Investment Banking Satishj (1)

8/11/2019 Investment Banking Satishj (1)

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UNIVERSITY OF MUMBAI

PROJECT REPORT

ON

INVESTMENT BANKING

T.Y.B.B&I (SEMESTER V)

ACADEMIC YEAR: 2011-2012

SUBMITTED BY

SATISH .A. KASARE

ROLL NO13

PROJECT GUIDE

PROF. RASHNA .Z. GIARA

PEOPLES EDUCATION SOCEITYS

DR. AMBEDKAR COLLEGE OF

COMMERCE AND ECONOMICS


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WADALA, MUMBAI400 031.

(ACADEMIC YEAR2011-2012)

PROJECT REPORT

ON

INVESTMENT BANKING

SUBMITTEDIN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD

OF DEGREEOF

B.COMBANKING & INSURANCE

BY

SATISH .A. KASARE

ROLL NO. 13

T.Y.B.B&I (SEMESTER V)

PEOPLES EDUCATION SOCEITYS



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WADALA, MUMBAI400 031.

CERTIFICATE

PEOPLES EDUCATION SOCIETYS



WADALA , MUMBAI- 4000 31.

NAAC ACCREDITED

This is to certify that , Mr. / Miss _SATISH .A. KASARE (13)

Of B.Com Banking and Insurance Semester v (2011-2012) has successfully

completes project on INVESTMENT BANKING Under the guidance of Prof.

RASHNA Z. GIARA.

(Signature of project guide.) (Signature of principal.)


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(Signature of co-ordinator) (Signature of External Examiner)

ACKNOWLEDGEMENT

It is my great privilege to thanks Dr. Ambedkar College of Commerce

and Economics particularly to Prof. KHAN (Co-ordinator of BBI) and Dr. S.R

Kamble (Principle) for giving this opportunity to complete this project and support

us.

I also sincerely thank to my guide Prof. RASHNA Z GIARA without

whose suport and guidance it wouldnt be possible to complete the project.

I also thanks to my parents, relatives and colleagues for their

encouragement and support.

Place

Date

(Signature)


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DECLARATION

I MR.Satish kasare the student of DR.AMBEDKAR College of Commerce &

Economics, studying in T.Y.B.Com Banking & Insurance (Semester V), hereby

declare that I have completed the project report on INVESTMENT BANKING

in the academic year 20112012.

The information submitted is genuine and practical to the best of my

knowledge.

Date:

SATISH .A. KASARE

(Roll No.13)

Place:


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EXECUTIVE SUMMARY


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CONTENT PAGENO.

1 Introduction of Investment banking.

2 Role of investment banking in IPO process.

3. Major services provided by Investment banking.

4.

5.

6.

7.

8. CONCLUSION.

9. LITERATURE REVIEW

10. BIBLOGRAPHY


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11. APPENDIX.


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CHAPTER.1. INTRODUCTION TO INVESTMENT BANKING

1.1. INVESTMENT BANKING

It is concerned with the primary function of assisting the advisory

capital market in its function of capital intermediation, i.e., the movement of

financial resources from those who have them (the Investors), to those who need to

make use of them for generating GDP (the Issuers). Banking and financialinstitution on the one hand and the capital market on the other are the two broad

platforms of institutional that investment for capital flows in economy. Therefore,

it could be inferred that investment banks are those institutions that are

counterparts of banks in the capital markets in the function of intermediation in the


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resource allocation. Nevertheless, it would be unfair to conclude so, as that would

confine investment banking to very narrow sphere of its activities in the modem

world of high finance. Over the decades, backed by evolution and also fuelled by

recent technologies developments, an investment banking has transformedrepeatedly to suit the needs of the finance community and thus become one of the

most vibrant and exciting segment of financial services. Investment bankers have

always enjoyed celebrity status, but at times, they have paid the price for the price

for excessive flamboyance as well.

Investment banks help companies, governments, and their agencies to raise

money by issuing and selling securities in the primary market. They assist public

and private corporations in raising funds in the capital markets (both equity and

debt), as well as in providing strategic advisory services for mergers acquisitions

and other types of financial transactions.

1.2.WHAT IS INVESTMENT BANKING?

It Provides strategic, financial and valuation services

Use industry knowledge, expertise and contacts to advise senior executives

and boards of directors

Identify and assess strategic opportunities

Interpret market information and enhance shareholder value Provide general valuation services (e.g., segment analysis, break-up

valuations, fairness opinions)


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Raise capital through the issuance of securities

Act as intermediary between issuers and investors

Provide access to equity and fixed income capital (e.g., investment grade,

bank, high yield, preferred stock)

Create specialized securities and derivatives (e.g., convertibles, trust

preferred securities, warrants)

Advise companies in merger &acquisition and restructuring transactions

Sell-side assignments (represent client in the sale of its company or some of

its assets)

Buy-side assignments (represent potential acquirers and negotiate

transactions)

Hostile take-over defense/advisory

Offer specialized products and services that satisfy the needs of corporate and

government clients

Private equity (e.g. Merchant banking, Real Estate, Venture Capital, other)

Privatization

Monetization

1.3.HISTORY OF INVESTMENT BANKING.

Without a sound and effective banking system in India it cannot have a healthy

economy. The banking system of India should not only be hassle free but it should

be able to meet new challenges posed by the technology and any other external and

internal factors.


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For the past three decades India's banking system has several outstanding

achievements to its credit. The most striking is its extensive reach. It is no longer

confined to only metropolitans or cosmopolitans in India. In fact, Indian banking

system has reached even to the remote corners of the country. This is one of themain reason of India's growth process.

The government's regular policy for Indian bank since 1969 has paid rich

dividends with the nationalization of 14 major private banks of India.

Not long ago, an account holder had to wait for hours at the bank counters for

getting a draft or for withdrawing his own money. Today, he has a choice. Gone

are days when the most efficient bank transferred money from one branch to other

in two days. Now it is simple as instant messaging or dial a pizza. Money have

become the order of the day.

The first bank in India, though conservative, was established in 1786. From 1786

till today, the journey of Indian Banking System can be segregated into three

distinct phases. They are as mentioned below:

Early phase from 1786 to 1969 of Indian Banks

Nationalization of Indian Banks and up to 1991 prior to Indian banking

sector Reforms.

New phase of Indian Banking System with the advent of Indian Financial &

Banking Sector Reforms after 1991.

To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II

and Phase III.


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1.3.1.Phase -I

The General Bank of India was set up in the year 1786. Next came Bank of

Hindustan and Bengal Bank. The East India Company established Bank of Bengal(1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units

and called it Presidency Banks. These three banks were amalgamated in 1920 and

Imperial Bank of India was established which started as private shareholders

banks, mostly Europeans shareholders.

