lot of importance to details; however, the idea must
necessarily and clearly signify a distinct and unique competitive advantage. Generally,
market potential and attractiveness are an integral part of a marketing plan.
Though visibility and transparency in a business may not necessarily inverse its
attractiveness, it is more of a necessity. One of the most important considerations for
investment bankers while judging an investment proposal is clarity of the exit mode and the
expected return from the project, which is quality of the investment. This is because the VC
is ultimately a fund and they (like mutual fund managers) need to manage their portfolio to
get maximum return.
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Chapter 2:
Research and Methodology
Research methodology deals with the procedure adopted to carry out the study. A research
design is the specification of methods and procedures acquiring the information needed. It is
an overall operational pattern or framework of the project that stipulate which information
should be collected from which sources by what procedures. For conducting the project, both
primary and secondary methods of data collection have been adopted.
2.1 OBJECTIVES/AIMS OF STUDY:

• To evaluate functioning (services) of Investment Banks with context to its
significance for the development of India.
• The majority service provided by Investment Banks.
• To investigate the common problem face by Investment banks in India.
• To investigate the functioning and growth of investment banks in India.
• To examine the rules implemented by SEBI to Investment Banks.
2.2 HYPOTHESIS
It is an exploratory form of research. The investigation is loose and flexible with hypothesis.
Findings might be topic specific or might not have much relevance outside of research’s
domain.
H0: Knowledge level among the people is not high about the services provided by the
investment banking.
H1: Experience in stock market is independent of education.
2.3 SCOPE OF THE STUDY:
• The purpose of the research would be to find the awareness of the different services
provided by the investment banks.
• The study is done through a mixture of primary data and secondary data.
• The study focuses on Indian audience.
• The scope of study was extended to area of Indian boundaries.
• The duration of the study was from December to February.
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2.4 Limitation of the study
• The sample size of the present study was relatively small to generalize the result in
Mumbai.
• The area of study is limited to a particular region, results may differ from place to place
• Data collected through Questionnaire may be biased.
• Respondents may give biased answers for the required data. Some of these respondents
did not like to respond.
• It was difficult to collect all the information due to the respondent’s confidential nature.
• The study is focused on individual investors ignoring other players in the market like
institutional investors.
• Time and money are the major constraint in the study.
2.5 Importance / Significance of the study:
The study may get affected by the upward and downward movements of financial markets and
other related factors which may have significant influence on the individual investor’s selection
behaviour. This study has not been conducted over an extended period of time having both
market ups and downs. The market state has a significant influence on the buying patterns and
preferences of investors. For example, the July 2001 UTI fall has sent violent shock waves
across the MF investor community and is bound to influence the scheme preference/selection
of the investors. The study has not captured such situations. Simple random analysis and
Judgmental sample selection techniques had been adopted in order to save both time and
financials and of them both especially finance is under severe constraints as the whole research
is self-financed. Respondents will be screened and their inclusion will be purely on their basis
of knowledge about financial markets and instruments available for investment with special
preference to mutual funds. The whole process will be completely affected by the personal
judgment of the interviewer as to how he ranks the respondent. Besides data will be affected
by how the respondents react to each personal question. Respondents will not be asked to verify
what they say or answer and document their opinion with documentary evidences and
accounting records including income tax submissions. As it is well known that people are
hesitant to answer any query in relation to their financial strength and weaknesses hence it will
be difficult to make people jot done the opinions. Hence, we intended to keep at least serious
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qualified respondents as an ideal figure to carry out research. The study may be affected by the
condition that the respondents may largely belong to middle income groups as to obtain the
correct information from business men will not be possible and similarly lower income group
people may not respond well to the questionnaire. It shall be the middle income group whose
income is taxed and transparent who may provide unbiased results. The study may get affected
by the upward and downward movements of financial markets and other related factors which
may have significant influence on the individual investor’s selection behaviour. Selecting of
fair market days in between the period of research will again be affected by personal bias of
the interviewer. In this analysis the unit of observations and analysis is an individual investor.
For the purpose of study individual investor is one who has invested in mutual funds along
with other modes of investments. He is one whose average annual income does not exceed
rupees six lakhs per annum. Big and high net worth individuals, corporate houses,
organizations, legal bodies, government institutions, etc. had not been included in the study.
2.6 Source of data:
1. The study is based on primary and secondary data.

