What is IB ???

Origins of IB
IB defined
History of IB
Goldman Sachs A global
investment bank
IB in India
SBI Capital Markets
Role of an Investment Bank
Conclusion.
In a very broad perspective, Investment Banking
as the term suggests, is concerned with the
primary function o f assisting capital market in
the movement of financial resources from those
who have them (investors) to those who want them
(issuers).
In short, it can be said that it the process by
which money is raised.
This money could be in the form of debt
(loans, bonds) or equity (IPOs or Private Equity
placements).
This money may be used for financing the
working capital, capital expenditures,
dividend payouts, etc.
The main activities under IB are Advisory
functions, Administrative functions,
Underwriting functions and other finance
related activities.
In India, the existence of IB can be
traced to over three decades (30 yrs.) ,
investment banking was largely limited to
merchant banking services.
Grindlays bank which has now merged with
Standard Chartered bank in India started
the banking operations in 1967 with the
license from the RBI followed by Citibank in
1970.
For example :
SBI set up SBI Capital Markets Ltd.
In 1986 ICICI, Indian Bank any many other
created separate merchant baking entities.

However around 1980s most of the

public sector banks were transformed
into separate subsidiaries.
The Dictionary of Banking and Finance defines
Investment bank as a term used in the US to
mean a bank which deals with the
underwriting of new issues and advises
corporations on their financial affairs.
Bloomberg says an
investment bank is a financial intermediary that
performs a variety of services, including aiding in the
sale of securities, facilitating mergers and other
corporate re-organizations, acting as brokers to both
the individual and the institutional clients and
trading in its own account.
John F. Marshall & M.E Ellis say
investment banking is what
investment banks do.
By the middle of 1800s, professional
investment banks had sprung up in the US to
help government raise funds for infrastructure
projects and the civil war.
In the 1830s, commercial banks started
adding investment banking services to their
regular banking activities in the US.
Investment Banking hit a milestone in the
1870s when a syndicate of banks from Europe
and US teamed up to buy $50 million worth of
US Treasury Bonds for resale to public.
Also important in the evolution of investment
banking were private banks, many of which
were family enterprises, and finance companies.
Advising clients on mergers and acquisitions
and public offerings was the main focus of major
Wall Street partnerships.
These firms included:
Goldman Sachs, Morgan Stanley, Lehman
Brothers, First Boston and others.
That trend began to change in the 1980s as a
new focus on trading propelled firms such as
Salomon Brothers, Merrill Lynch and Drexel
Burnham Lambert into the limelight.
In the mid-20th century, large investment
banks were dominated by the dealmakers
Investment banks earned an increasing
amount of their profits from proprietary
trading.
Goldman Sachs is a bank holding company
and a leading global Investment bank, securities
and investment management firm that provides a
wide range of services worldwide to a substantial
and diversified client base that include
corporations, financial institutions, governments and
high-net-worth individuals.
Goldman Sachs is the successor to a
commercial paper business founded in
1869 by Marcus Goldman.
On September 21, 2008, the Group became
a bank holding company regulated by the
Board of Governors of the Federal Reserve
System under the U.S. Bank Holding Company
Act of 1956 (BHC Act).
On May 7, 1999, the Company
converted from a partnership to a
corporation and completed an initial
public offering of its common stock.
Grindlays bank began Investment Banking
(Merchant Banking) in India in 1967 with RBI
issuing the second license to Citibank in 1970.
These two banks primarily provided
services which included loan
syndication, equity raising and other
advisory services.
Merchant banks were meant to manage
investments and provide advisory services.
SBI was the first Indian public sector bank
to set up its merchant banking division in 1972.
This was followed by Bank of India, Central Bank of
India, Bank of Baroda and many more.
The categories for which merchant banking
registration may be g ranted by SEBI:

Category I - to carry on the activity of
issue management and to act as adviser,
consultant, manager, underwriter,
portfolio manager.

Category II - to act as adviser,
consultant, co-manager, underwriter,
portfolio manager.

Category III - to act as underwriter,
adviser or consultant to an issue

Category IV to act only as adviser or
consultant to an issue .
The minimum net worth requirement for acting
as merchant banker are :

-Category I Rs. 5 crores,

-Category II Rs, 50 lakhs,

-Category III Rs. 20 lakhs

-Category IV Nil
The capital requirement depends upon the
category.
SBI Caps has three major services to offer:
Project Advisory & Structured Finance
Capital Markets
M and A Advisory
SBI Caps is one of the leading merchant banks
in India.
Project Advisory and Structure Finance:
It performs the function
of collecting funds from the international and Indian financial markets
for the infrastructure sector including transportation, power,
telecommunication, energy and urban infrastructure.

Capital Markets:
It is entrusted with the duty of raising funds
for banks, corporates, PSUs, financial institutions and
undertakings of state governments. In the last five years, SBICAP
has mobilized more than Rs. 16000 billion as funds through rights
issues, public issues and private placements.


M and A Advisory:
It was formed in 1990 with the aim of
taking part in the privatization business. It has successfully
worked out many privatization deals with the central and
state government.
Managing public assets of businesses.
Similar with that of a private brokerage house.
Helps the corporations in raising capital.
Trading of securities thereby, increasing the
liquidity of the securities.
It provides investment opportunities to the
individuals or entities.
Consulting. Offer advices on mergers and
acquisitions to companies.
Relevance to developing and transition
economies.
Tracking the market.
Brokering Privatization
Focus on environmental Issues in below two
circumstances:
For IPO, Due diligence and disclosure process
Transactions relating to environmental Service
Industry
Underwriting Government Bonds.
Assisting the capital market in its function of
capital intermediation
1.Avendus Capital
2.Bajaj Capital
3.Cholamandalam
Investment &
Finance Company
4.ICICI Securities Ltd
5.IDFC
10.UTI Securities Ltd
6.Kotak Mahindra
Capital Company
7.SBI Capital Markets
8.Tata Investment
Corporation Limited
(TICL)
9.Yes Bank
Investment Banking could be termed as a relatively
American phenomenon.
Indian Investment Banking industry has still a
long way to go before it catches up with its
global peers.
The investment banks are inventing and
manufacturing new products with higher margins
in hope of winning over clients.
Investment banking is one of the most global
industries and hence is continuously to grow with
the new developments and innovations in the global
financial market.
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S.Y.BMS
Banking and Insurance text book
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