PhD RESEARCH PROPOSAL

DOCTORAL PROGRAMME IN BUSINESS MANAGMENT

A study on investment bank and practices in India: an opportunity

and challenges in the present competitive environment

Advisor:

DR. RICHA PANDIT

SUBMITTED BY:

KAVISHA M SHAH

APPLICATION NO:PH182771

SEAT NO:ET10495

SUBMITED TO:

THE GUJARAT TECHNOLOGICAL UNIVERSITY

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 TABLE OF CONTENTS
Sr.No Particulars Pg. No.
1 Introduction 3-8

2 Literature Review 9-13

3 Introduction of the study 14
3 Research Methodology 15-16
4 Bibliography 17
5 Reference 18

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 1) INTRODUCTION

About investment banks

Current scenario of Investment banking in India is itself very wide. An Investment banks
do not take deposits. An investment bank is a financial services company or corporate
division that engages in advisory-based financial transactions on behalf of individuals,
corporations, and governments. Traditionally associated with corporate finance, such a
bank might assist in raising financial capital by underwriting or acting as the
client's agent in the issuance of securities. An investment bank may also assist
companies involved in mergers and acquisitions (M&A) and provide ancillary services
such as market making, trading of derivatives and equity securities, and FICC services
(fixed income instruments, currencies, and commodities). Most investment banks
maintain prime brokerage and asset management departments in conjunction with
their investment research businesses. Mainly companies are required cash in order to
expand their businesses; Investment Banks help these by issuing sell securities (debt
and equity) to the investors. These securities can be stocks, bonds, debt etc.

All investment banking activity is classed as either "sell side" or "buy side". The "sell side"
involves trading securities for cash or for other securities (e.g. facilitating transactions,
market-making), or the promotion of securities (e.g. underwriting, research, etc.). The
"buy side" involves the provision of advice to institutions that buy investment
services. Private equity funds, mutual funds, life insurance companies, unit trusts,
and hedge funds are the most common types of buy-side entities.

An investment bank (IB) is financial intermediary that performs a variety of services.

Investment banking is a special segment of banking operation that helps individuals or
organizations raise capital and provide financial consultancy services to them. They act
as intermediaries between security issuers and investors and help new firms to go public.
They either buy all the available shares at a price estimated by their experts and resell
them to public or sell shares on behalf of the issuer and take commission on each
share. 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
and/or financial advisor for institutional clients.

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Investment banks help corporations issue new shares of stock in an 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 counseling
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.

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 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.

Investment Banking falls under two broad headings: the provision of financial advice
and capital raising. Investment banking provides services to their client for investment
in capital market through share; these services are based on research activity. In this,
primarily the act of the purchasing and selling of shares includes. Investment banking
organization performs role as an intermediary between investor and capital market.
Investment banking has now gained considerable position in Indian capital market.
Investment banking should reach to investors and finally faithfulness of investor for
investing in banking organization. The investment banking has the ability to draw
willingness of their investors to invest more funds for investment in capital market. The
government and semi-government agencies should come in a parallel manner to make
new agenda or policies in the investment sector to improve Indian capital market.

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 Industry Coverage
corporate finance:

in corporate finance position you would work to help companies raise capital needed for
new projects and ongoing operations.

Capital markets

This position can be either in debt capital markets or equity capital markets (ECM).

Mergers and Acquisition:

Setting up deals where one company buys another is an important source of fee income
for many investment banks.

Project finance:

Project finance involves funding infrastructure and oil capital projects off of a company
or governments main balance sheet

Structured finance:

Position in structured finance involve the creation of financing vehicles to redirect cash
flows to investors (known as asset – backed securities.

Sales and trading:

Trading at own account or as a broker on behalf of clients

Asset management:

Investing clients’ money and providing wealth management advisory.

