•CONCEPT OF INVESTMENT BANKING
& INVESTMENT BANKER
•FUNCTION & OBJECTIVES OF
INVESTMENT BANKING.
CHAPTER •LIST OUT THE REQUIREMENTS FOR THE
REGISTRATION OF A MERCHANT BANKER.
OUTLINE •UNDERSTAND THE REGULATIONS
INVOLVED IN THE ISSUE MANAGEMENT.
•EVALUATE THE PERFORMANCE OF
INVESTMENT BANKER IN INDIA.
To make students aware of the
concept of Investment Banking
& Financial Services.
LEARNING Know the regulatory environment in
which the Investment Bankers
OBJECTIVES operates in India.
To familiarize the students with the
concepts of Financial Management
3
Students will learn the structure,
functions and the role of Merchant
Learn
Banking in the financial system.
LEARNING Be
Students will be able to learn
about the regulatory issues
OUTCOME relating to Investment
Banking.
S Students will become familiar with
Becom the theory of services rendered by
e Investment Banking.
4
CONCEPT OF INVESTMENT
BANKING
INVESTMENT
BANKING
Investment banking is a specialised field
within the financial services industry that
primarily assists large organisations,
corporations, and governments in raising
capital, facilitating mergers and acquisitions
(M&A), and providing financial advisory
services. Investment banks act as
intermediaries between companies or entities
seeking capital and investors willing to
provide
. that capital.
INVESTMENT BANKING
In simple terms, investment banking involves:
● Advising clients on various financial matters, such as determining
the value of a company
●Structuring deals for acquisitions or mergers
● Helping companies issue new securities (stocks or bonds) to raise
capital
Investment bankers are experts in the financial markets, and their
expertise is crucial for clients looking to make informed decisions
about significant financial transactions.
WHO IS A INVESTMENT BANKER?
A Investment banker is one who is a critical link
between a company raising fund
and the investors.
The Investment banker may be in the form of a bank, a
company, firm or even a
proprietary concern.
Investment Banker understands the requirements of the business
concern and arranges finance with the help of financial
institutions, banks, stock exchanges and money market
• ACCORDING TO SECURITIES AND EXCHANGE
BOARD OF INDIA (MERCHANT BANKERS) RULES,
1992, IT IS MANDATORY FOR A MERCHANT BANKER
TO HOLD A CERTIFICATE OF REGISTRATION
GRANTED BY THE SECURITIES AND EXCHANGE
BOARD OF INDIA.
INVESTMENT
BANKING Application for grant of Certificate
REGULATIONS Furnishing of information, clarification &
personal representation
Consideration of Application
Grant of a Certificate
Payment of fees & the
consequences
of failure to pay fees
FUNCTIONS OF
INVESTMENT
BANKS
1. Initial Public Offering
This investment banking function i.e. IPO is an initial public offering wherein a company hires an
investment bank to issue IPO.Investment bank helps a company to set everything and list IPO in a stock
exchange. IPO is one of the major investment banking functions. This bank in return charges commission from a
company.
2. Merger and Acquisitions
Merger and Acquisitions is the area of corporate finances, management, and strategy dealing with
purchasing or joining with other companies. An investment bank in return charges fees for M&A. M&A
company hires a bank for mergers and acquisitions.
3. Risk Management
Risk Management from the name itself it is clear that its management of risk involves, it is a continuous
process as capital is involved it set a limit to avoid loss in trade.
4. Research
This equity research investment banking function is one of the most important investment banking
function is research.
This research helps provide a rating to the company to help investors to take a decision of investment.
Research reports tell whether to buy, sell or to hold the base on a rating of a company.
Research is done by analyzing and comparing various reports and performance reports of the company.
Investment bank primary work is research and these researches are of multiple types like equity research,
fixed income research, macroeconomic research, qualitative research, etc.
Investment bank shares these reports with clients which helps an investor to generate profit through
trading and sales.
5. Structuring of Derivatives
For this Investment banking function i.e. structuring of derivatives, investment bank needs a strong technical team
working on such a complex structure of derivatives. Derivatives product offer a high rate of return and good margin
hence a lot of risks is involved with it. Investment bank prepares these derivatives with a strategy based on a single as
well as multiple securities.
