Investment Banking in India*

Flow Chart on Investment Banking

What Is an Investment Bank - IB?

An investment bank (IB) is a financial intermediary that performs a variety of services. Most
Investment banks specialize in large and complex financial transactions, such as underwriting,
acting as an intermediary between a securities issuer and the investing public, facilitating
mergers and other corporate reorganizations and acting as a broker or financial adviser for
institutional clients.
Major investment banks include JPMorgan Chase, Goldman Sachs, Morgan Stanley, Citigroup,
Bank of America, Credit Suisse and Deutsche Bank. Some investment banks specialize in
particular industry sectors. Many investment banks also have retail operations that serve small,
individual customers.
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 1970’s, 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.

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Note: Only for internal students to understand the topics (Academic Purpose), Not for sale or otherwise
By 1980, the number of merchant banks had risen to more than 30. This growth in the financial
services industry included 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 1990’s 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 member’s 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.
Investment Banking in India – List of AIBI Member Investment Banks:
 A.K. Capital Services Ltd.
 Ambit Corporate Finance Pvt.Ltd.
 Anand Rathi Advisors Ltd.
 Ashika Capital Ltd.
 Avendus Capital Pvt.Ltd.
 Axis Bank Ltd.
 Axis Capital Ltd.
 Barclays Bank Plc
 Bcb Brokerage Pvt.Ltd.
 Birla Capital & Financial Services Ltd.
 Bnp Paribas
 Bob Capital Markets Ltd.
 Boi Merchant Bankers Ltd.
 Canara Bank
 Central Bank Of India
 Centrum Capital Ltd.
 Chartered Finance Management Ltd.
 Choice Capital Advisors Pvt.Ltd.
 Citigroup Global Markets India Pvt.Ltd.
 Credit Suisse Securities (India) Pvt.Ltd.
 Deutsche Equities India Pvt.Ltd.
 DSP Merrill Lynch Ltd.
 Edelweiss Financial Services Ltd.
 Ernst & Young Merchant Banking Services Pvt.Ltd.
 HDFC Bank Ltd.
 HSBC Securities & Capital Markets (India) Pvt.Ltd.
 ICICI Securities Ltd.
 IDBI Capital Market Services Ltd.
  IDFC Securities Ltd.
 LIFL Holdings Ltd.
 Il&Fs Capital Advisors Ltd.
 Indian Overseas Bank
 Inga Capital Pvt.Ltd.
 Jefferies India Pvt.Ltd.
 JM Financial Institutional Securities Ltd.
 JP Morgan India Pvt.Ltd.
 Karvy Investor Services Ltd.
 Keynote Corporate Services Ltd.
 KJMC Corporate Advisors (India) Ltd.
 Kotak Mahindra Capital Co.Ltd.
 Lazard India Pvt.Ltd.
 Morgan Stanley India Co.Pvt.Ltd.
 Motilal Oswal Investment Advisors Pvt. Ltd.
 Munoth Financial Services Ltd.
 Pantomath Capital Advisors Pvt.Ltd.
 Religare Capital Markets Ltd.
 Rothschild (India) Pvt.Ltd.
 Saffron Capital Advisors Pvt.Ltd.
 SBI Capital Markets Ltd.
 SMC Capitals Ltd.
 Trust Investment Advisors Pvt.Ltd.
 UBS Securities India Pvt.Ltd.
 Union Bank Of India
 Vivro Financial Services Pvt.Ltd.
 Yes Bank Ltd.

Top 10 Investment Banking Companies in 2018 in India

Investment banking companies play a prominent role in the development of an economy.
Considered as one of the growth accelerators for India, we have listed the top 10 investment
banking companies which lead the sector.
1. JP Morgan Chase: This is the bestinvestment bank in India right now. It provides
various services like securities services and investment banking. The firm is known
for its services rendered in case of mergers and acquisitions and is the third largest
US deposit base bank.
2. Goldman Sachs: Goldman Sach is a leading investment bank with different
branches in the country. They provide services to the government,financial
institutions and high net profit individuals. It focuses on four important segments
like investment management, investment banking, lending and institutional client
services. It earned about $5 billion as investment banking fees and has more than
$100 billion market capitalization.
 3. Bank of America Merrill Lynch: One of the best investment banks in the world,
Merill Lynch has branches operating in India since 1964 and offers financial
services like book dealing and investment advisory management. It has earned $4.5
billion as investment banking fees and has branches in more than 150 countries. It
has a strong track record of producing profitable returns for its investors.
4. Morgan Stanley: The bank has been operating in India for the last two decades. It
is one of the fastest growing firms in the world and has a track record of producing
long term profits to investors. Some of the services provided by them include capital
management for corporations, government and individuals. With branches in more
than 36 countries and 200 million customers, the bank is renowned across the globe.
5. Citigroup: The bank is a subsidiary of the Citigroup and provides services like
brokerage and consumer finance. It has more than 150 million customers and an
asset to the valuation of $1.801 trillion. It is recognized as one of the primary dealers
of Treasury security of the United States.
6. Deutsche Bank: The best investment banking firm in the world, Deutsche Bank has
an excellent track record. They serve more than 70 countries with 1 million
employees and provide services like foreign exchange.
7. Credit Suisse: The bank has three subsidiaries-private banking, investment
management and asset management. It has received numerous awards for global
research expertise and advisory work.
8. Barclays Capital: Barclays is one of the largest banks in the UK. It has a few
branches in India and provides services like risk management for institutional
clients and government. It has its branches in 29 countries globally.