2. Primary data is also known as first hand data which is collected by researchers.
3. Self – administered questionnaires were distributed to be answered by the public in
large as per requirement of the questions included in the questionnaire.
4. The goal of the study was to provide information primarily out of raw data. After
data gathering was completed, it has been edited to detect errors or omissions and
cross checked to verify consistency with other respondents. Then the data was
grouped based on their similarity for easy handling.
5. Raw data was transformed into a format that is easy to understand and interpret.
Calculations of average and percentage were made for the purpose of summarizing
data.
6. The main tools which were used for the collection of data was investigation and
observations.
7. Secondary data which has already been collected by someone else, not the
researcher itself. It provides reliable, suitable, adequate and specific knowledge.
8. Finally, the task of interpretation and a report describing the result has been done.
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2.7 SAMPLE TECHNIQUE:
1. Sample technique means the limits in which the survey was conducted.
2. Google forms were circulated in public at large and the area wasn’t restricted, it
was circulated between the people of different groups, different occupation and not
liked minded people in order to get maximum accurate responses and it was found
that young age group and young adult group have answered to the questionnaire
actively.
2.8 SAMPLE SIZE:
• Sample size denotes the number of the responses that collected for the survey and its
analysis.
• In this particular survey I have taken 40 responses of people of different age group have
answered to the questionnaire actively.
2.9 DATA COLLECTION:
The study is based on primary and secondary data. Following are the sources of primary
and secondary data.
1. PRIMARY DATA: -
The primary data are the first-hand information gathered for research to solve the need
by surveying the sampling units and collection of feedback from them involves the
primary data with structured queries will be prepared for the customers. There will be
survey within the customers giving the questionnaire. The questionnaire was structured
non disguised questionnaire which the questionnaire contained, were arranged in a
specific order beside the questions asked were logical for the study, no questions can
be termed as irrelevant.
Sources of primary data:
A) Personal interview
B) Questionnaire
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A) Personal interview: -
This method was the most appropriate way of survey, because by personal interview I
came to know about how the respondents feel about Investment Banking. The personal
interview is conducting mainly for collecting information for fulfil of the questionnaire.
B) Questionnaire: -
In this method questionnaire were distributed to the respondence and they were asked
to answer the questions in the questionnaire. The questionnaire was structured non
disguised questionnaire because the questions which the questionnaire contained, were
arranged in a specific order every besides every question asked were logical for the
study, no questions can be termed as irrelevant.
2. SECONDARY DATA: -
The secondary data is collected from the SEBI website and other websites, through
listing by personal observation. The secondary data are collected by some other people
for their work and it already exist. The researcher started investigation by first
examining the secondary data to see whether the problem can be partly or fully solved
by without collecting primary data. Since the secondary data was not sufficient to solve
the entire problem, so primary data were not sufficient were collected to fill the gap.
Sources of secondary data: -
A) Libraries
B) Internet
C) Journals and magazine.
2.10 Tabulation of data:
1. Google Forms: -
Survey method is employed to collect the data from the respondents and the
data is collected with the help of questionnaire formed is google forms. Google
forms provide a convenient, systematic and easy to interpret representation of
data through pie charts, bar graphs and rating scales.
2. Google Docs: -
Google Does application has been my prime aid in organizing, editing and
storing all of my data in a methodical and secure manner.
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2.11 Techniques and tools data:
Data collected from the respondents have been analysed with the help of the following
tools.
1. Pie chart diagram: -
Pie charts formed through google forms were analysed for the research and to
conclude the result for better understanding and effective learning of the things
obtained.
2. Percentage technique: -
Percentage technique is the most widely and efficient technique to be used in any
survey conducted. In this survey regarding detail study of investment banking in
Mumbai. I have used this technique to make the study more interesting and worth
learning. It not only makes the study effective but also makes it easy and
understandable.
2.13 METHODOLOGY:
1. The paper contains material which is a blend of primary and secondary data.
2. The researcher does not violate the provision of copyright act 2012 due credits are
given at the end of the paper.
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Chapter 3:
Literature Review
Review of literature is body of knowledge that aim to review the important aspects of current
and previous knowledge in a critical way. It has an ultimate objective of bringing the reader
with up-to-date information with present literature on a topic and makes a foundation for
another study that may be needed in the same area. It bridges the gap between existing
knowledge and the knowledge to explore. This chapter deals with the discussion on the earlier
studies relevant for the present topic of research that is a detail study on investment banking.
1. Pratap Subramanyam (2009) in his book named "Investment Banking - An

