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    INTRODUCTION

    Investment banking, or I- banking, as it is often called, is the term

    used to describe the business of raising capital for companies and

    advising them on financing and merger alternatives. Companies need

    cash in order to grow and expand their business ; investment banks

    sell securities to public investors in order to raise this cash. These

    securities can come in the form of stocks or bonds .

    At a very micro level, Investment banking is concerned with

    the primary function of assisting the capital market in its

    function of capital intermediation i.e. the movement of financialresources from those who have them (the Investors), to those who

    need to make use of them (the Issuers).Banking and financial institutions

    on the one hand and the capital market on the other are two broad

    platforms of institutional intermediation for capital flows in the

    economy. Therefore, it could be inferred that investment banks

    are those institutions that are the counterparts of banks and the capital

    market in the function of intermediation in resource allocation. From its

    small beginnings in the seventies and eighties, investmentbanking unfolded itself as a full -f ledged service industry

    during1991. From mere public flotation services such as issue managem

    ent and underwriting , the investment banking industry has evolved to

    encompass many

    high profile corporate actions. The term Investment Banking has a

    much wider connotation and is gradually becoming more of an inclusive

    term to refer to all types of capital market activity, both fund-based and

    non-fund based . Investment Banker provides two general

    functions:1.raising funds for clients and,2.assist ing clients in the sale

    or purchase of securities

    Over the decades, backed by evolution and also fuelled by recent

    technological developments, investment banking has transformed

    repeatedly to suit the needs of the finance community and thus become

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    one of the mostvibrant and exciting segments of financial

    services. Investment bankers have always enjoyed celebrity

    DEFINITION

    There appears to be considerable confusion today about what does and

    does not constitute an investment bank and investment banker. Let us

    see what is it?

    Investment Bank (IB)

    A financial intermediary that performs a variety of services .This

    includes underwriting, acting as an intermediary between an issuer of

    securities and the investing public, facilitating mergers and

    other corporate reorganizations, and also acting as a broker for

    institutional clients .The role of the investment bank begins with

    pre-underwri ting counseling and continues after the distribution of

    securities in the form of advice.

    Investment Banker

    A person represent ing a f inancial ins t i tu t ion that i s in

    the business of raising capital for corporations and municipalities.

    An investment banker may not accept deposits or make commercial

    loans. Investment bankers are the people who do the grunt work for IPO

    and bond issues.

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    MEANING OF INVESTMENT BANKING

    In the definition, investment banking is the raising of

    funds; both in debt and equity, and the division handling this in an

    investment bank is often called the "Investment Banking Division"

    (IBD). However, only a few small firms provide only this service.

    Almost all investment banks are heavily involved in providing

    additional financial services for clients, such as the tradingof derivatives, income, exchange, commodity, a n d equity. I t i s

    therefore acceptable to refer to both the " Inves tment

    Banking Division" and other'front office' divisions such as "Fixed

    Income" as part of "investment banking," and any employee

    involved in either s ide as an "investment banker." Furthermore, one

    who engages in these activities in-house at a non-investment bank is also

    considered an investment banker

    More commonly used today to characterize what was

    traditionally termed "investment banking" is

    " sell side."

    This is trading securities for cash or securities (i.e., facilitating

    transactions, market-making), or the promotion of securities (i.e.

    underwriting, research, etc.).

    The" buy side"

    constitutes the funds, mutual, hedge, and the 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.

    http://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Ownership_equityhttp://en.wikipedia.org/wiki/Derivative_(finance)http://en.wikipedia.org/wiki/Front_officehttp://en.wikipedia.org/wiki/Sell_sidehttp://en.wikipedia.org/wiki/Buy_sidehttp://en.wikipedia.org/wiki/Buy_sidehttp://en.wikipedia.org/wiki/Sell_sidehttp://en.wikipedia.org/wiki/Front_officehttp://en.wikipedia.org/wiki/Derivative_(finance)http://en.wikipedia.org/wiki/Ownership_equityhttp://en.wikipedia.org/wiki/Debt
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    Who needs an Investment Bank?

    Any firm contemplating a significant transaction can benefit from the

    advice of an investment bank. Although large corporations often have

    sophisticated finance and corporate development departments, an

    investment bank provides objectivity, a valuable contact network,

    allows for efficient use of client personnel, and is vitallyinterested in seeing the transaction close. Most small to medium

    sized companies do not have a large in-house staff, and in a financial

    transaction may be at a disadvantage versus larger co mpet i tors .

    A qual i ty inves tment banking f i rm can provide the serv ice

    s required to initiate and execute a major transaction, thereby

    empowering small to medium sized companies with financial and

    transaction experience without the addition of permanent overhead.

    What to look for in an Investment Bank

    Investment banking is a service business, and the client should expect

    top-notch service from the investment banking firm. Generally only large

    client firms will get this type of service from the major Wall Streetinvestment banks; companies with less than about $100 million in

    revenues are better served by smaller investment banks. Some criteria

    to consider include:

    Services OfferedFor all functions except sales and trading, the services should go well

    beyond simply making introductions, or "brokering" a transaction. For

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    example, most projects wil l include detai led industry and financial

    analysis, preparation of relevant documentation such as an offering

    memorandum or presentation to the Board of Directors, assistance with

    due diligence, negotiating the terms of the transaction, coordinating

    legal, accounting, and other advisors,

    Andgenerallyassisting in all phases of the project to ensure succe

    ssful

    completion.

    ExperienceIt extremely important to make sure that experienced,

    senior members of the investment banking firm will be active in

    the project on a day-to-day basis. Depending on the type of transaction,

    it may be preferable to work with an investment bank that has some

    background in your specific indus t ry segment . The in ves tment

    bank should have a wide network of relevant contacts, such

    as potential investors or companies that could be approached for

    acquisition.

    Record of SuccessAlthough no reputable investment bank will guarantee success,

    The firm must have a demonstrated record of closing transactions.

    Ability to Work QuicklyOften, investment banking projects has very specific deadlines,

    for example when bidding on a company that is for sale. The investment

    bank must be willing and able to put the right people on the project and

    work diligently to meet critical deadlines.

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    Fee StructureGenerally, an investment bank will charge an initial retainer fee, which

    may be one-time or monthly, with the majority of the fee contingent upon

    successful completion of the transaction. It is important to utilize a fee

    structure that aligns the investment bank's incentive with your own.

    Ongoing SupportHaving worked on a transaction for your company, the investment bank

    will be intimately familiar with your business. After the

    transaction, a good investment bank should become a trusted

    business advisor that can be called upon informally for advice and

    support on an ongoing basis.

    Because investment banks are intermediaries, and generally

    not providers of capital, some executives elect to execute

    transactions without an investment bank in order to avoid the

    fees. However, an experienced, quality investment bank adds

    significant cant value to a transaction and can pay for its fee many times

    over.

    The investment banker has a vested interest in making sure the

    transaction closes, that the project is completed in an efficient time frame,

    and with terms that provide maximum value to the client. At the

    same time, the client is able to focus on running the business,

    rather than on the day-to-day de ta il s of the tra nsa ct ion ,

    knowing that the t ransact ion i s being handled b y

    individuals with experience in executing similar projects.