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 Activities

 A typical investment bank will engage in some or all of the following activities:
 Raise equity capital (e.g., helping launch an IPO or creating a special class
of preferred stock that can be placed with sophisticated investors such as
insurance companies or banks)
 Raise debt capital (e.g., issuing bonds to help raise money for a factory expansion)
 Insure bonds or launching new products (e.g., such as credit default swaps)
 Engage in proprietary trading where teams of in-house money managers invest or
trade the company's own money for its private account (e.g., the investment bank
believes gold will rise so they speculate in gold futures, acquire call options on gold
mining firms, or purchase gold bullion outright for storage in secure vaults).
 Up until recent decades, investment banks in the United States were not allowed
to be part of a larger commercial bank because the activities, although extremely
profitable if managed well, posed far more risk than the traditional lending of money
done by commercial banks. This was not the case in the rest of the world.
Countries such as Switzerland, in fact, often boasted asset management
accounts that allowed investors to manage their entire financial life from a single
account that combined banking, brokerage, cash management, and credit needs.
 Most of the problems you've read about as part of the credit crisis and massive
bank failures were caused by the internal investment banks speculating heavily
with leverage on collateralized debt obligations (CDOs). These losses had to be
covered by the parent bank holding companies, causing huge write-downs and the
need for dilutive equity issuances, in some cases nearly wiping out regular
stockholders. A perfect example is the venerable Union Bank of Switzerland, or
UBS, which reported losses in excess of 21 billion CHF (Swiss Francs), most of
which originated in the investment bank.
 The legendary institution was forced to issue shares as well as mandatory
convertible securities, diluting the existing stockholders, to replace the more than
60% of shareholder equity that was obliterated during the meltdown.

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 Investment Banks in India
An investment bank is basically a financial company that provides a range of services
from investment, financial advisory, underwriting, research, trading, raising capital,
issuance of shares and bonds, to recommendations and advisory on mergers and
acquisitions. They are involved where large amount of money is involved.

Typically, the clients of investment banks include large business corporations, as well
as high net worth individuals (HNIs).

There are various reasons for multinational investment banks come to India. Major
reason behind investment banks invest into India is its Lower operating cost model.

 Reducing operating costs of an investment banks because much cheaper

workforce is available than US, UK and other countries.
 Also in India various Indian companies like WIPRO, SYNTEL; TCS offers an IT,
ITES and KPO services i.e. back office services for an Investment bank.

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 Big foreign players in Indian Investment banking sector

Many foreign investment banks are set up in India, so the investment banking sector in
India becomes more competitive. Following are list of top investment banks in India.

 ABN-AMRO Bank
 Nomura
 The Bank of New York Mellon
 BNP Paribas Bank
 Citi Bank
 Deutsche Bank
 HSBC
 JPMorgan Chase Bank
 Goldman Sachs
 Morgan Stanley
 Barclays

List of Top Indian Investment Banks

 Bajaj Capital
 Avendus
 ICICI Securities Ltd
 Kotak Mahindra Capital Company
 SBI Capital Markets
 Yes Bank

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 2) Literature review
The review of literature plays a significant role in understanding the work done by
researchers in the same field and help in identifying the research gap to pursue further
study on the similar topic.

Thomas J. Chemmanur, Mine Ertugrul, Karthik Krishnan (2017) in their research work
title“A Study of the Role of Investment Bank and Investment Banker Human Capital in
Acquisitions “has finalized that investment bankers’ prior deal experience is significantly
and positively related to acquisition CAR and post-acquisition operating performance.
they find that these effects are stronger for acquirers in more complex and opaque
industries. Second, using graduation year stock market performance and point in career
as of the acquisition date as the instrument for bankers ‘experience, they show that the
positive relation between investment banker experience and acquisition performance is
causal. Third, they find that acquisition deals with more experienced investment banking
teams fetch higher fees for the investment banks that they work for. Finally, they find that,
when more experienced investment bankers switch to a new bank, acquirers are more
likely to move with them. Overall, their results suggest that an important source of the
value to acquirers of using investment bank advisors is the skill and ability of the individual
investment bankers working on the deal.