Odyssey in High Finance" stated that Investment Banking has grown to encompass an
important place in the field of financial services for India in the liberalized era. It states
with conviction that this field of financial services can only become more important in
the years to come. The increasing sophistication and deepening of the financial markets
on one hand, and the fast-transforming corporate landscape from a protective
background to a globalised market place on the other, would lead to more complex
corporate transactions and therefore, the role of investment bankers as transaction
experts and advisers would become indispensable. There is utmost need at this point of
time for organized learning of this field of financial activity through a systematic
approach based on conceptual clarity. The pace at which Indian corporate landscape is
transforming leaves no doubt that investment banking would grow into a larger service
area in future. Indian cooperates are steadily grappling with the globalised realities and
coming out successful in various sectors. Cross border capital flows are becoming an
imperative. Capital raising, consolidation and restructuring are the order of the day. The
law makers and regulators are constantly engaged in providing the necessary bandwidth
by enactment and amendment of corporate and securities laws and refining the statutory
framework through periodical changes in guidelines, rules and regulations.
2. Businessworld (2011-12) in the book named "The SME White book 2011-2012"
stated that the success, of and indeed the survival, of a small and medium business is a
David vs. Goliath story. Small businesses have it tough. Small and medium enterprises
(SMEs) have limited resources and access to capital. They are unable to leverage
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economies of scale, tap into efficient scales channels, or invest in Research and
Development. Attracting talent is difficult, and building a brand even more so. With
weak pricing power, high costs, and sales inefficiencies, the fact that SMEs survive is
amazing; the fact that they often thrive is testament to the power of entrepreneurial
ingenuity. The greatest asset of any business is the mind, the passion and the hunger of
an entrepreneur. The ingenuity of an entrepreneur will create new products, open new
markets and sometimes even break down industry structures. The transformation of the
Indian economy in the last two decades has been fuelled largely by entrepreneurs who
started out as small businesses. They were SMEs for a long time before their success
led them to outgrow the tag. The opportunity for SMEs in India is bigger than ever.
Technology and Internet have already broken-down information barriers. The Internet
allows SMEs to collaborate across organizations and helps reduce the disadvantages of
scale, while technology helps them to amplify their flexibility. Their market reach has
extended from local customers to domestic and international markets. Technology is
helping businesses achieve their lifecycle, from conceptualization to execution of
scaling. The real story ahead, lies in the tier11 and rural markets. The Indian consumer
has rising awareness and purchasing power, needs specific solutions and has the scale
to create successful business overnight. The challenge is market reach. I am seeing
remarkable business models creating products and market networks in urban and rural
markets. The sheer size of these markets can potentially create companies larger than
Google. Lower price points are leading to the evolvement of innovative processes,
creating very capital and cost-efficient products and market networks. These
innovations will transform sectors such as materials and design, in addition to
technology, retail and healthcare.
3. Europe Council (2006) in the study "Think Small First" stated that SMEs are vital to
promoting economic growth, competitiveness, entrepreneurship and innovation, and to
create new jobs. Ensuring adequate access to finance so that SMEs can grow and
achieve their full potential. Moreover, the conclusions of the Council emphasized that
'fully integrated financial markets and sufficient access to finance are crucial for the
growth of small and medium sized enterprises'. The current crisis in the financial sector
around the world has made such access even more critical.
4. Organization for Economic Co-operation and Development (OECD) research
(2006) suggests that securing suitable financing remains an obstacle, especially for the
growth of innovative SMEs, a problem known as the 'SME financing gap'. While many
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SMEs are reliant upon internal sources of financing, including cash-flow, to fund
investment in their development and growth, particularly at the start-up and early
growth stage, they will necessarily have to consider external financing sources as they
progress through the development phases of the SME lifecycle. Addressing the
"financing gap" is increasingly important in the context of a fast changing, knowledge-
based economy in which innovative SMEs with high growth potential are key in raising
productivity and in maintaining competitiveness. The ability of small firms -
particularly fast-growth 'gazelles' - to exploit investment opportunities is dependent on
the extent to which low-cost external sources of financing are available.
5. In a Consultant's Report on Business Support in FCT Number 107, by David
Irwin for DFID (March 2004), it was stated that "Governments all around the world
now recognize the important contribution that small firms make to the economy and
many governments have established extensive support arrangement to help people start
and grow their businesses. The dearth of venture capital financing has also aggravated
the situation as venture capital provides long-term patient capital, which allows a small
business to grow, as is the case in Ghana and some developed economies.
6. According to Rwigema and Karungu (1999), in the study "Small and Medium
Enterprises (SME) Risk Management Practices" stated that SMEs are dominant in
numbers in most economies. In First World countries like the United States of America
and the United Kingdom, small enterprises play an important role in the economy,
accounting for an estimated one third of industrial employment and a lower percentage
of output. In Third World countries where SMEs dominate economically active
enterprises, the SMEs prosperity is considered far more important than in First World
countries.
7. Levine (2005) in the study "Role of Investment Banking for German Economy"
stated that five channels through which financial systems may have an effect on
economic growth: Financial Intermediaries provide ex ante information, monitor
investment, manage risk, mobilize savings and facilitate the exchange of goods and
services. Investment bank activities can be attributed to some of these channels.
Acquisition of ex ante information on firms or investment opportunities may involve
high fixed costs for investors. Financial intermediaries can reduce these costs by
utilizing economies of scale in information acquisition or provide higher quality
information. Investment banks provide ex ante information to market participants in
various ways. First, within the scope of M&A advisory, investment banks specialize in
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information generation and value determination of companies. This information