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    GLOBAL INDUSTRIAL STRUCTURE

    The Investment banking industry on a global scale is oligopolistic

    in nature ranging from the global leaders (known as the Global Bulge

    Group) to Pure Investment banks and Boutique Investment

    banks. The bulge group consisting of eight investment banks has a global

    presence and these firms dominate the league in key business segments.

    Therefore, the global investment banking industry ranges from the

    acknowledged global leaders listed above to a large number of

    mid-sized competi tors a t a nat ional or regi onal l evel and

    the rear end is supported by boutique firms or advisory and sector

    specialist.

    Inves tment banking is one of the most g lobal indus t r iesand is hence cont inuously chal lenged to respond to new

    developments and innovation in the global financial markets.

    Throughout the history of investment banking, many have theorized

    that all investment ba nk in g p ro du c t s an d se rv ic es wo ul d

    b e commoditized. N e w p r o d u c t s w i t h h i g h e r m a r g i n s

    a r e c o n s t a n t l y i n v e n t e d a n d manufactured by

    bankers in hopes of winning over cl ients and de veloping

    trading know-how in new markets . However , s ince thesecan us ua ll y no t be patented or copyrighted, they are very often

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    copied quickly by competing banks, pushing down trading

    margins.

    INDIAN SCENARIO

    Origin

    In India, though the existence of this branch of financial services can be

    traced to over three decades, investment banking was largely confined to

    merchant banking services.

    The forerunners of merchant banking in India were the foreign banks.

    Grind lays Bank (now merged with Standard Chartered Bank in

    India) began merchant banking operations in 1967 with a license

    obtained from the

    RBI followed by the Citibank in 1970. These two banks were providing

    Services for syndication of loans and raising of equity apart from other

    advisory services.

    It was in 1972; the Banking Commission Report asserted the need for

    merchant banking services in India by the public sector banks. Based on

    the American experience which led to the passing of the Glas s

    Steagall Act, the Commission recommended a separate structure

    for merchant banks so as to distinct them from commercial banks and

    financial institutions.

    Merchant banks were meant to manage investments and provide advisoryservices. Following the above recommendation, the SBI set up its

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    merchant banking division in 1972. Other banks such as the

    Bank of India, Bank of Baroda, Syndicate Bank, Punjab National Bank,

    and Canara Bank also fo ll ow ed su it to se t u p t he ir me rc ha nt

    banking out f i t s . ICICI was th e f i rs t financial inst itution to

    set up its merchant banking division in 1973.

    The later entrants were IFCI and IDBI with the lat ter setting up

    its merchant banking division in 1992. However, by the mid eighties

    and early nineties, most of the merchant banking divisions of public

    sector banks were spun off as separate subsidiaries. SBI set up

    SBI Capital Markets Ltd. in 1986. Other such banks su ch as

    Canara Bank, BOB, PNB, Indian Bank and ICICI c reated

    separate merchant banking entities.

    Growth

    Merchant banking in India was given a shot in the arm with the advent

    of SEBI in 1988 and the subsequent in t roduct ion of f ree

    pricingof pr imary market equi ty i ssues in 1992. However , pos t -

    1992, the merchant banking indust ry was largely dr iven b

    y issue management activity which fluctuated with the trends

    in the primary market.

    There have been phases of he c t i c a c t i v i t y f o l l o we d b y

    S E B I s t a r t e d t o regulate the merchant bankers who registered

    with a se ve re se tb ac k in bu s i ne ss . SEBI were either in

    issue management or associated activity such as underwriting or advisor

    ship.

    SEBI had four categories of merchant bankers with varying eligibility

    criteria based on their net worth. The highest number of registered

    merchant bankers with SEBI as at the end of March 2003 was 124,

    from a peak of almost thousand in the nineties. In the financial year 2002-

    2003 itself, the number decreased by 21.

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    Constraints in Investment Banking

    Due to the over-dependence on issue management activity in the initial

    years, most merchant banks perished in the primary market downturn that

    followed later. In order to stabilize their businesses, several

    merchant banks diversified to offer a broader spectrum of capital

    market services.

    However, other than a few industry leaders, the other merchant banks

    have not been able to transform themselves into full service

    inv es tme nt ba nks . Go in g by the service portfolio of the leading

    full service investment banks in India, it may be said that the industry inIndia has seen more or less similar development as its wes tern

    counterpar ts , though the breadth avai lable in the overseas

    capi tal market is still not present in the Indian capital market.

    Secondly, due to the lack of institutional financing in a big way to fund

    capital market activity, it is only the bigger industry players who are

    in investment banking. The third major deterrent has also been the

    lack of depth in the secondary market, especially in the corporate debt

    segment.

    Investment banking and Merchant banking

    Investment banks and Merchant banks in their purest forms are

    di f ferent k inds of f inancial ins t i tu t ions that perform

    dif ferent serv ices . In pract ice, the f ine l ines that separate

    th e fu nc t io ns of me rc ha nt ba nk s an d investment banks tend to

    blur. Traditional merchant banks often expand into the field of marketing

    of securities and have an onerous responsibility towards the i nvestors

    w h o i n v e s t i n such securities. While many investment

    banks participate in trade financing activities. In theory, inves tment

    banks and merchant banks perform different functions.

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    Pure investment banks raise funds for businesses and some

    governments by registering and issuing debt or equity and selling i t on a

    market. Traditionally, investment banks only participated in underwriting

    and sel l ing securi t ies in la rge blocks. Investment banks

    facilitate mergers and acquisitions

    through share sales and provide research and financial consulting to

    companies. Traditionally, investment banks did not deal with the

    general public.

    Traditional merchant banks primarily perform international financing

    activities such as foreign corporate investing, foreign real estate

    investment, trade finance and international transaction

    facilitation. Some of the activities that a pure merchant bank is

    involved in may include issuing letters of credit, t ra ns fe rr in g

    funds in ternat ional ly , t rade consul t ing and co- inves tment

    in projects involving trade of one for or another.

    As a general rule, investment banks focus on

    initial offerings(IPOs)and large public and private share offerings

    . Merchant banks t end t o oper ate on smal l-scal e co mpanies

    and off er cre at ive eq uit y financing , bridge financing ,mezzanine

    financing and a num be r o f cor por at e credit products. While

    investment banks tend to focus on larger companies, merchant

    banks offer their services to companies that are too big

    for venture capital

    firms to serve properly, but are still too small to make acompelling public share offering on a large exchange. In order to

    bridge the gap between venture capital and a public offering,

    larger merchant banks tend to privately place equity with other

    financial institutions, often taking on large portions of ownership in

    companies that are believed to have strong growth potential.

    Merchant banks still offer trade financing products to their clients.