In 1865 Allahabad Bank was established and first time exclusively by Indians,

Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore.

Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda,

Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of

India came in 1935.

During the first phase the growth was very slow and banks also experienced

periodic failures between 1913 and 1948. There were approximately 1100 banks,

mostly small. To streamline the functioning and activities of commercial banks, the

Government of India came up with The Banking Companies Act, 1949 which was

later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act

No. 23 of 1965). Reserve Bank of India was vested with extensive powers for the

supervision of banking in India as the Central Banking Authority.

During those days public had lesser confidence in the banks. As an aftermath

deposit mobilisation was slow. Abreast of it the savings bank facility provided by

the Postal department was comparatively safer. Moreover, funds were largely

given to traders.


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1.3.2.Phase II

Government took major steps in this Indian Banking Sector Reform after

independence. In 1955, it nationalised Imperial Bank of India with extensive

banking facilities on a large scale specially in rural and semi-urban areas. It formed

State Bank of India to act as the principal agent of RBI and to handle banking

transactions of the Union and State Governments all over the country.

Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on

19th July, 1969, major process of nationalisation was carried out. It was the effort

of the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial

banks in the country was nationalised.

Second phase of nationalisation Indian Banking Sector Reform was carried out in

1980 with seven more banks. This step brought 80% of the banking segment in

India under Government ownership.

The following are the steps taken by the Government of India to Regulate Banking

Institutions in the Country:

1949: Enactment of Banking Regulation Act.

1955: Nationalisation of State Bank of India.

1959: Nationalisation of SBI subsidiaries.

1961: Insurance cover extended to deposits.

1969: Nationalisation of 14 major banks.

1971: Creation of credit guarantee corporation.

1975: Creation of regional rural banks.


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1980: Nationalisation of seven banks with deposits over 200 crore.

After the nationalisation of banks, the branches of the public sector bank

India rose to approximately 800% in deposits and advances took a huge

jump by 11,000%.

Banking in the sunshine of Government ownership gave the public implicit

faith and immense confidence about the sustainability of these institutions.

1.3.3.Phase III

This phase has introduced many more products and facilities in the banking sector

in its reforms measure. In 1991, under the chairmanship of M Narasimham, a

committee was set up by his name which worked for the liberalisation of banking

practices.

The country is flooded with foreign banks and their ATM stations. Efforts are

being put to give a satisfactory service to customers. Phone banking and net

banking is introduced. The entire system became more convenient and swift. Time

is given more importance than money.

The financial system of India has shown a great deal of resilience. It is sheltered

from any crisis triggered by any external macroeconomics shock as other East

Asian Countries suffered. This is all due to a flexible exchange rate regime, the

foreign reserves are high, the capital account is not yet fully convertible, and banks

and their customers have limited foreign exchange exposure.


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1.4. ROLE OF INVESTMENT BANKING

The major work of investment banks includes a lot of consulting. For instance,

they offer advices on mergers and acquisitions to companies. The other arena

where they give advice are tracking the market and determining when should a

company come out with a public offering and what is the best possible way to

manage the public assets of businesses. The role that an investment bank plays

sometimes gets overlapped with that of a private brokerage house. The usual

advice of buying and selling is also given by investment banks. There is no

demarcating line between the investment banking and other forms of banking in

India. This has been observed majorly of late. All banks nowadays want to provide

their customers the best of services and create a niche for themselves and that is

why apart from investment banks, all other banks too are aiming at making it big.

At the macro level, investment banking is related with the primary function of

assisting the capital market in its function of capital intermediation, i.e., the

movement of financial resources from those who have them (the investors), to

those who need to make use of them for producing GDP (the issuers). Over the

decades, investment banks have always suited the needs of the finance community

and thus become one of the most vibrant and exciting segment of financial

services. Globally investment banks handle significant fund-based business of their

own in the capital market along with their non-fund service portfolio which is

offered to the clients. All these activities are broadly segmented across three

platforms - equity market activity, debt market activity and merger and

acquisitions (M&A) activity. In addition, given the structure of the market, there is

also a segmentation based on whether a particular investment bank belongs to a

banking parent or is a stand-alone pure investment bank.


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CHAPTER.2. ROLE OF INVESTMENT BANKER IN THE IPO

PROCESS.

2.1.1INTRODUCTION TO IPO

It is clear from the above discussion that, the activities or roles of the investment

banker in the IPO process cannot be discounted. The success of the IPO will to a

large extent depend on the capabilities of the investment banker selected (Ellis,

1989). However, in the absence of a model to guide issuers of securities in

selecting investment banks, how does a company come up with the right

investment banker to manage its IPO? Despite the numerous efforts made by

academics to investigate into issues concerning the market for IPOs, not much has

been done on the capabilities of investment banks. However by examining

critically the roles and responsibilities of investment banks in the IPO process, we

can glean some qualities or capabilities an investment banker must possess in order

to survive in its market. Weston and Copeland (1989) identified three main

functions or roles investment banks play in the IPO process and these include:

2.1.2Underwriting. This is the insurance function of bearing the risk of adverse

price fluctuations during the period in which a new issue of securities is being

distributed. There are two fundamental ways of doing this, and they are the firm

commitment and best efforts underwriting agreements. The firm commitment

agreement obligates the investment banker to assume all the risks inherent in the

issue. On the other hand, the best efforts agreement absolves the investment banker

from any risks in the issue. Under this underwriting agreement, the investment

banker undertakes to help sell at least minimum amount of the issue with any


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unsold amounts returned to the issuing firm. Where the investment banker is not

able to sell the minimum quantity agreed upon, the whole issue is cancelled and

reissued when the market is ready to accommodate the issue.

2.1.3Distribution: Another related function to the one described above is the ability

of the issuing firm to reach as many investors as possible with its security.

According to Weston and Copeland (1989), investment banks play a very crucial

role here, because of their expertise in doing this relative to the issuing firm

assuming this responsibility when issuing securities. Advice and Counsel: This

involves the investment banker making valuable inputs into decisions concerning

its client ability to succeed in the capital market with an IPO. Its ability to make

valuable inputs in this direction may largely depend on its experience in

origination and selling of securities.

In addition, Ellis (1989), identified two categories of factors critical to evaluating

and choosing an investment bank. In his assessment, the most important factors

include.

1. Understand our company

2. Earn credibility with our senior management

3. Make useful recommendations to our company

The least important are:

1. Expertise in Eurobond market

2. Expertise in equity underwriting


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Ellis (1989), again identified six (6) reasons why investment banks gain

importance with their corporate clients. These are:

1. Credibility with the client corporations senior management-earned over several

years.

2. Understanding the client companys needs for service and its financial goals and

policies.