supports more efficient companies in taking over less efficient companies, which in
turn should add to the efficiency of the entire economy. Second, prior to IPOs,
investment banks distribute general information about the company to the public, which
should reduce adverse selection costs. Moreover, the investment bank's sell side
analysts provide information about shares in the secondary market. In fixed income,
investment banks perform rating advisory and issuer evaluation, also a form of
information generation. Finally, the market making position, which many investment
banks perform on secondary markets, facilitates the efficient use of information.
8. Loayza and Ranciere (2006) in the study "Role of Investment Banking for German
Economy" find a significant positive long-run relationship between financial
development and output growth. In the short run, however, this relationship is mostly
negative. The negative short-run relationship between growth and financial sector
development emphasizes the trade-off between financial development and financial
stability: Extensive financial development and financial innovation may result in
banking or financial crises, higher volatility of output and periods with very high or
very low growth. Exchange rate volatility reduces productivity growth in financially
underdeveloped countries and increases productivity in financially developed
countries. This may be an indication that investment banking helps to hedge exchange
rate risk, which in turn may have positive effects on the development of the tradable
goods sector in an economy.
9. Mayer & Mathonet (2005) in the study "Can Private Equity Improve Portfolio
Performance?" stated that it is important to clarify which type of asset class private
equity belongs to, in order to assess the portfolio capabilities. A group of investments
may be referred to as an asset class, when this group can be considered distinct from
other existing asset classes, and possess a unique risk and return profile. Private equity
investments are normally considered part of the group of investments, which are
referred to as alternative asset classes. This group of assets refers to non-traditional
assets that normally would not be found in a standard private investment portfolio.
While many large portfolio managers for long have considered private equity a unique
asset class, Mayer & Mathonet (2005) argues that quantitative investment analysis have
yet to provide solid proof that this asset class, in fact, has its own risk return profile. If
this argument is true and private equity cannot even be considered a distinct asset class,
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without a unique risk return profile, the benefits of adding it to an investment portfolio
may be limited.
10. Brown & Morrow (2001) in the study "Can Private Equity Improve Portfolio
Performance?" stated that numerous opinions exist on private equity's ability to
generate superior returns. The reason for this may be due to tire unavailability of
lengthy reliable data and that the legal requirements for this industry call for less
disclosure from the funds. Therefore, much debate has been created over the
trustworthiness of specific surveys. The general argument follows that the incentive for
investing in private equity is the potential for increased returns relative to traditional
publicly traded securities. Further reports that the Yale University's Endowment fund,
which are among the largest investors in private equity, believe that investments in
private equity can potentially generate incremental returns independent of the
performance of the broader market. More specifically, the Yale Endowment fund has
achieved annualized returns of 29%, since the interception in 1973 to 2003. Arguments
like these summarize some of the expectations that many investors have to private
equity as an asset class. However, looking at some of the studies conducted in recent
years, a diverging picture seems to emerge.