David Oesch, Dustin Schuette, and Ingo Walter (AUGUST 2015) in their research work
title “Real Effects of Investment Banking Relationships: Evidence from the Financial
Crisis” In this paper, researcher focus on the failure of three major investment banks
during the financial crisis of 2007-2009 as an empirical setting to investigate the real
effects of a distortion in investment banking relationships. Their results suggest that
clients of a troubled investment bank reduce their investment expenditures and financing
activities significantly more than a sample of control firms

Mariana Mazzucato(September 2015)in their work title their research work title “The rise
of mission-oriented state investment banks: in case of Germany and brazil” This paper
focuses on the rise of state investment banks (SIBs) as lead funders of mission oriented
innovation in various countries’ agendas regarding Smart growth, and not just fixers of
‘market failures’. The market failure justification for public finance fails to capture the
active mission-oriented role that such banks are playing in shaping and creating markets,

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rather than just fixing them. In tackling innovation priorities and shaping new markets,
these banks are developing new financial tools that also help to reform the financial
system from within, addressing issues of short-termism and financialisaton. The paper
presents a rich analytical description of mission-oriented investments.

Emmanuel Mamatzakis and Theodora Bermpei (2015)in his research work titled “The
Effect of Corporate Governance on the Performance of US Investment banks” has
recognized the impact of the corporate governance on the performance of the
US investment banks over the 2000–2012 period. This time period offers a unique set of
information, related to the credit crunch, Results show that the board size asserts a
negative effect on performance consistent with the ‘agency cost’ hypothesis, particularly
for bank with board size higher than ten members. Analysis reveals that in the post‐crisis
period most of investment bank opt for boards with less than ten members, aiming to
decrease agency conflicts that large boards suffer from. We also find a negative
association between the operational complexity and performance. Moreover, the CEO
power asserts a positive effect on performance consistent with the ‘stewardship’
hypothesis. In addition, an increase in the bank ownership held by the board has a
negative impact on performance for banks below a certain threshold. On the other hand,
for banks with board ownership above the threshold value this effect turns positive,
indicating an alignment between shareholders’ and managers’ incentives.

Yulia lapina (Dec 2015) in his research work titled “Investment Banks Efficiency and
corporate governance framework” The main aim of researcher has the features
of investment banks in comparison with commercial banks, what has allowed
distinguishing principal differences in their functioning. The research identifies the main
economic factors, which give the opportunity to evaluate the financial intermediaries’
performance in the investment banking sphere. The author suggests the phased system
of scientific and methodological approach to assess the effectiveness of quantitative
determination of specific investment banking activities, which will include system of the
most relevant indicator for this specific banking area. In complex this method assesses
efficiency of assets, cost, risk, capital and liquidity management. The author defined the
investment banking efficiency by using the comprehensive procedure which allows input
indicators base, highlighted integrated assessment which is based on the calculation of
synthetic investment banking key performance index (SIBKPI).

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Amit kashyap and Anjani singh tomar (October 21,2013) in his research” Investment
banking in India: Towards a Comprehensive Regulatory Structure” analyzed that Banking
and financial institutions and the securities market are two broad platforms for institutional
intermediation of the flow of capital in the economy. Investment banking mainly deals with
the primary function of assisting the securities market in the movement of financial
resources from the investors to the issuers. Investment banks are actually the
counterparts of commercial banks in financial markets. They perform the function of
intermediation in the area of resource allocation. Regulatory authorities require promotion
of quality issues, integrity and maintenance of compliance with the law on behalf of
the banks as well as the issuers. Advising corporations on how best to configure their
balance sheets constitutes the very heart of Investment banking. This paper focuses on
investment banking industry and related laws, with special reference to India and SEBI’s
active role in the development of a powerful regulatory structure.

Janis Berzins, Crocker H. Liu ,Charles Trzcinka,(April 26, 2013) in their research work
title “Asset management and investment banking “they found that conflicts of interest are
pervasive in the asset management business owned by investment banks. They using 19
years of data of investment banks and non-bank conglomerates and compare the alphas
of mutual funds, hedge funds, and institutional funds. They found that, no difference exists
in performance by fund type, being owned by an investment bank reduces alphas by 46
basis points per year in their baseline model. The dispersion of fees across portfolios
decreases alphas and its decrease companies’ economic loss.