3. Making useful recommendations to the company over a period of time.

4. Innovating with new financing techniques.

5. Having special expertise in a specific service.

6. Recommending a specific transaction.

Credibility with Senior Management His postulation on the role of an investment

banker goes beyond the IPO process to include other activities or capabilities of the

investment banker, which tends to impaction choice of an investment banker by

senior management who are interested in strategic issues of the organizations they

are responsible for. Thus if an investment bankers capabilities fit well with

financial strategies of the organization, it is made an integral part

2.1.4Understand Client Company

Another reason he finds important to corporate executives is the investment

bankers knowledge of their companies and their operations. More conservative

corporate executives rated this as a critical success factor in dealing with

investment banks, especially when the investment banking industry in US has over

the years survived, by maintaining a relationship with their clients. In his study, 3


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of the 4 different industries he studied ranked this variable as the most important of

all in dealing with an investment banker.

2.1.5Making Useful Recommendations

A more IPO related factor is the ability of the investment banker to make valuable

recommendations to the issuing firm over time. This is because it reinforces the

reliability and consistency of the investment banks capabilities to its corporate

clients. In this light an investment banker that is able to consistently make valuable

inputs into the financial decisions of a client strengthens the relationship between

itself and its client.

2.1.6Expertise in Equity Underwriting

Another important IPO related capability is the ability of the investment banker to

under write securities. In the absence of any model to determine the overall

capabilities of an investment banker, this has been one of the criteria for ranking

the performance of investment banks.

2.1.7Having Expertise in a Specific Service

The competitive wave sweeping the US investment banking industry has caused

most investment banks to concentrate on their capabilities where they can gain a

competitive advantage. The era where one investment banker was at the centre of a

corporate entitys financial strategy is over. Corporate entities are shopping for

specific capital market capabilities of investment banks. This has eventually


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changed the structure of the investment banking industry where size used to be a

competitive factor.

2.1.8Supplementing Capabilities

Other capabilities such as Euro market capabilities, recommending specific

transactions and innovating with new financing techniques are all additives to the

more generic functions described above. These capabilities, though not really taken

to be very important then are now making very important inputs into the choice of

firms by corporate clients. Grinblatt and Titman (2002), point out that investment

banks have been motivated in various ways to develop capabilities in these areas to

expand their client-base beyond their domestic financial markets.

2.2IPO Decisions:

2.2.1 Phase-I

At Phase-I, IPO decisions usually start with the company making decisions in thefollowing areas:

1. Amount to be raised: The decision variable here is the amount of new capitalneeded by the firm.

2. Type of Securities to use: This stage of the process will consider the bestsecurity to use; the firm would have to choose from basic forms such as shares,

bonds or other innovative types, which may include various combinations ofsecurities usually called exotic securities. The choice of security and the method


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of selling will normally fall within the regulatory framework of the securitiesindustry.

3. Competitive bids versus a Negotiated deal: Should the company offer a blockofsecurities for sale to the highest bidder? Or should it negotiate a deal with an

Investment banker? Competitive bids normally are used by large well-known

firms whiles negotiated deals are used by small firms not known to the investmentbanking community.

4. Selection of an Investment Banker: the firm must decide on the investmentbanker to use in raising the needed capital. This stage is very important to the firm,as attends to have other implications on the success of the IPO process. Theintensity of the problem faced by the issuing firm may stem from the fact that there

is no model to rely on in selecting an investment banker to make the IPOsuccessful (Minister and Carter, 1990). Reputable investment banks target moreestablished firms whiles other investment banks are good at speculative issues ornew firms going public.

2.2.2Phase-II

At Phase-II, decisions include the input of the firms selected investment banker.Components of Phase-II decisions generally include the following:

1. Re-evaluating the initial decisions: at this stage, the firm and its investmentbanker will have to re-evaluate regarding issues such as size of the issue and typeof securities to use etc. These decision processes are organized under pre-underwriting conferences as espoused by Weston and Copeland (1989).

The main aim of the re-evaluation processes is to fine-tune the internal decisions ofthe company under Phase-I. This is to ensure the success of the issue.

2. Filing of Registration: The investment banker, after taking an inventory of all

the relevant information, it has to file an application with the Securities andExchange Commission (SEC) and the stock exchange if it wants the shares to bepublicly traded. In Ghana, the securities industry laws (SIL) however allowapplications tube filed with the GSE before it is filed with the SEC. Without theexamination and approval by these regulatory bodies, public sale of the securitycan never begin.


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3. Pricing of the Security: Another important decision at this phase is the pricing ofthe security. This depends on a plethora of issues, usually resolved through theresearch or experience of the investment banker. The important issues consideredhere include, the risk profile of the issuer, the capacity of the market accommodatethe issue, the reputation of the investment banker etc. The pricing of the issue has

been identified as one of the sources of controversy between the issuer and theinvestment banker (Weston and Copeland, 1989; Brigham et al,1999; Grinblatt andTitman, 2002).

4. Forming the Underwriting Syndicate: In underwriting of security issues, themanaging/selected investment banker may or may not be in the position tounderwrite the whole issue. Where it is unable to underwrite the issue, it may haveto form an underwriting syndicate. This will ensure the diversification ofunderwriting risk to the managing investment banker and permits economy of

selling effort and expense and encourages nationwide distribution.

5. Forming of the Selling Group: The selling group is formed to facilitate thedistribution of the issue for a commission. The managing investment bank throughthe selling group agreement, which usually covers the description of the issue,concession, handling of purchased securities and duration of the selling group, isable to control the selling group.

6. Offering and Sale: The last important step in this process is the formal sale ofthe securities after the approval by the regulatory authorities. This is usually

preceded by a series of publicity campaigns. The date on which the selling of theissue will begin is made public before or during the publicity campaign in order toavoid unfavorable events or circumstances.

2.3 Investment Banking falls under two broad headings:

2.3.1 The provision of financial advice capital

Principal clients are companies, particularly publicly listed companies, andgovernments. For companies, these services are primarily directed towards raisingshareholder value (that is, ensuring that the share price fully reflects the value ofthe business); and the actions prescribed are corporate actions (taking over another


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company, selling a division, returning cash to shareholders by paying them aspecial dividend, etc). For governments, these services are usually directed atexecuting government policy, for example by selling off, or privatizing,government-held businesses or industries.

Provision of financial advice As noted above, investment banking advice relates tocorporate actions rather than product or organizational matters, such as productimprovement, market analysis or management of organization. Nonetheless, aninvestment banker needs to have an understanding of all these things because they,too, will have an impact on shareholder value.