11. Brealey et al., (2006) in the study "Motives and Effects of Mergers and
Acquisitions" stated that there are three categories of conglomerate M & A: product
extension mergers, geographic market extension mergers and the other conglomerate
mergers. The first type is also called concentric mergers, which means two firms’
merger or acquire in related businesses in order to broaden the product lines of firms.
The second one occurs when two firms, which have no overlapping businesses, merge
in different geographic areas. The last kind refers to a pure conglomerate M & A in
different business field.
12. Brealy and Myers (2005) in the study "Initial Public Offerings on the National
Stock Exchange of India" stated that going public marks a watershed in the life cycle
of the firm. While increased equity can support the firm's future plans of growth, the
trade-off for the firm is that of increased public scrutiny. In the context of USA, the
firms may seek private equity in their initial years and only later go for public issues.
Firms going public are not seeking money for growth but are rebalancing their accounts
after high investment and growth. The post IPO period sees a reduction in leverage as
well as investment. They state that going public is a conscious choice that some firms
make while some others prefer to remain private. Thus going public is not a natural
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element in the life cycle of a firm. There are times (windows of opportunity) when the
markets could be extremely optimistic about a particular industry and it may be a good
time for the firms in that industry to go public. In this study they found firms go public
when the equity valuations are high and when these are low; the firms choose the private
placement route.
13. Mr. Ayan Banerjee (1995), in the study "Capital Market Access to SMEs in India"
stated that innovation is the means by which the entrepreneur either creates new wealth
producing resources or endows existing resources with enhanced potential for creating
wealth. Innovation has always been the hallmark of SMEs. The prime progression in
the economic force of changes is the introduction of innovation culture. Since the
innovation process is a recursive heuristic cycle, problems at some stage of
development necessitate the need for revaluation of the earlier stage of the innovation
process - leading to learning. Innovation is an ongoing effort and the success of the
economy (just as is those of any business enterprises) is dependent on its ability to
continuously provide innovation. The constraints facing high growth companies and
SMEs in accessing equity finance, which in turn inhibits their growth and expansion,
thereby impairing innovation and job creation.
14. Sullivan and Miller (1996) in the study "Investor of Venture Capital" advise that
entrepreneurs should adopt a marketing perspective in raising finance for their business
ventures. They argue that adopting a marketing perspective would enable entrepreneurs
see potential investors as a market of 'customers' with a broad range of needs, wants
and values. By limiting their view of investors to the home economics, as often happens,
entrepreneurs may be missing significant segments of the market. The 'customers'
should, therefore, be segmented according to their different desired benefits. All the
books, research articles and reports read by the researcher were found to be dealing
more with the concept of Investment Banking, IPO, Mergers and Acquisition, Private
equity, Venture capital, SME in India. There were also few articles written on this
subject but none of the above covered the study of investment banking in detail nor did
they cover all aspects of the services provided by the investment banking. Hence, the
researcher has chosen this subject for the research study.
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Chapter 4
Data Analysis and Interpretation Data
Q1. What age group do you belong?
Operation Total Percentage