9. UBS: This is the best bank that operates in India in addition to 50 other countries.
It provides various services like risk management, asset management and wealth
management.
10. Wells Fargo: The bank does not have an Indian origin but it has branches in
Bengaluru and Hyderabad. The bank is well established and serves almost 23
million customers.

What are Investment Securities?

Investment securities are securities (tradable financial assets, such as equities or fixed income
instruments) that are purchased in order to be held for investment. This is in contrast to
securities, which are purchased by a broker-dealer or other intermediary, for quick resale (i.e.
trading account securities).
Investment Securities are subject to governance via Article 8 of the Uniform Commercial Code
(UCC).
Understanding Investment Securities
Investment securities can be found on the balance sheet assets of many banks, carried at
amortized book value (defined as the original cost less amortization until the present date).
Banks often purchase marketable securities to hold in their portfolios; these are usually one of
two main sources of revenue, along with loans.
The main difference between loans and investment securities is that loans are generally
acquired through a process of direct negotiation between the borrower and lender while the
acquisition of investment securities is typically through a third-party broker or dealer.
Investment securities at banks are subject to capital restrictions. For example, the number of
Type II securities or securities issued by a state government is restricted to 10 percent of the
bank's overall capital and surplus.
Investment securities provide banks with the advantage of liquidity in addition to the profits
from realized capital gains when these are sold. If they are investment-grade, these investment
securities are often able to help banks meet their pledge requirements for government deposits.
In this instance, they can be viewed as collateral.
Investment Bank
How an Investment Bank Works
The advisory division of an investment bank (IB) is paid a fee for their services, while the
trading division experiences profit or loss based on its market performance. Professionals who
work for investment banks may have careers as financial advisors, traders or salespeople. An
investment banking career can be very lucrative, but it typically comes with long hours and
significant stress.
Investment banks are most known for their work as financial intermediaries. That is, they help
corporations issue new shares of stock in an initial public offering (IPO) or follow-on offering.
They also help corporations obtain debt financing by finding investors for corporate bonds.
The investment bank's role begins with pre-underwriting counselling and continues after the
distribution of securities in the form of advice. The investment bank will also examine the
company’s financial statements for accuracy and publish a prospectus that explains the offering
to investors before the securities are made available for purchase.
Investment banks’ clients include corporations, pension funds, other financial institutions,
governments, and hedge funds. Size is an asset for investment banks. The more connections
the bank has within the market, the more likely it is to profit by matching buyers and sellers,
especially for unique transactions. The largest investment banks have clients around the globe.
Key points
Investment banks specialize in complex financial transactions, such as underwriting, IPOs,
facilitating mergers and other corporate reorganizations and acting as a broker or financial
advisor.
Size is an asset for investment banks, where the more connections the bank has the more likely
it is to profit.
Because investment banks have external clients, but also trade their own accounts, a conflict
of interest can occur.
Types of Investment Bank Activities
Financial Advisors
As a financial advisor to large institutional investors, the job of an investment bank is to act as
a trusted partner that delivers strategic advice on a variety of financial matters. They
accomplish this mission by combining a thorough understanding of their clients' objectives,
industry and global markets with strategic vision trained to spot and evaluate short- and long-
term opportunities and challenges facing their client.
Mergers and Acquisitions
Handling mergers and acquisitions is a key element of an investment bank's work. The main
contribution of an investment bank in a merger or acquisition is evaluating the worth of a
possible acquisition and helping parties arrive at a fair price. An investment bank also assists
in structuring and facilitating the acquisition in order to make the deal go as smoothly as
possible.
Research
The research divisions of investment banks review companies and author reports about their
prospects, often with "buy", "hold" or "sell" ratings. While research may not generate revenue
itself, the resulting knowledge is used to assist traders and sales. Investment bankers,
meanwhile, receive publicity for their clients. Research also provides investment advice to
outside clients in the hopes that these clients will take their advice and complete a trade through
the trading desk of the bank, which would generate revenue for the bank. Research maintains
an investment bank's institutional knowledge on credit research, fixed income research,
macroeconomic research, and quantitative analysis, all of which are used internally and
externally to advice clients.
Size is an asset in the investment banking business, where bigger banks have a greater
opportunity to profit by matching buyers and sellers.
Criticism of Investment Banks
Because investment banks have external clients, but also trade their own accounts, a conflict
of interest can occur if the advisory and trading divisions don’t maintain their independence.
Thus, most investment banks must maintain what's called a Chinese wall. The wall is a
figurative barrier between the two investment banking departments to help prevent the sharing
of information that would allow one side or the other to unfairly profit.