2.3.2 Mergers and Acquisitions (or "M&A")

The majority of financial advice relates to M&A. The client company seeks toexpand by acquiring another business. There are many possible commercialreasons for this, such as:

Increasing the range of products increasing the business' geographical footprintcomplementing existing products integrating vertically (i.e. acquire suppliers,further up the chain, or customers, Further down the chain)protecting a position(for example by preventing a competitor from acquiring the business in question).

In practice therefore, Investment Banking divisions tend to be divided into industrysector teams, who can then familiarize themselves with the principal players,economics and dynamics of the sector.

There are also many possible financial reasons for making an acquisition,

such as

:raising profitability, and therefore the share price increasing in size followed andmore widely invested in; again, likely to have a positive effect On the share price

financing growth. Improving quality of profits - the market likes predictable profitstreams, and will value these more highly shifting the business towards sectorsmore favorably viewed by the market.

The Investment Bankers' roles in these transactions involve: using their knowledgeof the industry sector, to help with the identification of potential targets whichmeet commercial criteria such as those referred to above using their knowledge of


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the investment market, to advise on valuation, form of consideration (should thesellers be paid in cash - which is likely to involve the buyer borrowing the money -or in the buyer's shares - so that the seller ends up with a stake in the buyer, or a

blend of the two?), timing, tactics and structure coordinating the work of the otheradvisers involved in the transaction - lawyers, who prepare the documentation for

the acquisition and help with the "due diligence" to be performed on the businessbeing acquired; accountants, who advise on the financial reporting aspects of thetransaction, and tax consequences; brokers, who advise on shareholder aspects(how are the buyer's shareholders likely to view the acquisition?) and how themarket as a whole is likely to receive the transaction; and public relationsconsultants, who ensure that the transaction has a favorable press.

2.4. General financial advice

Investment Banking also involves providing general financial advice on a range ofissues, such as funding structure (perhaps the company is too indebted, and shouldissue shares to raise more money; or does it have too much cash on its balancesheet, just sitting there not earning interest, so that it should consider paying a largedividend to its shareholders or buying back some of its own shares?).

2.4.1 Capital raising

If a company is to grow, it has to invest and, often, that capital comes fromexternal sources. This can be in the form of either "equity", when the companyissues more shares to investors, who buy them for cash; or debt, either from banksor - more usually nowadays - directly from investors. Investors may be eitherinstitutional (pension funds and the like) or retail (individuals).Investment Banks

advise on the raising of capital - in what form, how much, from whom, timing -

and may also charge a fee for arranging the financing or for"underwriting"(guaranteeing to take up any securities that are unsold in the market,so that the issuer knows for sure how much cash it is going to raise and can planaccordingly).


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2.4.2 Ways of Raising Capital

There are several ways of raising equity capital: These are discussed below: RightsOfferings Most company regulations or charters allow shareholders to have a pre-emptive righting additional stock issues. Thus, anytime the company wants to raise

additional equity capital, it must make a formal offer to existing shareholdersbefore it can seek the interest of potential outside investors. Where it sellsadditional stock issues to existing shareholders, it is called a rights offering. Thisoffer may be renounceable or non-renounceable. A renounceable rights offeringgives the shareholder the option to exercise his right to purchase the new shares atthe issue price. A non-renounceable rights offering obligates the shareholder toexercise his rights at the issue price.

2.4.3 Public Offerings

Where the corporate charter or regulations are silent on pre-emptive rights ofexisting shareholders, it may decide to sell new shares or stock through a rightsoffering or a public offering.

Private Placements:

This method of selling securities is generally used by companies who are interestedin reducing their floatation costs and are interested in a specific group of investors.Under private placements, new stocks are sold to one or a few investors, generallyinstitutional investors who invest in large blocks of shares. Employees PurchasePlans and Employee Share/Stock Ownership Plain most organizations, theregulations or charter allows employees to purchase the shares of the companyusually at predetermined prices based on the financial performance of the entity.This usually affects managerial staff in order to reduce the prevalence of the

2.4.4 Principal-agency problem.

The Initial Public Offering and the Regulatory Framework At this stage we willfocus on the Initial Public Offering (IPO) process, the regulatory framework withinwhich the activity is organized and the role of the investment banker.


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CHAPTER.3 MAJOR SERVICES PROVIDED BY INVESTMENT

BANKIING.

3.1Merchant Banking:

The merchant banker are those financial intermediary involved with the activity of

transferring capital funds to those borrowers who are interested in borrowing.

The activities of the merchant banking in India is very vast in nature of which

includes the following

a) The management of the customers securities

b) The management of the portfolio,

c) The management of projects and counseling as well as appraisald) The management of underwriting of shares and debentures

e) The circumvention of the syndication of loans

f) Management of the interest and dividend etc


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3.1.1Factors responsible for the Changes:

Globalization of Indian Economy has made the whole economy open, which has

more multinational player in the era of the financial services? This has resulted into the emergence of the global investment in financial sector. Government has now

open up the doors of investments especially in the area of banks and insurance,

which leads to competitive environment for the present players. Now they have to

bring something new which is efficient and best services to live in the competitive

environment.

Competition arising out of Private Company Participation is due to the

liberalization of the economy. Now along with the public/government players,

private players are also offering financial services and instruments, which are more

innovative and different than the earlier offering. All around, there is a fresh

thinking on the financial products, structure of banking and insurance instruments

with value creation. Financial markets are being redefined, reinvented and

reconfigured on a persistent basis.

3.1.2 The emerging areas in banking services are;

1. Two in one Accounts

2.Overdrafts (OD)

3.ATMs


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4.Net Banking

5.Credit Card

Two in one accounts: Are available at many of the foreign and private

banks. It amalgamates the features of a savings or a current account and a fixed

deposit account. As soon as one opens 2 in 1 accounts with the bank, deposit

starts earning a rate of interest higher than that of a plain savings account. The

rate of interest can be equivalent to prevailing rates for Fixed Deposit.

Customers can choose the sweep optionTerm Deposit or Mutual Fund, based

on their requirements.

Overdraft [OD]

Overdraft is the agreed amount by which a bank account can be overdrawn.

When the amount of money withdrawn from the bank account is greater than

the amount actually available in the account the excess is known as the

overdraft and the account is said to be overdrawn. If agreed by the bank in

advance this is essentially a form of loan facility and there is a particular

interest rate attached with the overdrawn amount.

ATMs

Automated Teller Machines has revolutionary's entire banking sector. Currently

there are more than 16000 ATMs in India fulfilling the daily requirement of


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money to a common man. The story of the humble cash-dispensing machine

started around three decades back. Since then they have become common site in

metros and semi metro cities. ATM allows a customer to do number of banking

functions like withdrawing cash, making balance inquiries, transferring moneyfrom one account to another account, request for a Cheque book and statements,

Utility Bill Paymentlike electricity bills, Credit Card payments etc by using a

plastic, magnetic strip card and personal identification number issued by

financial institution.