18-24 32 80%
25-40 4 10%
41-60 2 5%
60 & above 2 5%
5%
5%
10%
80%
18-24 25-40 41-60 60 & above
Observation
The above pie chart represents the age group of the respondent which vary from age 18 to 60
and above, the majority of the respond were for the 18-24 category i.e., 80%. The age group
25-40 is followed up and had a response of 10%. The age group 41-60 and 61 & above has 5%
response respectively.
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Q2. What is your Gender?
Gender Total Percentage

Male 29 73%
Female 11 28%
28%
72%
Male Female
Observation
The above pie chart shows the gender ratio of male and female. 72% of the respondence is
male and 28% respondence is from female.
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Q3. What is your occupation?
Occupation Total Percentage

Student 26 65%
Businessman 6 15%
Professional 2 5%
Employee 3 7%
Other 3 8%
8%
7%
5%
15%
65%
Student Businessman Professional Employee Other
Observation
The above pie chart shows the percentage of response by occupation. The majority response
was from student i.e., 65% and the least were by the professional people i.e., 7%.
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Q4. What is the annual income?
Income Total Percentage

Less than 50000 26 65%
50000-100000 3 7%
100000-500000 5 13%
Above 500000 6 15%
Chart Title
15%
13%
7% 65%
Less than 50000 50000-100000 100000-500000 Above 500000
Observation
The above pie chart shows the annual income of the respondent the majority of the respondent
fall in the category of les than 50000 which is 65% and the least response fall in the category
of 50000-100000 which is 50000-100000.
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Q5. From the following list select any one of the following options which you are aware of
the Safe / Low risk investment avenues?
Investment Total Percentage

Saving Accounts 15 37%
Bank Fixed Deposit 10 25%
Public Provident Fund 4 10%
National Saving Certificate 2 5%
Post office saving 5 13%
Government securities 4 10%
10%
13%
37%
5%
10%
25%
Saving Accounts Bank Fixed Deposit

Public Provident Fund National Saving Certificate
Post office saving Government securities
Observation
According to the above pie-chart the greater number of investments is done in Saving Accounts
i.e., 38%, while the less numbers of investment is done in National Saving Certificate i.e., 5%
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the Moderate risk investment avenues?

Mutual Funds 14 35%
LIC 16 40%
Debentures 5 12%
Bonds 5 13%
13%
35%
12%
40%
Mutual Funds LIC Debentures Bonds
Observation
According to the above pie-chart the more numbers of investment is done in Life Insurance
i.e., 40%, while the less numbers of investment is done in bonds i.e., 13%.
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the high-risk investment avenues?

Equity Risk Market 23 57%
Commodity Market 9 23%
Forex Market 8 20%
20%
57%
23%
Equity Risk Market Commodity Market Forex Market
Observation
According to the above pie-chart the more numbers of investment is done in equity risk market
i.e., 58%, while the less numbers of investment is done in forex market i.e., 20%
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Q8. From the following list select any one of the following which you are aware of the
traditional investment avenues?

Real estate 14 35%
Gold/Silver 17 42%
Chit Funds 9 23%
23%
35%
42%
Real estate Gold/Silver Chit Funds
Observation
According to the above pie-chart the more numbers of investment in traditional avenues is done
in gold and silver i.e. 43%, while the less numbers of investment is done in chit funds i.e. 23%
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emerging investment avenues?

Virtual real estate 7 36%
Hedge Funds 5 12%
Private Equity Investment 12 28%
Art and passion 3 7%
Crypto Currency 15 17%
Chart Title
17%
36%
12%
7%
28%
Virtual real estate Hedge Funds Private Equity Investment

Art and passion Crypto Currency
Observation
According to the above pie-chart the greater number of investments is done in Crypto Currency
i.e., 38%, while the less numbers is in Art and Passion i.e., 8%.
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Q10. Have you ever heard about this Investment Bank?
Banks Total Percentage

J.P. Morgan 19 47%
Morgan Stately chase 5 13%
Bank of America 8 20%
Goldman Sachs 6 15%
BofA Securities 2 5%
Chart Title
5%
15%
47%
20%
13%
J.P. Morgan Morgan Stately chase Bank of America

Goldman Sachs BofA Securities
Observation
According to the above pie chart the J.P Morgan is the most known by 48% and BofA Securities
is the least heard bank with 5%
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Q11. How much return do you expect from the money that you have invested?
Return Total Percentage