    Investment banks rarely offer trade financing because most investment

    banking cl ients have already outgrown the need for t radefinancing and the var ious credit products linked to it. But,

    http://www.investopedia.com/terms/b/block.asphttp://www.investopedia.com/terms/b/block.asphttp://www.investopedia.com/terms/m/mergersandacquisitions.asphttp://www.investopedia.com/terms/m/mergersandacquisitions.asphttp://www.investopedia.com/terms/m/mergersandacquisitions.asphttp://www.investopedia.com/terms/i/ipo.asphttp://www.investopedia.com/terms/p/privateplacement.asphttp://www.investopedia.com/terms/p/privateplacement.asphttp://www.investopedia.com/terms/b/bridgefinancing.asphttp://www.investopedia.com/terms/m/mezzaninefinancing.asphttp://www.investopedia.com/terms/m/mezzaninefinancing.asphttp://www.investopedia.com/terms/v/venturecapital.asphttp://www.investopedia.com/terms/v/venturecapital.asphttp://www.investopedia.com/terms/v/venturecapital.asphttp://www.investopedia.com/terms/m/mezzaninefinancing.asphttp://www.investopedia.com/terms/m/mezzaninefinancing.asphttp://www.investopedia.com/terms/b/bridgefinancing.asphttp://www.investopedia.com/terms/p/privateplacement.asphttp://www.investopedia.com/terms/i/ipo.asphttp://www.investopedia.com/terms/m/mergersandacquisitions.asphttp://www.investopedia.com/terms/m/mergersandacquisitions.asphttp://www.investopedia.com/terms/b/block.asp
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    Investment banking is a term of much wider connotation than Merchant

    banking as it implies significant fund -based exposure to the

    capital market. Internationally, Investment banks have progressed in

    both fund-based and non-fund based segments of the industry. In India,

    the dependence has been heavily on Merchant banking more particular

    with issue management and underwriting. However, downturn in the

    primary market has forced merchant banks to diversify and become full-

    fledged Investment banks.

    INVESTMENT BANKS AS FINANCIAL INTERMEDIARY

    Investment bankers facilitate the flow of money. They are

    financial intermediaries, the critical link between users and providers of

    capital. They bring together those who need funds with those who have

    funds, and they ma ke the mar ke ts tha t al loc at e ca pit al an d

    regulate price in these financial exchanges.

    Those who desire to raise capital are called issuers, since they i ssue

    ownership in thei r en terpr ises ( i .e . equi ty) or obl igat ionsfrom thei r en terpr ises ( i .e . promises to pay debt in teres t

    and rep ay deb t p rin ci pal ) i n exchange for cash or cash

    equivalents; those who provide capital are called investors,

    since they must invest cash or cash equivalents in exchange

    for those rights of ownership or obligation.

    Investment bankers enable issuers to raise capital (i.e.

    corporations or companies that sell or issue securities forcash)

    and investors to place capital (i.e. individuals or institutions that

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    buy or invest in those securities) in the most efficient manner for both.

    investors, since they must invest cash or cash equivalents in

    exchange for those rights of ownership or obligation.

    Investment bankers enable issuers to raise capital (i.e.corporations or companies that sell or issue securities forcash)

    and investors to place capital (i.e. individuals or institutions that

    buy or invest in those securities) in the most efficient manner for both.

    Investment banking is a dynamic industry characterized by flux a n d

    t r a n s f o r m a t i o n . F i n a n c i a l i n s t r u m e n t s h a v e g r o w n

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    m o r e c o m p l e x a s financial intermediaries have become more

    competitive. Blizzards of innovative i n s t r u m e n t s a r e s w e e p i n g

    f i n a n c i a l m a r k e t s .

    B o u n d a r i e s a m o n g d i v e r s e f in an ci al i ns ti tu ti on s ar eblurr ing . Bar r iers between in terna t ional f inancial markets

    are eroding. And, ampl i fy ing the complexi ty and the

    compet i t ion, financial markets, firms, products, and techniques are

    merging and melding. Investment banking, long simply synonymous with

    the d o m e s t i c u n d e r w r i t i n g a n d m a r k e t m a k i n g o f

    c o r p o r a t e e q u i t y a n d d e b t securities, has expanded dramatically.

    The industry has been transformed new functions (e.g., the

    prominence of mergers and acquisit ions), new products(e.g., raterisk management mechanisms, such as swaps), new techniques (e.g.,

    securitization of illiquid receivables), new markets (e.g., Tokyo,

    London and India) , and new muscle (e.g. , merchant

    banking) have changed the face of contemporary Investment

    banking

    BUSINESS PORTFOLIO OF INVESTMENT BANKS

    Globally, investment banks handle significant fund-based business of

    their own in the capital market along with their non -fund

    service portfolio that is offered to clients. However these distinct

    segments are handled e i t h e r o n the same balance sheet or through

    subsidiaries and a ff i l ia tes depending upon the regulatory

    requirements in the operating environment of each country. All

    these activities are segmented across three broad platforms equity

    market activity, debt market activity and merger and acquisitions

    (M&A)ac t i v i t y .

    I n a d d i t i o n , g i v e n t h e s t r u c t u r e o f t h e m a r k e t ,

    t h e r e i s a l s o s e g me nt at io n b as ed o n w he t he r a

    part i cular inves tment bank belongs to a banking parent or

    investment bank. In the case of universal banks such as the Citigroup or

    UBS Warburg, l oan produc ts form a s ignif ica nt part of the

    de bt ma rk et bu si ne ss portfolio. Pure investment banks such asGoldman Sachs, Merrill Lynch and Morgan Stanley Dean Witter do

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    not have commercial banking in their portfolio and therefore, do not

    offer loan products. Besides the larger firms, there are a host of

    other domestic players present in each country and mid-sized

    investment banks, which either specialize in local markets or in certain

    product segments.

    The global mergers & acquisitions business is very large and

    measures up to t r i l l ions of dol lars annual ly . Inves tment

    banks play a lead advisory role in this booming segment of financial

    advisory business. Besides, they come in as investors in

    management buy-outs and management buy-in transactions. On the

    other occasions, wherein investment banks manage private equity funds ,t

    hey also represent their investors in such buy-out deals.

    S o m e i n v e s t m e n t b a n k s i n t h e o v e r s e a s m a r k e t s a l s o

    s p e c i a l i z e i n n i c h e s e g me nt s s uc h a s management of

    he dg e fu nd s, bu ll io n tr ad e , co mmo di ty hedges, real estate and

    other exotic market. Below given is the diagram, which represents the

    broad spectrum of global investment activity.

    INDIAN INVESTMENT BANKING INDUSTRY

    CHARACTERISTICS AND STRUCTURE

    Investment banking in India has evolved in its own characteristic

    structure over the years both due to business realities and the regulatory

    regime. On the regulatory front, the Indian regulatory regime does no

    allow all investment banking functions to be performed under one entity

    for two reasonsto prevent excessive exposure to business risk under

    one entity and to prescribe and monitor capital adequacy and risk

    mitigation mechanisms.