Pascal Stock (February 29, 2012) in his research title “The Advising Investment banks
industry expertise and access to the bidder’s private information: their positive influence
on the performance in Acquisition sequences” This study extent the literature of the
advising bank’s positive influence on the performance in mergers and acquisitions by
modeling the expertise of banks on the industry level while considering two levels of
endogeneity. The first level of endogeneity is caused by the most experienced
banks being selected into the largest and most complex transactions with the lowest
returns. The second level of endogeneity is caused by the observability of the influence
of the bank’s industry expertise on the performance only when the acquirer decided to
employ a bank as advisor and to choose that bank in particular. Along the acquisition
sequence the bank that is most familiar with the acquirer and that has the highest industry
expertise in the acquirer’s and target’s industries is most likely to be chosen as advisor.
The choice of the advising investment bank based on its industry expertise and its access
to the acquirer’s private information has a positive influence on the acquirer’s returns. In
the analysis of the alternative advisor choice by endogenous switching the employment

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of a more experienced bulge-bracket bank would have resulted in higher returns in
transactions advised by non-bulge-bracket banks or that are unadvised. The analysis
shows that the matching of the most experienced banks with the largest and most
frequent serial acquirers in the most complex transactions is efficient in terms of higher
returns and a higher completion probability.

Andre gygax and Stephanie S. Ong (June 2011) in this research “what do investment
banks truly bring to the table?” researcher investigates the role of intermediaries in the
initial public offering (IPO) process. In the U.S. market, investment banks have
traditionally been involved in a firm‐commitment or best‐efforts underwriting capacity.
However, in the Australian IPO market, investment banks are increasingly being named
in association with new issues in diverse roles such as issue managers, sponsoring
brokers and corporate advisers. Using a sample of 468 IPOs over the 1996 to mid‐2006
period, we examine the influence of investment banks across these different
engagements. In support of the signaling and information production roles of
intermediaries, we find that issuers choosing high intermediary involvement are typically
older, retain more capital, seek to raise larger amounts of capital and are without
independent expert certification. We find mixed support for the certification hypothesis
when testing for the effect of intermediary reputation on IPO issuer wealth loss. Further,
the impact of intermediary involvement on underpricing is not significantly different for the
different levels of intermediary involvement once issue characteristics have been
accounted for. This is puzzling since these different roles by definition do not provide the
same level of issue quality assurance.

Vincenzo farina (May2009) in his research work titled “Network embeddedness,

specialization choices and performance in investment banking industry “has recognized
that the possibility of fully exploit network opportunities is depending on firm specialization
choices. By analyzing network embeddedness within the European investment banking
industry, I find that banks enhance performance by having a central position in their
network and that specialization reduces bank’s benefits of having a central position in the
network.

Andriy Bodnaruk, Massimo Massa and Andrei Simonov (September 2008) in his research
“Investment banks as insiders and the market for corporate governance” Researcher
studied holdings in M&A targets by financial conglomerates which affiliated investment
banks advise the bidders. they show that advisors take positions in the targets before
M&A announcements. These stakes are positively related to the probability of observing

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the bid and to the target premium. They argue that this can be explained in terms of
advisors, privy to important information about the deal, investing in the target in the
expectation of its price to increase. They document the high profits of this strategy. They
also document a positive relationship between the advisory stake and the deal
characteristics. The advisory stake is positively related to the likelihood of deal completion
and to the termination fees. However, these deals are not wealth-creating: there is a
negative relation between the advisory stake and the viability of the deal. These results
provide new insights into the conflicts of interest affecting financial intermediaries
simultaneously advising on deals and investing in equities

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 3) Introduction of the study

1 RESEARCH GAP:

This study makes a clear picture of investment banks related to the

productivity. The investment bank management of India faced many
challenges.

At the stage of Literature Review, the researcher found that many

researchers have investment banks in the form of challenges, opportunities,
positive and negative impact on banks. At the same time there are several
studies on the performance evaluation of in banks in India but researcher did
not come across a study where all the aspects of regulatory framework and its
effect on Banks are considered precisely.