Net Banking

Internet technology has invaded the portal of our banking institutions. No doubt

innovation like ATM have considerably put customer at ease in the recent past,

but with net banking the customer will be able to transact with the help of the

mouse. The services offered enable one to check credit card transactions,

paying bills, transferring fund between accounts in two different banks, and

scheduling future payments and transfers. A gradual increase in net banking is

logical as the need to minimize costs catches attention. A North American

Internet Banking survey done by management consultancy Booz Allen &

Hamilton in 2000 revealed that the cheapest way of banking is internet

banking.

Credit CardsIt is estimated in the year 2004; the total credit card market in the country was

at 17 million cards. The credit card industry is growing at 30 35 % per annum

at present. The size of Indian credit card market is estimated to be around $4bn

by end of 2010.


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3.1.4Mutual Funds Services

The Indian corporate companies must equally be informed that the mutual fundscomprises of the exact funds gained by pooling all the public savings. The

mutual funds are comparatively invested in those portfolios, which are

commonly diversified in nature with the main objectives of sharing the risk.

The Indian small-scale investors cannot be able to get their funds from the

comparative big corporate companies can equally gain there working funds

from the mutual funds.

However, the modern concept of the mutual funds was developed in1968 in

London by the foreign and colonial government trust of London. By which it

gained its invention in India in early 1980, even if it was exactly started in 1964

by the unit trust of India.

In addition to the above, the mutual funds can be grouped into [a] Close ended

funds & [b] Open ended funds. The Indian corporate companies can only

benefits from the mutual funds on gaining savings for investment, better yield

low cost on investment, tax benefits, flexible on investment, promoting

industrial development reducing the cost of new issue and many more other

advantages.

On the other side, Indian corporate companies must be informed on the kind of

risks involved with the mutual funds like market risks, scheme risks, business

risk, investment risks and even the political nature of risks. While the investors

are selecting the funds must take into account the objectives of the fund,


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consistency of performance of the funds. Historical background of the funds,

cost of operation, capacity for innovation, the investors servicing, market

trends, and even the transparence of the fund management. For the Indian

mutual funds to have good future there must be full support of SEBI bettercontrol of capital issue, better interest rate, good PE ratio, investors must have

good choice, tax concessions, and many more.

3.1.5Hire Purchase Services

In the hire purchase kind of transaction is that method of selling by which

goods are left out on hiring by the Indian corporate company to the purchaser

by which the hirer is comparatively required to the payment on an agreed sum

of amount in the system of periodical installments. In the hire purchase the

Indian corporate companies must know that the ownership of such kind of the

property exactly remain under the control of the creditor who normally passes

the right to hirer on the condition of payment of the last agreed sum of money

in installment.

The Indian corporate company must know that legally, payment is made in

installment over the agreed specified period, possession of the same right is

delivered to the purchaser during the time of agreement, the property passes to

the exact purchaser on the agreed last installment, and the hirer has a right to

return the property without further installment. In addition to the above, theIndian corporate company must know that the agreement must comparatively

contain the nature of the goods as described in manner so that to identify them

easily, the nature of the hire purchase price, the date of commencement and

finally the extend or number of installments.


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3.1.7. Discounting, factoring and forfeiting services

Due to the exact trade transaction the trade bill comparatively arises, the Indian

corporate companies must take into consideration that the supplier of the exactgoods draws bill which is based on the purchase for the invoice price of goods

sold on credit method of which is drawn on the short period of time. The buyer

pays the amount on the exact date by which the supplier of goods has to await

until the expiry of the exact bill. However, the banks provides the cash

discounting based on the exact trade bills by which they deduct certain charges

as discount based on the amount of the bill and credit balance of the customers

account.

Factoring

Factoring is to get thing being done. The ward factor means to mark or to do

according to R.W. Johnson factoring is a service involving the purchase by

financial organization, called a factor of receivables owned bymanufacturers and distributors by the customers with the factor assuming

full credit and collection responsibilities.

The main conditions of factoring that the Indian corporate companies must

know are these must be assignment of debt that has to be in favour of the

factor. The selling limits for the client, the factor must have recourse to the

client in the case of non-payment by the customer; the factor will equally

have recourse in case of non-payment, details on payment for the services,

interest and limit of any overdraft facility charged. The Indian corporate

companies must be well informed about the types of factoring as full service,


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recourse factoring, maturity, bulk, invoice, agency and also international

factoring. At the same time the exact cost of factoring like the pricing, fee,

discount, accounting system must be taken into consideration.

Forfeiting

Forfeiting is the French term means "to give something" or "give one's

right". Generally the term forfeit is non-recourse purchase by the

commercial bank or any other financial intermediaries or institutions

receivables that equally arises from the export of the goods.

Securitization of Debt Services

The securitization is that process by which the liquidating of the liquid and

the long term assets of the Indian corporate companies like the loans and

receivables by the issuing marketable securities against the same. However,

the Indian corporate companies must know that securitization is that

technique by which the exact long term, non-negotiable instruments are

equally converted into securities of such kind of small value in nature which

can be easily transacted in the commercial capital market.

In India, apart from the above, there is low and unpopularity of

securitization due to introduction of it as it's a new idea or concept to India,

heavy stamp duty and comparative registration fees imposed by the Indian

government, complicated and also legal transfer procedure the difficulty in


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the assignment of debts. Also there is poor standard of loan documentation,

problem of inadequate credit rating system, poor accounting procedure and

lack of comprehensive guidance.

3.1.8 Derivatives

The derivatives are those instruments, which are commonly used to derive

therein-exact value of underlying asset of the financial institutional corporate

companies. The derivatives comparatively may involve the payment or

receipt of the value or income created by the underlying assets. The main

factors that are responsible for the slow growth of derivatives in India and

high level of misconception of the derivatives, the derivatives lends

themselves to leveraging, the nature of the off balance sheet, items, poor

accounting system, speculative mechanism and finally poor infrastructure

system.

3.1.9 Credit Rating Services

According to Moody's Rating are designed exclusively for the purpose of

grading bonds according to their investments qualities". Also according to

the Australian Ratings "A corporate credit rating provides lenders with a

simple system of gradation by which the relative capacity of companies to

make timely repayment of interest and principal on a particular type of debtcan be noted".

The main credit ratings in India are credit rating information service

ltd(CRISIL), investment information and credit rating agency of


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India(ICRA), Credit Analysis and Research (CARE), and Duff Phelps Credit

Rating

Financial services refer to services provided by the finance industry. The finance

industry encompasses a broad range of organizations that deal with the

management of money. Among these organizations are credit unions banks, credit

card companies insurance companies, consumer finance companies, stock

brokerage, investment funds and some government sponsored enterprises As of

2004, the financial services industry represented 20% of the marker capitalization

of the S&Pin the united states.