6. Merchant Banking
This investment banking function is one of the private activities of the investment bank where the bank also does
consultancy for their clients. They provide consultancy in a matter of financial, marketing, legal and managerial.
7. Investment management
This investment banking function is a core job of an investment bank to guide the investor to
purchase, manage his portfolio and to trade various securities. Investment bank prepares reports based on
company performance and through this it investment bank makes a decision on financial securities
QUALITIES OF A INVESTMENT BANKER
1. Leadership
2. Problem solving: Ability to analyze & evaluate various
technical,financial & economical problem.
3. Knowledge : Knowledge & information about the capital
markets,trends in stock exchange ,psychology of the investing
public.
4. Innovation: Develop innovative capital market instruments
for satisfying the changing needs of investors
5. Integrity:Safeguard the interest of the investingpublic.
Integrity & maintenance of high professional standards are
necessary for the success.
6. Contacts: Keep cordial relationship with the investors.
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2023
INSTITUTIONAL STRUCTURE
Development/Public Financial Institute
Commercial Banks
NBFC
Capital Market
1. DEVELOPMENT/ PUBLIC FINANCIAL INSTITUTION
Development financial institution (DFI), also known as a Development bank or Development finance company (DFC), is a
financial institution that provides risk capital for economic development projects on a non-commercial basis.
Secondly, in addition to the financing by these institutions in the traditional form of rupee/foreign currency term loans for
project finance.
•Underwriting
• Lease Financing
Example: NATIONAL HOUSING BANK, IDBI.
2. COMMERCIAL BANKS
A commercial bank is a financial institution that provides services like loans, certificates of deposits, savings bank accounts
bank overdrafts, etc. to its customers. These institutions make money by lending loans to individuals and earning interest on
loans.
A commercial bank is a kind of financial institution that carries all the operations related to deposit and withdrawal of
money for the general public, providing loans for investment, and other such activities.
INSTITUTIONAL STRUCTURE
2/7/20XX 20
INSTITUTIONAL STRUCTURE
3. NBFC
• NBFCs are financial institutions that provide various financial services and products, including
loans, insurance, and asset management, but do not have a banking license. Unlike banks, NBFCs do
not have the authority to accept deposits from the public.
•Services offered by NBFCs
•NBFCs offer a wide range of financial services, including:
•Personal loans
•Home loans
•Vehicle loans
•Gold loans
•Microfinance
•Leasing and hire-purchase services
•Credit card services
•Insurance services
•Investment and asset management services 2/7/20XX 21
INSTITUTIONAL STRUCTURE
2/7/20XX 22
INSTITUTIONAL STRUCTURE
CAPITAL MARKET
•Capital markets refer to the venues where funds are exchanged between
suppliers and those who seek capital for their own use.
•Suppliers in capital markets are typically banks and investors while those who
seek capital are businesses, governments, and individuals.
•Capital markets are used to sell different financial instruments, including
equities and debt securities.
•These markets are divided into two categories: primary and secondary markets.
•The best-known capital markets include the stock market and the bond markets.
2/7/20XX 23
INSTITUTIONAL STRUCTURE
2/7/20XX 24
OBLIGATIONS AND RESPONSIBILITIES
1.MAINTENANCE OF BOOKS OF ACCOUNTS RECORD:
•COPY OF BALANCE SHEET
•COPY OF AUDITOR REPORT
•STATEMENT OF FINANCIAL POSITION
•EVERY MERCHANT BANKER HAS TO INTIMATE THE SEBI THE PLACE WHERE
THE BOOKS OF ACCOUNTS, BALANCE SHEET MAINTAINED.
2. SUBMISSION OF HALF YEARLY:
•EVERY MERCHANT BANKER SHOULD FURNISH UNAUDITEDHALF YEAR
FINANCIAL REPORT TO SEBI WHICH IS REQUIRED BY SEBI.
3. APPOINTMENT OF LEAD MERCHANT BANKER:
•AT LEAST ONE MERCHANT BANKER SHOULD FUNCTIONING AS LEAD
MERCHANT BANKER IN ORDER TO MANAGE ALL THE ISSUES FROM PUBLIC.
4. RESPONSIBILITIES OF LEAD MERCHANT BANKER:
•LEAD MERCHANT BANKER MUST GIVE HIS RESPONSIBILITY DETAILS TO SEBI
AT LEAST ONE MONTH BEFORE.