    Therefore, bankruptcy remoteness is a key feature in structuring the

    business l ines of an inves tment bank so that the r isks and

    re wa rd s ar e defined for the investors who provide resources to

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    the investment banks. In addition, the capital adequacy requirements

    and leveraging capability for each business line have been prescribed

    differently under relevant provisions of law. On the same analogy,

    commercial banks in India have to follow the provisions of the Banking

    Regulation Act and the RBI regulations, which prohibit them

    from exposing themselves to stock market investments and

    lending against stocks beyond certain specified limits.

    Therefore, Indian investment banks structure their business segments

    indifferent corporate entities to be able to meet regulatory norms.

    For e.g. i t is desirab le t o ha ve me rcha nt ba nkin g in a

    se pa ra te co mp an y as it re qu ir es s eparate merchant banking

    license from the SEBI. Merchant Bankers other than

    Banks and financial institutions are also prohibited from undertaking any

    other business othe r than tha t in the sec uri t ies market .

    However , s inc e banks are subject to the Banking Regulation Act,

    they cannot perform investment banking to a large extent on the same

    balance sheet. Asset management business in the form of a mutual fund

    requires a three-tier structure under the SEBI regulations. Equity researchshould be independent of the merchant banking business so as to avoid

    the kind of conflict of interest. Stock broking has to be separated into

    different company, as it requires a stock exchange membership apart

    from SEBI registration. Investment banking in India has also been

    influenced by business realities to a large extent .

    Due to the above reasons, the Indian investment banking industry has a

    heterogeneous structure. The bigger investment banks have several group

    ent i t ies in which the core an d non-core bus iness segments

    are d is t r ibuted .Others have either one or more entities depending

    upon the activity profile. The heterogeneous and fragmented structure is

    evident even if Indian investment banks are classified on the basis

    of their activity profile. Some of t he m su ch as SBI, IDBI,

    ICICI, IL & FS, Kotak Mahindra, Citibank and others offer

    almost the entire gamut of investment banking services permitted in

    I n d i a .

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    A m o n g t h e s e , t h e l o n g - t e r m f i n a n c i a l i n s t i t u t i o n s a r e

    g r a d u a l l y transforming themselves into full service commercial banks

    9called universalbanking in the Indian context. They also have full

    service investment banking under their fold.

    INDIAN INVESTMENT BANKING INDUSTRY

    DEVELOPMENTS

    Over the subsequent years, two developments have taken place. Firstly,with the downturn in the capital markets, the merchant banking industry

    has seen tremendous shake out and only about a 10% of them remain in

    serious business as pointed out earlier. The other development is that due

    to the gradual regulatory developments in the capital markets, investment

    banking act iv i t ies have come under regulat ions which

    requ ire sepa rate regi st rati on, licensing and capital controls.

    Presently, there are no Indian investment banks although there i s a

    b u l g e b r a c k e t o f i n v e s t m e n t b a n k s i n I n d i a t h a t h a v es o m e o v e r s e a s presence to serve Indian issuers and their

    investors.

    At the middle level are s eve ral nich e pla yers inc ludi ng the

    me rc ha nt ba nk in g su bs id ia ri es of so me public sector banks.

    Some of these subsidiaries have been either shut down or sold off in

    the wake of the two secur i t ies scams seen in 1993 and in

    20 00 .However, certain banks such as Canara Bank and PunjabNational Bank have had successful merchant banking activities.

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    Among the middle level players are also merchant banks structured

    as non-banking financial services companies such as Rabo India

    Finance Ltd., Alpic Finance etc. There are also in the middle level ,

    some pure advisory f i rms such as Lazard Capi tal , Erns t

    & Young,KPMG, Pr ice Waterhouse Coopers etc . At the

    l ow er en d a re se ve ra l n ic h e p l a y e r s a n d b o u t i q u e f i r m s ,

    wh ic h f o c u s o n o n e o r mo re s e g m en t s o f t h e investment

    banking spectrum

    INSTITUTIONAL INVESTING AND INVESTMENTBANKING

    . Institutional investors have been a recent phenomenon in the Indian

    capital market, which till then had the presence of a handful of public

    financial institutions such as the UTI and the insurance companies. The

    term l e n d i n g i n s t i t u t i o n s s u c h a s t h e I D B I a n d I F C I

    d id no t p a r t i c i p a t e in s e c o n d a r y m a r k e t d e a l i n g a s

    a m a t t e r o f p o l i c y . W i t h t h e a d v e n t

    o f liberalization, there are presently a large number of domestic

    institutional investors in the secondary market apart from

    approved foreign ins titutional investors. In addition, institutional

    investments have risen significantly in the primary markets through

    venture capital and private equity investments by investors in both

    the domestic and non-resident categories. Several of the leading

    inves tment banks ei ther have dedicated venture funds or

    pr ivate equity funds that invest in primary market.

    What does the 'FIG' at an investment bank refer to?

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    The 'FIG' at an investment bank usually refers to the financial

    institutions group - a g r o u p o f p r o f e s s i o n a l s t h a t

    p r o v i d e s inves tment banking and me rgers and

    acquis i t ions exper t i se t o f i nancial ins t i tu t ions . In order to

    provide more ta i lored serv ices , some investment banks

    further segment their areas of expertise under the financial institutions

    g r o u p i n t o a b a n k i n g o r f i n a n c i a l s e r v i c e s group,

    and an insurance group.

    Some investment banks use these sorts of divisions more as

    marketing technique than as a representation of real expertise .

    Some examples of companies that may represent prospective FIG

    clients include insurance companies specializing in personal o rc o m m e r c i a l i n s u r a n c e p r o d u c t s , c o m m e r c i a l

    f i n a n c e c o m p a n i e s that p r ovide f i nancial s e rvices to

    businesses, banks , brokerages , investment dealers, and wealth

    management companies.

    The services that the FIGs may provide to clients include, but are not

    l i m i t e d t o : private and public equity or debt financing,

    recapitalization, financial restructurings, mergers, acquisitions,

    corporate valuations, expert f i n a n c i a l o p i n i o n a n d

    c o r o l l a r y a n a l y s i s a n d a d v i s o r y s e r v i c e s .

    Some other investment banking segments include: health care,

    industrial , media, telec ommunic at ions, mining, energy,

    r et ai l, t ec hn ol og y a n d r ea l - e s t a t e , a l t h o u g h t h i s i s b y n o

    m e a n s a n e x h a u s t i v e l i s t o f t h e b u s i n e s s divisions within

    which investment banks operate.

    SERVICE PORTFOLIO OF INDIAN INVESTMENT BANKS

    The core services provided by Indian investment banks are broadly

    divided into two categories

    A) Management of public offers and private placements.

    B)Corporate advisory services.

    These are profiled below:

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    (A)Management of public offers and private placements

    Initial Public Offer

    The first exposure of a company to the capital marketi.e. Initial

    P ub li c O ff er . I n i t i a l p u b l i c o f f e r i n g o r I P O , i n

    f i n a n c i a l m a r k e t terminology, is the initial sale of the

    common shares of a corporation to the public. It represents a

    primary market . Companies typically issue stock when they first

    go public through initial public offerings (IPOs), and they may issue

    stock and bonds periodically to fund such enterprises as

    research, new product development, and expansion. IPO, whichis currently, perceivedby entrepreneurs and start-up executives is a

    good way to secure money to expand the business without over-reliance

    upon third-partydebt.