3.1.10. Banking services

The primary operations of banks include:

Keeping money safe while also allowing withdrawals when needed

Issuance of checkbooks so that bills can be paid and other kinds of payments

can be delivered by post

Provide personal loans commercial loans, and mortgage loans(typically

loans to purchase a home, property or business) Issuance of credit cards and processing of credit card transactions and billing

Issuance of debit cards for use as a substitute for checks

Allow financial transactions at branches or by using Automatic teller

machine. (ATMs)


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Provide wire transfers of funds and Electronic transfer funds between banks

Facilitation of standing orders and direct debits, so payments for bills can be

made automatically

Provide overdraft agreements for the temporary advancement of the Bank'sown money to meet monthly spending commitments of a customer in their

current account.

Provide internet banking system to facilitate the customers to view and

operate their respective accounts through internet.

Provide Charge card advances of the Bank's own money for customers

wishing to settle credit advances monthly.

Provide a check guaranteed by the Bank itself and prepaid by the customer,

such as a cashiers checks or certifiedchecks .

Notary service for financial and other documents

3.1.11. Other types of bank services

Private banking- Private banks provide banking services exclusively tohigh

net worth individuals. Many financial services firms require a person or

family to have a certain minimum net worth to qualify for private banking

services. Private banks often provide more personal services, such as

wealth management and tax planning, than normal retail banks.

Capital market bank - bank that underwrite debt and equity, assist company

deals (advisory services, underwriting and advisory fees), and restructure

debt into structured finance products.

Bank cards - include both credit cards and debit cards. Bank of America is

the largest issuer of bank cards.
http://en.wikipedia.org/wiki/High_net_worth_individualshttp://en.wikipedia.org/wiki/High_net_worth_individualshttp://en.wikipedia.org/wiki/High_net_worth_individualshttp://en.wikipedia.org/wiki/High_net_worth_individuals


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Credit card machine services and networks - Companies which provide

credit card machine and payment networks call themselves "merchant card

providers".

3.1.13. Foreign exchange services

Foreign exchange services are provided by many banks around the world.

Foreign exchange services include:

Currency exchange- where clients can purchase and sell foreign currency

banknotes.

Foreign currency banking- banking transactions are done in foreign

currency.

Wire transfer- where clients can send funds to international banks abroad.

3.1.14. Investment services

Asset management - the term usually given to describe companies which run

collective investment funds. Also refers to services provided by others,

generally registered with the Securities and Exchange Commission as

Registered Investment Advisors.

Hedge fund management - Hedge funds often employ the services of "prime

brokerage" divisions at major investment banks to execute their trades.

Custody services - the safe-keeping and processing of the world's securities

trades and servicing the associated portfolios. Assets under custody in theworld are approximately $100 trillion.

3.1.15. Other financial services
http://en.wikipedia.org/wiki/Investment_managementhttp://en.wikipedia.org/wiki/Collective_investment_fundhttp://en.wikipedia.org/w/index.php?title=Registered_Investment_Advisors&action=edit&redlink=1http://en.wikipedia.org/wiki/Hedge_fundhttp://en.wikipedia.org/wiki/Hedge_fundhttp://en.wikipedia.org/w/index.php?title=Registered_Investment_Advisors&action=edit&redlink=1http://en.wikipedia.org/wiki/Collective_investment_fundhttp://en.wikipedia.org/wiki/Investment_management


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Intermediation or advisory services - These services involve stock brokers

(private client services) and discount brokers. Stock brokers assist investors

in buying or selling shares. Primarily internet-based companies are often

referred to as discount brokerages, although many now have branch officesto assist clients. These brokerages primarily target individual investors. Full

service and private client firms primarily assist and execute trades for

clients with large amounts of capital to invest, such as large companies,

wealthy individuals, and investment management funds.

Private equity - Private equity funds are typically closed-end funds, which

usually take controlling equity stakes in businesses that are either private,

or taken private once acquired. Private equity funds often use leveraged

buyouts (LBOs) to acquire the firms in which they invest. The most

successful private equity funds can generate returns significantly higher

than provided by the equity markets

Venture capital is a type of private equity capital typically provided by

professional, outside investors to new, high-potential-growth companies in

the interest of taking the company to an IPO or trade sale of the business.

Angel investment - Anangel investor or angel (known as a business angel or

informal investor in Europe), is an affluent individual who provides capital

for a business start-up, usually in exchange for convertible debt or

ownership equity. A small but increasing number of angel investors

organize themselves into angel groups or angel networks to share research

and pool their investment capital. Conglomerates - A financial services conglomerate is a financial services

firm that is active in more than one sector of the financial services market

e.g. life insurance, general insurance, health insurance, asset management,

retail banking,wholesale banking, investment banking, etc. A key rationale
http://en.wikipedia.org/wiki/Private_equityhttp://en.wikipedia.org/wiki/Venture_capitalhttp://en.wikipedia.org/wiki/Angel_investorhttp://en.wikipedia.org/wiki/Conglomerate_(company)http://en.wikipedia.org/wiki/Retail_bankinghttp://en.wikipedia.org/wiki/Retail_bankinghttp://en.wikipedia.org/wiki/Conglomerate_(company)http://en.wikipedia.org/wiki/Angel_investorhttp://en.wikipedia.org/wiki/Venture_capitalhttp://en.wikipedia.org/wiki/Private_equity


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for the existence of such businesses is the existence of diversification

benefits that are present when different types of businesses are aggregated

i.e. bad things don't always happen at the same time. As a consequence,

economic capital for a conglomerate is usually substantially less thaneconomic capital is for the sum of its parts.

Debt resolution is a consumer service that assists individuals that have too

much debt to pay off as requested, but do not want to file bankruptcy and

wish to payoff their debts owed. This debt can be accrued in various ways

including but not limited to personal loans, credit cards or in some cases

merchant accounts. There are many services/companies that can assist with

this. These can includedebt consolidation,debt settlement andrefinancing.
http://en.wikipedia.org/wiki/Economic_capitalhttp://en.wikipedia.org/wiki/Economic_capitalhttp://en.wikipedia.org/wiki/Debt_consolidationhttp://en.wikipedia.org/wiki/Debt_settlementhttp://en.wikipedia.org/wiki/Refinancinghttp://en.wikipedia.org/wiki/Refinancinghttp://en.wikipedia.org/wiki/Debt_settlementhttp://en.wikipedia.org/wiki/Debt_consolidationhttp://en.wikipedia.org/wiki/Economic_capitalhttp://en.wikipedia.org/wiki/Economic_capital


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CHAPTER.4. RBI AND SEBI GUIDELINES REGARDING

INVESTMENT BANKING

4.1 Various functions provided by investment banking.

4.1.1. ADVISING FUCTION

The advising function starts with the investment banker assessing the fundrequirements of its client, whether an individual or a corporate.