5%to7% 4 10%
7%to8% 14 35%
8%to9% 7 17%
9%to10% 15 38%
Chart Title
10%
38%
35%
17%
5%to7% 7%to8% 8%to9% 9%to10%
Observation
The majority of the respondent has chosen the return of 9% to 10% with a percentage 38 and
the least was 5% to 7% i.e., 10%
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Q12. What are your investment objectives?
Objectives Total Percentage

Income and capital preservation 9 22%
Short term growth 6 15%
Growth and income 16 40%
Long term growth 9 23%
Chart Title
23% 22%
15%
40%
Income and capital preservation Short term growth

Growth and income Long term growth
Observation
According to the above pie-chart the greater number of investment objectives is in growth and
income i.e., 40%, while the less number is in short-term growth i.e., 15%.
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Q13. In which sector do you prefer to invest your money?
Operation Total Percentage

Private Sector 15 37%
Government Sector 9 22%
Public Sector 11 28%
Foreign Sector 5 13%
13%
37%
28%
22%
Private Sector Government Sector Public Sector Foreign Sector
Observation
According to above pie-chart the more numbers of investment is done in private sector i.e.,
38%, while the less numbers is in foreign sector i.e., 13%.
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Q14. What is the purpose behind your investment?
Purpose Total Percentage

Wealth Creations 12 30%
Tax saving 7 17%
Earn Returns 16 40%
Future expense 5 13%
13%
30%
40%
17%
Wealth Creations Tax saving Earn Returns Future expense
Observation
According to the above pie-chart the more numbers of investments purpose is in earn return
i.e., 40%, while the less numbers is future expense i.e., 13%.
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Chapter 5
Conclusions
An investment banks operated in a very different technological, legal, and political

environment; the mechanisms just described are very close to those that underpin modern
security offerings. In these cases, investment banks lever off their relationships to provide
incentives for information production and dissemination, and they are trusted because they risk
their reputational capital every time, they underwrite a fresh deal.
As Investment bank are different for commercial bank and play a very crucial role in market
transactions on behalf investors, government and corporations and for growing economy in
India needs a helping hand. A helping hand can only be provided by the financial or the banking
industries.
We can say that Investment banks exist because they maintain an information marketplace that
facilitates information-sensitive security transactions. Investment Banking A recent
development in Business sector such as Development of Debt Market. Entry of foreign
Investor. Growth of New Issues Market. Innovation in Financial Instrument. etc by the
investment Banking it has change the lifecycle of business.
Thus, bank develop an adequate infrastructure including expertise in order to provide full range
of service to corporate sector. So, it has great scope and as it related to service sector it is very
useful for fast growing economy.
Given the scope for investment banking in India, the future looks bright for the industry as a
whole in India. Many more pure investment banks and advisory firms could convert themselves
into full-service investment banks that would broaden the market and make the service delivery
much. more efficient. In addition, the technological and market developments shaping the
capital market as discussed would also provide an added impetus to growth of investment
banking.
Better regulatory supervision and stricter enforcement of the code of conduct of market
intermediaries would ensure that better quality issuers come to the market and existing issuers
would follow enhanced standards of corporate governance. In the long run, all the
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developments would ensure fair return to investors, and bring back investor support to the
market.
Chapter 6
Suggestion
1. The future of investment banking industry as a whole looks bright. Many more pure
merchant banks & advisory firms could convert themselves into full-service investment
banks that would broaden the market & make the service delivery much more efficient.
2. In addition, the technology & market developments shaping the capital market would
also provide an added path to the growth of investment banking.
3. Better regulatory supervision & stricter enforcement of the code of conduct of market
intermediaries would ensure better issuers come to market & existing issuers would
follow enhanced standards of corporate governance.
4. In long run, all these developments would ensure fair returns to investors, & encourage
them to invest in the market. This would lead to growth for capital market in general &
investment banking industry also.
5. So hereby I conclude that Kotak Securities is an upcoming brand, in the area of security
business (Investment Banking), trying hard to provide various services and facilities to
their clients. Now as per their recent.
6. Investment Banking strategy they are trying to capture retail investors, in order to
increase their goodwill in the market. In future the company will expand and diversify
its business in terms of new products and innovations in existing products to cater to
the needs of their valuable customers.
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Chapter 7
Bibliography
1. World development Report (1989), (available at www.rbi.ac.in)
2. "Morgan Stanley: The Cuomo Report’s Bonus Breakdown" The Wall Street Journal Blogs
(30 July 2009). Retrieved 7 March 2011.
3. Investment Banking Definition Investopedia Doodahs 19 November 2008.
4. U.S. Securities and Exchange Commission
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5. The Decline of Investment Banking: Preliminary Thoughts on the Evolution of the Industry
1996–2008". Journal of Business and Technology Law
6. Morrison, A. D.; Wilhelm, W. J. (2007). "Investment Banking: Past, Present, and