    Before stocks and bonds are issued, investment bankers perform due

    diligence examinations, which entail carefully evaluating a company's

    worth in terms of money and equipment (assets) and debt(liabilities).

    This examination requires the full disclosure of a company's strengths andweaknesses. Investment banks aid companies and governments in selling

    securities as well as investors in purchasing securities, managing

    investments, and trading securities. Investment banks take the form of

    brokers or agents who purchase and sell securities for their clients;

    dealers or principals who buy and sell securities for their personal interest

    in turning a profit; and broker-dealers who do both.

    The primary service provided by investment banks is

    underwriting, which refers to guaranteeing a company a set

    pr ice for the securi t ies i t p lans to i ssue. I f the securi t ies

    fa il to se ll fo r th e se t pr ic e , th e investment bank pays the

    company the difference. Therefore, investment banks must carefully

    determine the set price by considering the

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    expectations of the company and the state of the market for the

    securities. The lessons are clear. IPO is a complex process requiring hard

    work by a skilled team of investment bank: in the end, the market will

    punish the ill- prepared. Thus, IPO market is of special significance to

    investment banking s i n c e t h i s i s a n a r e a t h a t p r o v i d e s

    s t at u t o r y e xc l us iv i t y to th e m a s l e a d managers. In the days

    when the public offers market is very vibrant, this area of service forms

    the main activity for most Indian investment banks.

    Rights Issues and Secondary Public Offers

    A rights issue is made to the existing shareholders of a company. The

    right herein refers to the entitlement of a shareholder to apply for and

    receive additional shares in the company. It is a right and not obligation.

    Secondary public offer also known as follow on offering, consists

    of p o s t - l i s t i n g p u b l i c i s s u e s , o f f e r s f o r s a l e a n d

    c o m p o s i t e i s s u e s . A l i s t e d company shall be eligible to make

    rights issue and secondary public offers. A listed company has to consider

    many more aspects than anunlis ted company in approaching its

    shareholders or the primary market for funds. From Investment

    banking prospective too, a listed company has a set of opportunities andlimitations as compared to an unlisted company.

    Role of Investment Banker in Listed CompaniesThe functional areas for investment bankers in listed companies are thus

    listed below:

    1)Acting as advisers and arrangers in raising debt and equityfinance through the capital market.

    2)Acting as advisers and arrangers for private placement of debt and

    equity.

    3)Act ing as merchant bankers for t ransact ions relat ing to

    rights i ssues and secondary public offers.

    4)Advise companies on pricing and valuation for various types of offers.

    5)Advise companies on post-listing issues and offerings.

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    6)Advise companies on buy backs and act as merchant bankers for such

    offers.

    Private Placement of EquityEquity capital can be raised through public offers or through private

    issues. The term private issue of equity has to be interpreted in

    terms of issue of equity shares in the non -pu bli c rou te ei th er

    through a private offering or by other means. Private placement

    is distinguished from the public offering of securities. Depending upon

    the category of investors being looked at and the status of the investor

    company, the private market for raising equity can be broadly classifiedas

    INSTITUTION and NON-INSTITUTIONAL

    The Institutional investors are Venture Capital funds and Private

    Equity funds Inv est me nt Ba nke rs als o p la ce se cur iti es wit h al imi ted numb er of institutional investors such as insurance

    companies, investment companies, and pension funds.

    Venture Capital funds is institutional risk capital that hasthe mandate of investing in start-up companies. The investment

    banker plays a key advisory role in formulating the business of

    a start-up company and also helps it to raise its finances.

    Broadly, the investment banker can deliver the following services

    to a start-up company:

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    Strategy and business advisory services in formulating thebusiness model for the companys stated business objective.

    Perform a study of the industry landscape and competitor analysis,product pricing strategy and SWOT analysis.

    Advise the company on the necessary steps to be taken to make thebusiness model credit worthy and investor friendly.

    Act as the arranger for the companys debt or equityfinancing as per the financing plan that includes representation

    and negotiations.

    Raise financing for the company in the most efficient way possible.Considering the fact that investment banks provide transaction-

    oriented services, it is found that most of the top line investment

    banks do not prefer to work wi th s ta r t -ups in pure advisory

    role unless the companys business plan is large enough to their

    linking.

    Private Equity funds on the other hand, are larger investorsinvesting in later stage companies. In this area, the role of

    investment banker is more transaction oriented than in venture

    capital fund raising. This is because, the business model of the

    company is more established, the organization is fully in place and

    the cash flow model is proven. The engagement in connection

    with a private equity transaction can be summarized as follows:

    Ident i fy and in i t ia te contact wi th prospect iveinve s tor s , inc ludi ng ro ad shows, and following up as

    necessary;

    R e p r e s e n t o r a c c o m p a n y t h e c o m p a n y i nm e e t i n g s , p r e s e n t a t i o n s a n d ensuring negotiations with

    prospective Investors;

    Review the outcome of such meetings with the company, andrecommend to the company further action as may be required;

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    Review and advise on proposals/offers from prospective investors;The

    NON-INSTITUTIONAL

    investors include high net worth investors (called HNIs), seed

    s tage venture inves tors (also cal led angel investors), financial

    and investment companies, other corporate, stock broking companies,

    portfolio investors, institutional market investors such as mutual

    funds and, foreign ins t i tu t ional inves tors and non-res ident

    Indians

    Private placements in the non-institutional category are generally made

    through c l o s e s o u r c e s . S u c h k i n d o f l i m i t e d p r i v a t eo f f e r s a r e g e n e r a l l y m a d e b y appointing a suitable agency that

    can facilitate the fund raising. While some investment banks specialize

    only in raising venture c a p i t a l a n d p r i v a t e e q u i t y , o t h e r s

    th a t h a v e s t r o n g i n v e s t o r r e l a t i o n s h ip s especially in the

    HNI category, offer private placements to non-institutional

    investors as a service. These are boutique investment banks that

    are often an extension of stock broking houses.

    Private Placement of Debt

    The private placement market for debt securities essentially consists of

    medium to long-term debt securities such as debentures and

    bonds being placed privately with selected investors, mostly institutional

    or high net worth priva te inve stor s. As of now, the priv ate

    placement market which i s considered as a market for the informed

    investor and the placement being made i n a c l o s e l o o p , h a s

    b e e n h u g e l y p o p u l a r d u e t o i t s s i m p l e a n d q u i c kd e a l process, lack of elaborate disclosures and regulatory clearances.

    Private placement of Debt is an important source of funds both

    for companies under the Companies Act and other types of entities such

    as public sector corporations, financial institutions and banks.

    Debt securities issued through private placement can also be

    listed on the stock exchange to provide them with liquidity.

    Therefore, there are three main constituents in this marketthe issuers,

    t h e investors and both the se are broug ht toge ther by t heinvestment banker who acts as the arranger to the placement. The

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    deal process typically starts with the issuer rolling out a

    plan to raise funds through the private p l a c e m e n t r o u t e .