4.1.2. ADMINISTRATIVE FUNCTIONS

After deciding on the funding strategy, the second function is the administrativefunction, under which the investment banker has to prepare the documentation anda myriad of details associated with the regulatory framework of the country inwhich the funds are being raised.

4.1.3. UNDERWRITING FUNCTIONS

Underwriting means guaranteeing a fixed price to the security issuer in exchange

for its securities.

4.1.4 DISTRIBUTION FUNCTIONS

Distribution function involves the placement of newly issued securities in thehands of investors.

4.1.5. INVESTMENT MANAGEMENT FUNCTIONS

Given the fact that investment managers are involved with the issues from thebeginning, they have the strength to analyze the securities and firms that issuethem.

4.1.6. MERGERS AND AQUISITIONS

Mergers and acquisitions is another area where investment bankers have been


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active for a quite long time. The mergers and acquisitions departments ofinvestment banks provide consulting services to companies in the process ofmerging or acquiring other companies or organizations. Organizations wishing toacquire, dispose of, or invest in real estate will deal with the real estate division ofan investment bank.

4.1.7. OTHER ACTIVITIES

In addition to the above mentioned activities, investment bankers have beeninterested in designation of insurance products, pension plans, hedging risk andrisk management, foreign currency activities, real estate dealing, etc.

4.2.Gudelines on issues and valuation of shares in existingcompanies.

A. The price of shares issued to persons resident outside India under the FDIScheme shall not be less than :

i. the price worked out in accordance with the SEBI guidelines, as applicable,where the shares of the company is listed on any recognised stock exchange

in India;ii. the fair valuation of shares done by a SEBI registered Category - I Merchant

Banker or a Chartered Accountant as per the discounted free cash flowmethod, where the shares of the company is not listed on any recognisedstock exchange in India; and

iii. the price as applicable to transfer of shares from resident to non-resident asper the pricing guidelines laid down by the Reserve Bank from time to time,where the issue of shares is on preferential allotment.

B. The price of shares transferred from resident to a non-resident and vice versashould be determined as under:

i) Transfer of shares from a resident to a non-resident:

a) In case of listed shares, at a price which is not less than the price at which apreferential allotment of shares would be made under SEBI guidelines.


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b) In case of unlisted shares at a price which is not less than the fair value as perthe Discount Free Cash Flow (DCF) Method to be determined by a SEBI registeredCategory-I- Merchant Banker/Chartered Accountant.

ii) Transfer of shares from a non-resident to a resident - The price should not be

more than the minimum price at which the transfer of shares would have beenmade from a resident to a non-resident.

In any case, the price per share arrived at as per the above method should becertified by a SEBI registered Category-I-Merchant Banker / Chartered Accountant

4.3.Foreign Portfolio Investment.

Regulations regarding PI by SEBI registered Foreign InstitutionalInvestors (FIIs)?

Investment by SEBI registered FIIs is regulated under SEBI (FII)Regulations, 1995 and Regulation 5(2) of FEMA Notification No.20 datedMay 3, 2000, as amended from time to time. FIIs include Asset ManagementCompanies, Pension Funds, Mutual Funds, Investment Trusts as Nominee

Companies, Incorporated / Institutional Portfolio Managers or their Power ofAttorney holders, University Funds, Endowment Foundations, CharitableTrusts and Charitable Societies.

SEBI acts as the nodal point in the registration of FIIs. The Reserve Bank ofIndia has granted general permission to SEBI Registered FIIs to invest inIndia under the Portfolio Investment Scheme (PIS).

Investment by SEBI registered FIIs and its sub accounts cannot exceed10per cent of the paid up capital of the Indian company. However, in case of

foreign corporates or High Networth Individuals (HNIs) registered as subaccounts of an FII, their investment shall be restricted to 5 per cent of the

paid up capital of the Indian company. All FIIs and their sub-accounts takentogether cannot acquire more than 24 per cent of the paid up capital of anIndian Company. An Indian company can raise the 24 per cent ceiling to thesectoral cap / statutory ceiling, as applicable, by passing a resolution by itsBoard of Directors followed by passing a Special Resolution to that effect by


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their General Body. The Indian company has to intimate the raising of theFII limit to the Reserve Bank to enable the Bank to notify the same on itswebsite for larger public dissemination.

4.4 Regulations regarding Portfolio Investments by

NRIs/PIOs?

Non- Resident Indian (NRIs) and Persons of Indian Origin (PIOs) canpurchase or sell shares/ fully and mandatorily convertible debentures ofIndian companies on the Stock Exchanges under the Portfolio InvestmentScheme. For this purpose, the NRI/ PIO has to apply to a designated branchof a bank, which deals in Portfolio Investment. All sale/ purchase

transactions are to be routed through the designated branch. An NRI or a PIO can purchase shares up to 5 per cent of the paid up capital

of an Indian company. All NRIs/PIOs taken together cannot purchase morethan 10 per cent of the paid up value of the company. This limit can beincreased by the Indian company to 24 per cent by passing a General Bodyresolution. The Indian company has to intimate the raising of the FII limit tothe Reserve Bank to enable the Bank to notify the same on its website forlarger public dissemination.

The sale proceeds of the repatriable investments can be credited to the NRE/NRO, etc. accounts of the NRI/ PIO, whereas the sale proceeds of non-

repatriable investment can be credited only to NRO accounts. The sale of shares will be subject to payment of applicable taxes.

4.5. Investment in other securities .

Can a Non-resident Indian(NRI) and SEBI registered Foreign Institutional Investor(FII) invest in Government Securities/ Treasury bills and Corporate debt?

Under the FEMA Regulations, only NRIs andSEBI registered FIIs are permitted topurchase Government Securities/Treasury bills and Corporate debt. The details areas under :

A. A Non-resident Indian can purchase without limit,


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(1) on repatriation basis

i) Dated Government securities (other than bearer securities) or treasury bills orunits of domestic mutual funds;

ii) Bonds issued by a public sector undertaking (PSU) in India; andiii) Shares in Public Sector Enterprises being disinvested by the Government ofIndia.

(2) on non-repatriation basis

i. Dated Government securities (other than bearer securities) or treasury billsor units of domestic mutual funds;

ii. Units of Money Market Mutual Funds in India; andiii. National Plan/Savings Certificates.