• INCASE THERE IS MORE THAN ONE LEAD MERCHANT BANKER THE
RESPONSIBILITY SHOULD BE CLEARLY DEMANDED AND DIVIDED.
•5. APPOINTMENT OF COMPLIANCE OFFICER:
• EVERY MERCHANT BANKER SHOULD APPOINT ONE COMPLIANCE OFFICER TO
MONITOR THE COMPLAINTS OF PUBLIC. HE IS RESPONSIBLE FOR MONITORING THE
COMPLIANCE ACT, RULES AND REGULATION.
PROCEDURE FOR ACTION IN CASE OF
DEFAULT
SUSPENSION OF REGISTRATION
1. REASONS FOR SUSPENSION
MERCHANT BANKER VIOLATES THE PROVISIONS OF THE ACT, RULES AND REGULATION.
MERCHANT BANKER FAILS TO FURNISH DOCUMENTS REQUIRED BY SEBI
MERCHANT BANKER FAILS TO MAINTAIN CAPITAL ADEQUACY REQUIREMENT.
FAILS TO PAY THE FEES
VIOLATE CONDITIONS OF REGISTRATION
2. CANCELLATION OF REGISTRATION:
• A PENALTY OF CANCELLATIONS OF REGISTRATION OF A MERCHANT BANKER MAY BE IMPOSED
IF
• THE MERCHANT BANKER IS GUILTY OF FRAUD.
3. SHOW – CAUSE NOTICE AND
ORDER:
ENQUIRY OFFICER CAN ISSUE THE SHOW – CAUSE NOTICE, THE SEBI
ALSO
SHALL CONSIDER THE NOTICE GIVEN BY ENQUIRY OFFICER.
ONCE THE MERCHANT BANKER RECEIVED SHOW CAUSE
NOTICE, MERCHANT BANKER SHOULD REPLY TO SEBI WITHIN 21
DAYS.
AFTER ANALYZE THE REASON AND EXPLANATION SEBI HAS TO
SEND A
COPY OF THE ORDER TO THE MERCHANT BANKING.
CODE OF CONDUCT
Should make all efforts to protect the interest of investors.
Should maintain high standards of integrity, dignity and
fairness in conduct of business.
Should fulfill all obligations in a professional and ethical manner.
Should not discriminate among the clients.
Should endeavor to ensure that the inquiries, grievances are adequately dealt with
in a timely and appropriate manner .
Should ensure that prospectus/letter of offer is available to investors at the time of
issue.
SCOP
E
GROWTH OF ENTRY OF FOREIGN
PRIMARY MARKET INVESTORS
CHANGING POLICY OF DEVELOPMENT
FINANCIAL OF
INSTITUTIONS DEBT MARKET
MERGERS AND CORPORATE
RESTRUCTURING
CHALLENGES
1. SEBI GUIDELINE HAS RESTRICTED THEIR
OPERATIONS TO ISSUE MANAGEMENT AND
PORTFOLIO MANAGEMENT TO SOME EXTENT. SO,
THE SCOPE OF WORK IS LIMITED.
THE
CHALLENGES 2. IN EFFICIENCY OF THE CLIENTS ARE OFTEN
FACED B BLAMED ON TO THE MERCHANT BANKS, SO THEY
ARE INTO TROUBLE WITHOUTANYFAULT OF THEIR
MERCHANTY OWN.
BANKERS IN 3. THE NET WORTH REQUIREMENT IS VERY HIGH IN
CATEGORIES I AND II SPECIALLY, MANY
INDIA ARE: SO
PROFESSIONALLY PERSON/
ORGANIZATIONS
EXPERIENCED CANNOT COME INTO THE PICTURE.
4. POOR NEW ISSUES MARKET IN INDIA IS DRYING
UP THE BUSINESS OF THE MERCHANT BANKERS.
REFERENCES
•FINANCIAL SERVICES BY M Y KHAN, MCGRAW HILL
EDUCATION (INDIA) PVT LTD, 2013
•MERCHANT BANKING BY H.R. MACHHI RAJU, NEW
AGE INTERNATIONAL (P) LTD., PUBLISHERS, 2010
•FINANCIAL SERVICES BY SHASHI K.GUPTA & NISHA
AGGRAWAL, KALYANI PUBLISHERS, 2004
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