    T h e f i r s t s t e p i n t h i s d i r e c t i o n w o u l d b e t o a p p o i n t

    t h e investment bank as an arranger to the whole placement. The firststep for the investment banker is to ascertain that the company has

    taken the necessary approvals from its board, shareholders and

    existing lenders for the proposed debt and has the necessary

    powers under its memorandum and art ic les of association, Sec

    293(1)(a) and 293(1)(d) of the Companies Act.

    The arranger has to then become familiar with the companys business,

    the industry space, the financials of the company and the

    financing requirements. Usually a check-list of the required information

    is prepared and the information is put together in the form of a private

    placement memorandum. All the necessary back-up papers and

    documents are also compiled and kept ready for the requirement of

    investors.

    One of the important tasks of the investment banker is to arrive at the

    instrument in offer and the deal structure. The investment

    banker has to use his conventional wisdom, ingenuity and marketintelligence to arrive a t t h e c o u p o n r a t e a n d s u i t a b l e

    e n h a n c e m e n t s i f a n y , r e q u i r e d f o r t h e instrument.

    Credit rating is an important process in the deal as it enhances

    the possibility of closing the deal early by providing all the

    necessary comfort to investors.

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    (B)Corporate Advisory Services Corporate Re-organizations

    As a result of liberalization and globalization the co mp et it io n

    in the corporate sector i s becoming in tense. To survive in

    the competition, companies are reviewing their strategies,

    structure and functioning. This has led to corporate restructuring. This

    is the most important business segment for investment bankers after

    management of public offers.

    Globally, in the traditional days of investment banking, this business

    segment, popularly known as M&A, contributed to a significant share of

    the bottom line of investment banks, sometimes becoming the largestrevenue stream. In a corporate restructuring involving a split -up or

    dis inves tment by the promoters , the inves tment banker

    prepares the ent ire feasibi li ty plan, deal structure, identifies

    the buyers or the sel lers as the case may be, conducts the valuation

    and due diligence and negotiations for arriving a t t h e t e r m s h e e t .

    T h e i n v e s t m e n t b a n k e r a l s o w o r k s c l o s e l y w i t h

    ot h er profess ionals such as accountants and legal

    adv is ors in or der to loo k at the legal, accounting and tax issues

    involving such corporate re-organizations. Thus in all corporate re-

    organizations, the investment banker performs the p ivotal role of

    t ransact ion serv ice, act ing as a catalys t for the ent i re

    deal . With a growing number of mergers and acquis i t ions

    as wel l as

    corporate re-organizations, in ves tme nt ba nks hav e bec ome

    increas ingly involved in the process of arranging these transactions aspart of their primary services.

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    Project Advisory ServicesProbably one of the most fascinat ing are as in corporate

    f in an c e i s p ro je ct f i n a n c e , n o t o n l y b e c a u s e o f i t s

    c o m p l e x i t y b u t b e c a u s e o f i t s p r o f o u n d economicsignificance as well. Project financing has traditionally been a

    term

    loan based act iv i ty , where inves tment banks had very

    l i t t le to do unless an element of capital market financing was

    involved. However, it has now become an integral part of the

    advisory service portfolio of leading investment banks, especially

    of those with a Universal Banking background. Project advisory services

    relate to all facets of project finance, which begin at the stage of project

    conceptualization and extend till the completion of financial closures and

    beyond. Most projects in recent times have used the services of

    investment banks in this area of high finance. Broadly, the range of

    services entails the following:

    B i d a d v i s o r y s e r v i c e s i n p r o j e c t s w h e r e i n t h ep r o j e c t i s a w a r d e d t o a particular consortium through a

    bidding process

    Advise in entering into other key project contacts Structuring the means of finance for the project Preparation of Project Report, loan applications and associated

    documents

    Act as arranger on behalf of the client for representation andnegotiations with lenders and equity investors

    Management of private placements/public offers of debt or equity Achieve financial closure with the best terms and in the

    best possible time for the project.

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    Financial Restructuring Advisory

    Financial Restructuring as the term denotes is the art

    of restating the financial position of a company as reflected by its

    Balance Sheet as on a given date. In order to achieve such

    restatement a complex financial and legal process is involved as it

    concerns several conflicting interests. Financial Restructuring can be

    triggered off either from the asset side of the Balance Sheet or the liability

    s ide.

    Th er ef or e, Fina nc ia l Restructuring encompasses restructuring

    of debt capital (outside liability) as well as equity capital.

    The Investment Banking Services in Debt Restructuring

    Inves tment bankers , of la te , have developed a serv ice area

    in advising and representing companies in debt restructuring

    programmers. The various steps involved are as follows:

    The first stage would be to formulate a viability plan forthe company. For this purpose, the investment banker has

    to understand the business model, present financial position,

    existing borrowings and their carrying cost, future business

    opportunities and the resulting cash flow there from.

    O n c e t h e c o m p a n y s v i a b i l i t y a n d f u t u r eo p e r a t i n g p l a n h a v e b e e n formulated, the next step

    would be to float the Debt Restructuring Scheme( D R S ) . T h e

    D R S h a s t o c o m p l y w i t h s t a t u t o r y n o r m s a n d

    a p p l i c a b l e guidelines issued by the RBI.

    The investment banker has to use his expert knowledge and priorexperience in formulating the scheme, so as to envisage

    workable terms of sacrifice from lenders and attractive terms of

    liability and cost reduction for his client.

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    The next s tep would be to present the DRS to lendersand represent the cl ien t in d iscuss ion and

    negot iat ions wi th the consor t ium of leaders

    or individual lenders as the case may be.

    The Investment Banking Services in Equity RestructuringThe investment banker plays an important role in the equity restructuring

    of a company, in the area of share buy-back. More often than not,

    companies that intend to restructure their equity capital are listed on the

    stock exchanges and therefore, such restructuring may need to

    comply with the relevant provisions of the SEBI guidelines. However,the real need for an investment banker in equity restructuring is to play

    the role of a merchant banker for a proposed share buy-back if any,

    as part of the restructuring programme.

    Since SEBI guidelines stipulate that share buybacks have tocomply with SEBI guidelines, and a merchant banker

    hold ing a val id l icense should manage the offer , i t

    becomes imperat ive for the company to appoint a

    merchant banker as manager to the offer.

    The major contribution that the merchant banker makes in suchassignments ,apart from managing the offer, is in advising

    the company on the proper method to be adopted for the buy-

    back accordingly.

    The pricing becomes critical because if the buy-back isunder-priced, the offe r may not be succ essf ul. On the

    other hand, i f the buy-back is over pr iced , i t may

    erode shareholders value for those who remain wi th

    the company post-buyback. Therefore , the role of the

    merchant banker becomes extremely important.

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    Mergers and Acquisitions Advisory

    In simple words, merger is a combination of two or more companies

    in to a s ingle where one survives and o ther lose thei r

    corporate existence

    M&A advisory firms are referred to by a number of names including:

    investment banks, bulge bracket firms, middle market M&A

    firms, business interme diaries and busine ss brokers . As a

    general ru le , business brokers represent client of smaller

    transactions, middle market firms handle the mid-size transactions and

    investment banks handle the largest transactions.