Future" (PDF). Journal of Applied Corporate Finance.
7. What's the role of an investment bank?" Investopedia. Retrieved 29 January 2019.
8. Risk Management Consulting | J.P. Morgan
9. Brown, Aaron (March–April 2005). "Review of "The Greed Merchants: How Investment
Banks Played the Free Market Game" by Philip Augar, HarperCollins, April 2005". Global
Association of Risk Professionals
10. Stephen Grocer, "Wall Street Compensation–’No Clear Rhyme or Reason’" The Wall
Street Journal Blogs (30 July 2009). Retrieved 7 March 2011
11. "Goldman Sachs: The Cuomo Report’s Bonus Breakdown" The Wall Street Journal Blogs
(30 July 2009). Retrieved 7 March 2011
12. Wikipedia (2010), "Banking Industry in India"
13. "A Brief History of Investment Banking". In Cassis, Youssef; Schenk, Catherine R;
Grossman, Richard S (eds.). The Oxford Handbook of Banking and Financial History.
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A detail study on Investment Banking

Bachelors of commerce (Accountancy and finance) (University of Mumbai)

Studocu is not sponsored or endorsed by any college or university

A DETAIL STUDY ON INVESTMENT BANKING

VASANI JAIMIN ARUN

PROF. RUSHI JAYNARAYAN

25TH MARCH, 2022

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MALINI KISHOR SANGHVI COLLEGE OF COMMERCE

VILE PARLE (WEST)

MUMBAI – 400 049

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A DETAIL STUDY ON INVESTMENT BANKING

VASANI JAIMIN ARUN

PROF. RUSHI JAYNARAYAN

25TH MARCH, 2022

Downloaded by Siddhesh Sawant (siddheshsawant8668@gmail.com)

MALINI KISHOR SANGHVI COLLEGE OF COMMERCE

VILE PARLE (WEST)

MUMBAI – 400 049

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I, VASANI JAIMIN ARUN of MALINI KISHOR SANGHVI COLLEGE

25TH MARCH, 2022 SIGNATURE OF STUDENT

(VASANI JAIMIN ARUN)

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This is to certify that VASANI JAIMIN ARUN of MALINI KISHOR

SIGNATURE OF PROJECT GUIDE SIGNATURE OF BAF CO-ORDINATOR

COLLEGE SEAL SIGNATURE OF EXTERNAL EXAMINER

(DR. KESHAV GHORUDE)

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1.1 What is Investment Banking

Investment bankers function as intermediaries in financial transactions. They are experienced

The essential function of an investment bank is to act as an intermediary between potential

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An investment bank is defined as a financial institution or an organization that underwrites

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1.3 Evolution of investment banking

History of Investment Banking in India

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Association of Investment Bankers of India

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1.4 Growth of Investment Banking

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The global investment banking market is segmented –

1) By Type: Mergers & Acquisitions Advisory, Financial

2) By Enterprise Size: Large Enterprises, Medium and

3) By End-Use Industry: Financial Services, Retail & Wholesale, Information Technology,

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1.5 Function of Investment Banks

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• Total size of the project.

4) Management of Capital Issues

(A) Pre-issue Management

Steps required to be taken to manage pre-activity is as follows:

(1) Obtaining stock exchange approvals to memorandum and articles of association.

(2) Taking action, a as per Exchange Regulatory guidelines.