2 TENTATIVE OBJECTIVES:

1. To examine the growth prospects of investment banks in India.

2. To evaluate financial performance of investment banks.
3. To examine the performance of investment banks under various heads of
activates.
4. To find outs the various constrains form which investment banking market
suffers.
5. To evaluate the overall productivity and profitability of Indian investment
banks.

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 4) RESEARCH METHODOLOGY
Research Methodology describes the methods used to collect, evaluate, understand and
interpret the data and achieve the desired objectives of study. The whole research
process from the beginning to the end is described in a nutshell as Research Design.

1) RESEARCH PLAN
Research plan includes the all information regarding the sampling frame, period of the
study, research design and source of data.

SAMPLING FRAME:

Sampling frame

Sampling Unit Investment banks sector

Sampling Size Top 20 investment banks in India

PERIOD OF THE STUDY:

The present study has been made covering the period of last 5 years

RESEARCH DESIGN:

In the present study, the following research designs have been used simultaneously:

1. Descriptive Research Design

The study data collect from multiple investment bank so that study is descriptive in nature

2. Analytical Research Design

The next step to analyze the impact and financial performance and parameters of invest banking
in India. The analysis of various parameters based on secondary data of various investment
banks and also measure relationship between growing Indian capital market and investors.

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DATA COLLECTION METHOD SOURCES OF DATA:

Sources of Data: secondary

Annual report selected investment banks, supplement the data RBI publication, IBA Bulletin,
different publications, Bank quest, various books, periodicals, journals and different website
related banking industries etc. have used for better reliability. Opinions expressed in
Business standard, Newspapers, accounting literature, Annual review and different
publications also used in this study.

BENIFICIERIES OF STUDY

1) Facilitates growth of an Indian investment banks

2) Benefits to investors: -

Investors can analyze the Bank performance of last five years and understand
the consequences on macro level parameters and financial performance
parameters of investment Banks in India.

3) Benefits to Researchers/ Readers: -

The researchers/ readers whose area of interest is investment banking

industry will be beneficial to read the comprehensive study performed on
Banks in India for five years and may consider this study as a reference
for further study.

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 5) BIBLIOGRAPHY

https://corporatefinanceinstitute.com/resources/careers/jobs/investment-banking-india/

https://www.creditmantri.com/article-best-investment-banks-in-india/

https://www.slideshare.net/yogeshnamdeo/investment-banking-
25665381?next_slideshow=1

https://www.scribd.com/doc/36813414/Strategic-Analysis-of-Investment-Banking-In-
india

https://www.financewalk.com/investment-bank-work/#What_Is_an_Investment_Bank

https://www.thebalance.com/what-is-an-investment-bank-357318

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 6)Reference

Thomas J. Chemmanur, Mine Ertugrul, Karthik Krishnan in 2017“A Study of the Role of
Investment Bank and Investment Banker Human Capital in Acquisitions “

Emmanuel Mamatzakis and Theodora Bermpei in 2015 “The Effect of Corporate

Governance on the Performance of US Investment banks”

Yulia lapina in December 2015“Investment Banks Efficiency and corporate governance

framework”

David Oesch, Dustin Schuette, and Ingo Walter in AUGUST 2015“Real Effects of
Investment Banking Relationships: Evidence from the Financial Crisis”

Mariana Mazzucato in September 2015“The rise of mission-oriented state investment

banks: in case of Germany and brazil”

Janis Berzins, Crocker H. Liu ,Charles Trzcinka in April 26, 2013“Asset management
and investment banking

Amit kashyap and Anjani singh tomar in October 21,2013 “Investment banking in India:
Towards a Comprehensive Regulatory Structure”

Pascal Stock in February 29, 2012“The Advising Investment banks industry expertise
and access to the bidder’s private information: their positive influence on the
performance in Acquisition sequences”

Andre gygax and Stephanie S. Ong in June 2011“what do investment banks truly bring
to the table?”

Vincenzo farina in May2009 “Network embeddedness, specialization choices and

performance in investment banking industry”

Andriy Bodnaruk, Massimo Massa and Andrei Simonov in September 2008 “Investment
banks as insiders and the market for corporate governance”

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