    M&A have traditionally been the forte of investment banks world over .

    In the earlier era of investment banking, M&A advisory

    constituted the only advisory area and accounted for the second largest

    revenue stream of their business. This service warrants high range

    of ski ll in the ar t of f inancial deal m a k i n g t h a t i n v e s t me n t

    b a n k s s p e c i a l i z e i n . I t has become an important advisory

    area at a time when Indian industry is passing through a

    transformation to meet the demands of globalization.

    The investment banking domain in M&A advisory is mainly in partnersearch, negotiations and deal structuring, valuation, due

    diligence and deal closure. M&A advisory is also an area

    wher ein inve stme nt bank s fac e competition from pure

    advisory and professional firms and financial services companies.

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    The key differentiate or between a firm designated as an investment bank

    and a firm that operates as an M&A advisor is that an investment bank

    in addition to performing an M&A advisory rolemay also:

    Advise companies on matters related to the issue and placement ofstock

    Act as an underwriter or agent for corporations and municipalitiesissuing securities

    Maintain broker/dealer operations Maintain markets for previously issued securities

    Offer advisory services to investors Hence some of the services or

    business segments form the core of investment banking, others

    provide invaluable support.

    Interdependence between Different Verticals of Services

    There are different verticals in investment banking and they do enjoy

    synergies with one another. This inter-independence and

    complementary exis tence has been explained below. M e r c h a n t

    b a n k i n g l a r g e l y r e l a t e s t o m a n a g e m e n t o f p u b l i c

    f l o a t a t i o n o f s e c u r i t i e s o r r e v e r s e f l o a t a t i o n s u c h a s

    t h e b u y - b a c k s a n d o p e n o f f e r s , underwriting is an inherent

    part of merchant banking for public issues. While, advisory andtransaction services help in maintaining an enduring relationship with

    clients during those times when merchant banking is not a hot activity

    duet depressed market conditions. The other segment of primary

    market activity, i.e. venture capital and private e qu it y ha s

    equal synergies wi th merchant banking. The suppor t

    business verticals in the secondary market operations also have

    synergies with those in the primary equity and debt market segment

    as far as investment banking is concerned. T h u s , i t m a y b e

    s e e n t h a t t h e g r o w t h a n d s u c c e s s o f a n i n v e s t m e n t

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    b a n k depends on its st rengths in each vert ical and how well it

    combines them for synergies. To sum up, investment banking is a

    business that is very sensitive to t h e e c o n o m i c a n d c a p i t a l

    m a r k e t s c e n a r i o a n d t h e r e f o r e , t h e b r o a d e r

    t h e platform of its operations, the more is the likelihood of an

    investment bank surviving business cycles and sudden shocks from the

    market.

    REGULATORY FRAMEWORK FORINVESTMENTBANKING

    Investment banking in India is regulated in its various facets

    underseparate legislations or guidelines issued under statute. The

    regulatory powers a r e a l s o d i s t r i b u t e d b e t w e e n

    d i f f e r e n t r e g u l a t o r s d e p e n d i n g u p o n t h e

    constitution and status of the investment bank. Primarily the

    capital market regulator (SEBI) governs pure investment banks, which

    do not have presence in th e l e n d i n g o r b a n k i n g b u s i n e s s .

    Ho we ve r , pr i ma r i l y th e R BI re gu l a t es universal banks and

    NBFC investment banks in their core business of banking or lending and

    so far as the investment banking segment is concerned, they are also

    regulated by SEBI. An overview of the regulatory framework is

    furnished below:

    a) At the constitutional level, all investment banking companies

    incorporated under the Companies Act 1956 are governed by the

    provisions of that Act.

    b) Investment Banks that are incorporated under a separate statute such as

    the SBI or the IDB I are regulate d by thei r respe ct ive

    statute . IDBI is in the process of being converted into a company

    under the Companies Act.

    c) Universal Banks are regulated by the Reserve Bank of India under the

    RBI Act 1934 and the Banking Regulations Act which put

    restrict ions on the investment banking exposures to be taken by banks.The RBI has relaxed the exposure limits for merchant banking

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    subsidiaries of commercial banks. Till now, such comp anies were

    rest rict ing thei r expo sure to a sing le ent ity through the

    underwriting business and other fund based commitments such as standby

    facilities etc. to 25% of their net owned funds (NOF). Therefore, these

    companies are now on par with other investment banks, which can do so

    up to 20 times their NOF.

    d) Investment banking companies that are constituted as non-banking

    financial companies are regulated operationally by the RBI under

    chapter III B (sec45H to 45QB) of the Reserve Bank of India Act,

    1934. Under these sections RBI is empowered to issue direct ions in

    the area of resource mobilization, accounts and administrative

    controls. The following directions have been issued by the RBI sofar:

    Non-Banking Financial Companies Acceptance of

    Deposi ts (Reserve Bank) Directions, 1998.

    NBFCs Prudential Norms (Reserve Bank) Directions, 1998.

    e) Functionally, different aspects of investment banking are regulated

    under the Securities and Exchange Board of India Act, 1992 and

    the guidel ines and regulations issued there under. These are listed

    below:

    Merchant banking business consisting of management of public

    o f f e r s i s a l i c e n s e d a n d r e g u l a t e d a c t i v i t y u n d e r t h e

    S e cu r i t i e s an d Ex ch ang e Board of I n di a (Merchan t

    Banke rs) Rule s 19 92 and SEB I (Merchant Bankers) Regulations

    1992.

    Underwriting business is regulated under the SEBI

    (Underwriters)Rules, 1993 and the SEBI (Underwriters) Regulations

    1993.

    T h e a c t i v i t y o f s e c o n d a r y m a r k e t o p e r a t i o n si n c l u d i n g s t o c k broking are regulated under the relevant by-

    laws of the stock exchange a n d t h e S E B I ( S t o c k

    b r o k e r s a n d S u b b r o k e r s ) R u l e s 1 9 9 2 a n d

    Regulations 1992. Besides, foe curbing unethical trading practices, SEBIhas promulgated the SEBI (Prohibition of Insider Trading)

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    Regulations. 1 9 9 2 an d t h e S E BI (P ro h i b i t i o n o f

    F r a u d u l e n t a n d T r a d e P ra c t i c e s Relating to Securities

    Markets) Regulations 1995.