B. A SEBI registered FII may purchase, on repatriation basis, dated Governmentsecurities/ treasury bills, listed non-convertible debentures/ bonds issued by anIndian company and units of domestic mutual funds either directly from the issuerof such securities or through a registered stock broker on a recognised stockexchange in India.

The FII investment in Government securities and Corporate debt is subject to aceiling decided in consultation with the Government of India. Investment limit forthe FIIs as a group in Government securities currently is USD 10 billion and inCorporate debt is USD 20 billion.

4.6.Foreign Venture Capital Investment.

A SEBI registered Foreign Venture Capital Investor has general permission

from the Reserve Bank of India to invest in a Venture Capital Fund (VCF)or an Indian Venture Capital Undertaking (IVCU), in the manner and subjectto the terms and conditions specified in Schedule 6 of RBI Notification No.FEMA 20/2000-RB dated May 3, 2000, as amended from time to time.These investments by SEBI registered FVCI, would be subject to the SEBIregulation and sector specific caps of FDI.


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FVCIs can purchase equity / equity linked instruments / debt / debtinstruments, debentures of an IVCU or of a VCF through initial public offeror private placement in units of schemes / funds set up by a VCF. At thetime of granting approval, the Reserve Bank permits the FVCI to open aForeign Currency Account and/ or a Rupee Account with a designated

branch of an AD CategoryI bank.

The purchase / sale of shares, debentures and units can be at a price that ismutually acceptable to the buyer and the seller.

AD Category I banks can offer forward cover to FVCIs to the extent oftotal inward remittance. In case the FVCI has made any remittance byliquidating some investments, original cost of the investments has to bededucted from the eligible cover to arrive at the actual cover that can beoffered.

4.7. Foreign Direct Investment (FDI)

A foreign company planning to set up business operations in India may:

Incorporate a company under the Companies Act, 1956, as a Joint Ventureor a Wholly Owned Subsidiary.

Set up a Liaison Office / Representative Office or a Project Office or aBranch Office of the foreign company which can undertake activities

permitted under the Foreign Exchange Management (Establishment in Indiaof Branch Office or Other Place of Business) Regulations, 2000.

An Indian company may receive Foreign Direct Investment under the two routes asgiven under :

4.7.1. Automatic Route

FDI up to 100 per cent is allowed under the automatic route in all activities/sectorsexcept where the provisions of the consolidated FDI Policy, paragraph on'EntryRoutes for Investment'issued by the Government of India from time to time, areattracted.

FDI in sectors /activities to the extent permitted under the automatic route does notrequire any prior approval either of the Government or the Reserve Bank of India.


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4.7.2 Government Route

FDI in activities not covered under the automatic route requires prior approval ofthe Government which are considered by the Foreign Investment Promotion Board(FIPB), Department of Economic Affairs, Ministry of Finance. Application can be

made in Form FC-IL, which can be downloaded from http://www.dipp.gov.in.Plain paper applications carrying all relevant details are also accepted. No fee is

payable.

Indian companies having foreign investment approval through FIPB route do notrequire any further clearance from the Reserve Bank of India for receiving inwardremittance and for the issue of shares to the non-resident investors.

The Indian company having received FDI either under the Automatic routeor theGovernment route is required to report in the Advance Reporting Form, thedetails of the receipt of the amount of consideration for issue of equity instrumentviz. shares / fully and mandatorily convertible debentures / fully and mandatorilyconvertible preference shares through an AD Category I Bank, together withcopy/ ies of the FIRC evidencing the receipt of inward remittances along with theKnow Your Customer (KYC) report on the non-resident investors from theoverseas bank remitting the amount, to the Regional Office concerned of theReserve Bank of India within 30 days from the date of receipt of inwardremittances.

Further, the Indian company is required to issue the equity instrument within 180days, from the date of receipt of inward remittance or debit to NRE/FCNR (B)account in case of NRI/ PIO.

After issue of shares / fully and mandatorily convertible debentures / fully andmandatorily convertible preference shares, the Indian company has to file therequired documents along with Form FC-GPR with the Regional Office concernedof the Reserve Bank of India within 30 days of issue of shares to the non-residentinvestors


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Chapter 5 : Conclusion.

Investment banking is the process of raising capital for businesses through public

floating and private placement of securities. Investment banking is thus critical to

the existence of businesses intending to grow by employing external capital.Investment banks therefore play crucial role in the IPOs and capital raising

process.

IPOs generally involve the issue of equity securities by business for the first time

and generally involve the use of investment banks in achieving this goal. In the

absence of any model to guide businesses in choosing the capable investment

banker (Manaster and Carter, 1990), it might fail in achieving this objective.

Capabilities of investment banks, which are critical to the IPO process, have been

found to lead to the development of competitive advantages for the investmentbanks. These capabilities include, competitive pricing of services, knowledgebase

developed by the investment banker, provision of ancillary services, experience of

the investment banker in its area of business and the integrity of its stakeholders.


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Chapter 6. Appendix

About:


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Chapter 7. Bibliography.

1.Arditti, Fred Another look at mutual fund performance. Journal of financial

and quantitative analysis. VI, No3 (June 1991),PP. 909-12.

2.Elton, Edwin j., and Gruber, Martin J. optimal investment strategies with

investor liabilities, Journal of banking and finance. 10No. 2 (march..1991)pp 210-

230

3. Keim, Donald B., and stambangh, Robert F. Prediction returns in the stock and

bond market Journal of financial economics, 104, No.1(feb 1989)P.I

4. Brenman, M.J., and Schwartz, E. Conditional predictions of prices and returns

Journal of finance,35(1980)PP.405-417.

5. Niederhoffer. V ., and Regan, P. Earnings, changes, Analysts. Forecast, and

Stock Prices. Financial analyst journal, 28.no.3 (may-June 1972), PP 65-71

6. Cornell, Brad ford, and Green, Kevin. The investment performance of low-

grade bond funds. The journal of finance.49, No1 (Mar.1991), PP.29-48.


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Chapter.8 Literature Review.

This book, as the title suggest is concerned with the characteristics and analysis of

individual securities: as well as with the theory and practice of optimal combiningsecurities into portfolio.

You will find answers to these questions and more in the new sixth edition ofmodern portfolio theory and investment analysis. In this new Edition, Edwin Eltonand Marting Gruber, together with new co- authors Stephen Brown and willGeozman , offer an accessible up to date presentation of advanced theories andtechniques of investment analysis and portfolio management.

Following a concise introduction to the basic concepts of securities and markets,book guides you step through the nuts and bolts of modern portfolio theory,including its strength and weakness, and recent breakthroughs. Along the way, youwill learn how to evaluate individual securities , combines securities into huge

performance portfolios , and apply modern tools, such as equilibrium theory tomanage portfolios more effectively.

Documents

Investment Banking Satishj (1)