    The business of asset management as mutual funds is regulatedu n d e r t h e S E B I ( M u t u a l F u n d s ) R e g u l a t i o n s 1 9 9 6 .T h e b u s i n e s s o f venture capital and private equity by suchfunds that are incorporated in India is regulated by the SEBI (VentureCapital Funds) Regulations, 1996and by those that are incorporatedoutside India is regulated under the SEBI (Foreign Venture CapitalFunds) Regulations 2000. The business of institutional investing by foreign investment banks andother investors in Indian secondary markets is governed by the

    SEBI(Foreign Institutional Investors) Regulations 1995.

    f) Inves tment banks that are set up in India wi th foreigndirect inves tment ei ther as jo in t ventures wi th Indian

    partners or as fu l ly owned subsid iar ies of the foreign entitiesare governed in respect of the foreign investment by the ForeignExchange Management, 1999 and the Foreign E x c h a n g eM a n a g e m e n t ( T r a n s f e r o r i s s u e o f S e c u r i t y b y aP e r s o n Resident outside India) Regulations 2000 issued there under asamended from time to time through circulars issued by the RBI.

    g) Apart from the above specific regulations relating toinvestment banking, investment banks are also governed by otherlaws applicable to all other businesses such as thetax law, contractlaw, property law, local state laws, arbitration law and other general lawsthat are applicable in India.

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    TREND ANALYSIS OF INVESTMENT BANKINGThe recent trends in investment banking have shifted sources of

    profitability or firms. In the last few years, the major trends in investment banking have

    been:

    Growth in equity business, particularly IPOs; Increase in mergers and acquisitionDominance of new-economy sectors, such as Technology and

    telecom.The winners in the market have been the bulge bracket investment

    banks and highly focused boutiques.T h e g r o w t h o f i n v e s t m e n t b a n k i n g a n d r e s e a r c h

    c o s t s i s exceeding growth in revenues, especially for secondtier major bracket and boutique investment banks.

    Recent Trends in Investment Banking

    One of the trends that have been developing in the past few y e a r s i nt h e g l o b a l a n d I n d i a n i n v e s t m e n t b a n k i n g a r e n a ,i s t h e strong m e r g e n c e o f u n i v e r s a l b a n k s a h e a d o f

    p u r e i n v e s t m e n t b a n k s a s m a r k e t leaders .

    These universal banks have the additional financial muscle of

    their banking arms that add to their pure investment banking strengths.Pure investment banks have found it unmanageable to m a i n t a i n

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    l e a d e r s h i p p o s i t i o n s d u e t o d i f f i c u l t m a r k e tc on di t i on s an d th e economic downturn.

    The year 2002 has been dubbed as the watershed year ininves tment banking. Global ly , universal banks such as the Cit igroup, JP M o r g a n C h a s e a n d D e u t s c h e B a n k a r e e m e r g i n g s t r o n g l y a g a i n s t p u r e investment bankssuch as Goldman Sachs and Morgan Stanley. This trend could probablyreappear in India as well with the emergence of SBI, ICICI, IDBI andKotak Mahindra Bank as strong universal banks

    Case study on ICICI Securities Ltd.

    ICICI Sec Ltd. was amongst the first Indian investment banks to form a

    dedicated M&A pract ice and cont inues to be a leader by

    provid ing innovative and unique solutions to achieve varied objectives

    of the client. It also has a dedicated practice to assist companies

    with capital mobilization through th e pri va te equ it y/v en tur e

    capi tal route across thei r l i fe cycle .

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    T he y a ss is t c o m p a n i e s i n r a i s i n g c a p i t a l d u r i n g t h e

    s e e d , g r o w t h a n d e x p a n s i o n a n d acquisition financing. They

    are also at the forefront of capital markets advisory having been

    involved in most major book building and fixed price offerings

    over the last decade.

    ICICI Sec is amongst the leading underwriters of Indian equity with

    unparalleled execution capabilities. It has a dedicated

    infrastructure vertical focused on assisting clients in identifying and

    capitalizing on the opportunities thrown up by the all pervasive boom in

    the Indian infrastructure sector.

    Fixed income of Bonds and YieldsICICI Sec. Ltd. is an acknowledged leader in the Indian fixed

    income and money markets, with a strong franchise across the

    spectrum of interest rate products and services institutional

    sales and trading, resource mobilization and research. One of the

    first entities to be g r an te d Pr im ar y De a le r s h i p l i c en se

    b y R B I , I - S e c h a s m a d e p i o n e e r i n g contributions since

    inception to debt market development in India. The Fixed Income

    Group features desks trading actively in government securities,

    swaps and corporate bonds markets.

    The bond research of the Fixed Income team is a benchmark for the

    industry. Innovation and insight into rate markets drive I-Secs advice toclients. They actively assist clients in designing and marketing

    interest rate structures to suit their objectives.

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    Equities Dealing with Bulls and Bears

    ICICI Securities Limited assists global institutional investors to make theright decisions through insightful research coverage and a client

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    focused Sales and Dealing team. Mentions in various client

    survey polls, commending this team for the quality of analysis and

    client servicing standards, are a testimony to the quality of the team. So

    welcome to the world of equities. Where Bulls and Bears often collide,

    run amuck or even go awry.

    To survive and excel you need a cool head and an analytical mind. With a

    combined market experience of over 150 years, the equities team at ICICI

    Securities comprises some of the finest minds in the country manning the

    research desk, sales desk and the trading desks. But dont take their word

    for it. Let some of finest equity magazines in the world do the job for

    them: The only Indian research team to figure in the top ten rankings

    conducted by Institutional Investor in 2005; Adjudged by Asia money asthe Best Brokerage House in 2003.

    ICICI Securities SubsidiariesICICI Sec has wholly owned subsidiary, ICICI Brokerage Services Ltd.

    (IBSL), whish buys and sells equities for their institutional clients.

    ICICI Sec has a U.S. subs id iary , ICICI Sec Inc. , which i s

    a me mb er of th e National Association of Securities Dealers,

    Inc. (NASD). As a result of this me mbe rsh ip , IC IC I Se c Inc .

    can engage in permit ted act iv i t ies in the U.S. secur i t ies

    markets . These act iv i t ies include deal ing in secur i t ies

    markets transactions in the United States and providing research and

    investment advice to US investors.

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    CONCLUSION

    The Investment Banking industry is come of age and is now growing

    by leaps and bounds. Inves tment Banking companies in

    I nd ia h as j o i n e d h a n d s w i t h g l o b a l m a j o r s t o a d a p t t o

    g l o b a l s t a n d a r d s a n d a l s o t o collaborate to work on cross

    border transactions and participate in international offerings. Hence,

    given the scope for investment banking in India, the future looks

    bright for the indus t ry as a whole in India . Many morepure merchant banks and advisory fi rms 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 would also provide an added impetus to the growth of

    investment banking. The market regulator, Securities Exchange Board of

    India (SEBI) has continuously played an effect ive role inincreasing transparency and has been able to put adequate safeguards

    to protect general investors interest. T

    his effort has been the single most important factor because investor

    confidence is supreme and as long as investor confidence is high, both the

    capital market and the investment banking industry will continue to do

    well. Thus, investment banking can be quoted as

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    Investment Banking the financial facilitator of market driven

    capitalism and the economic catalyst of national and international

    development

    WEBLIOGRAPHY

    www.wisegeek.com www.investorwords.com www.wikipedia.org www.google.com

    BIBLIOGRAPHY

    Book of Environment and management of financial service Investment Banking and Securities Trading

    http://www.investorwords.com/http://www.wikipedia.org/http://www.wikipedia.org/http://www.investorwords.com/
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