Group4_Invst&MerchantBanking

8/3/2019 Group4_Invst&MerchantBanking

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INVESTMENT AND MERCHANT BANKING

Presented By:

Group# 4

Aniket Vipat 101108

Saurav Modi 101144

Shreyansh Rajpurohit 101145

Sunit Lohia 101149

Vipul Agrawal 101158Vishal Kukal 091255


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INVESTMENT BANKING


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Bank of America (Merrill Lynch)

Citigroup

Credit Suisse

Wells Fargo Securities

Barclays Capital Morgan Stanley

Deutsche Bank

UBS

Nomura Securities

Cholamandalam Investment & Finance Company

JP Morgan Chase

Bajaj Capital

Goldman Sachs


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Investment Bank (Definition)

A financial intermediary that performs a variety

of services. This includes underwriting, acting asan intermediary between an issuer of securitiesand the investing public, facilitating mergers andother corporate reorganizations, and also acting

as a broker for institutional clients.


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Investment Bank- (Features) 1/2

Unlike commercial banks and retail banks, investment banks donot take deposits. From 1933 (GlassSteagall Act) until 1999(GrammLeachBliley Act), the United States maintained aseparation between investment banking and commercial banks.Other industrialized countries, including G8 countries, havehistorically not maintained such a separation.

There are two main lines of business in investment banking. Trading securities for cash or for other securities (i.e., facilitating

transactions, market-making), or the promotion of securities(i.e., underwriting, research, etc.) is the "sell side",

while dealing with pension funds, mutual funds, hedge funds, and the

investing public (who consume the products and services of the sell-side in order to maximize their return on investment) constitutes the"buy side". Many firms have buy and sell side components.


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Investment Bank- (Features) 2/2

An investment bank can also be split intoprivate and public functions with a Chinesewall which separates the two to prevent

information from crossing. The private areasof the bank deal with private insiderinformation that may not be publicly

disclosed, while the public areas such asstock analysis deal with public information


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Indian Context

Commercial Banks and financial institutions setup subsidiaries in 1972.

With foreign investment banks in 1990smerchant banking came to be known asInvestment banking

Comes under the purview of SEBI.


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Types of Investment Banks

Investment Banks

Full ServiceGlobal

Investment Banks

Regional

Investment Banks

Boutique Firms


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Full Service Global Investment Banks

Operates on global basis and provides acomplete set of services to their clients

Large investment firms serving multi-nationals

E.g.

Jefferies

Goldman Sachs,

JP Morgan Chase &Co.

Kotak Investment Banking


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Regional Investment Banks

Concentrated in particular region withspecialized geographical knowledge.

Variety of product offerings

Also known as Speciality Investment Banks

E.g.

Piper Jaffray CompaniesSimmons & Company


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Boutique Firms

Small Investment Firms organized at locallevel

Specialize in particular industry or product

Better advisors in some particular deals

E.g

Avendus CapitalVeda (Chennai based)

Montague Partners


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INVESTMENT BANKING SERVICES

InvestmentBanking

Fund-RaisingServices AdvisoryServices


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FUND-RAISING SERVICES 1/1

Initial Public Offerings (IPOs)

Follow-on Public Offers (FPOs)

Qualified Institutional Placements (QIPs)

Rights Issues


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FUND-RAISING SERVICES 2/2

Preferential Allotments

Foreign Currency ConvertibleBonds (FCCBs)

Global Depository Receipts(GDRs)


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Advisory Services

Export and Project Finance

Project Advisory

Project Debt Arrangement

Forfaiting

Mergers and Acquisitions


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Strategic Advise Buy-side and Sell-side Advisory Divestures Recapitalizations Buyouts Capital Raising

Packageof

Services

Legal Documentation Valuation

Scope ofServices


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Target Short Listing

Preparing and Executing Term Sheet Due Diligence and Transaction Closure Transaction Closure

Buy SideAdvisory

Collateral Preparation Target Short-Listing Preparing and Executing Term Sheet Due Diligence and Transaction Closure

Sell SideAdvisory


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Promoter and Acquisition Financing Services

Promoter Financing

Acquisition Financing

Private Equity Advisory

Infrastructure Advisory

Capital

Advisory

Strategic Advisory Services


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Debt Syndication and Structure Finance

Raising Debt Capital

Debt Structuring

Financial Restructuring and TurnaroundFinancing

Private Client Services

Sales and Trading

Equities Research and Broking


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MERCHANT BANKING


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MERCHANT BANKING

Merchant Banker is any person who is Engaged in the business of issue management

OR Acting as a Manager, Consultant, Advisor

Facilitate the issue process by coordinating variousactivities Mandatorily required in case of

Public issues Rights issues

Open offers Buy-backs

Prohibited from carrying out any fund based activity


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MERCHANT BANKING ISSUE MANAGEMENT

1 Preparation of prospectus and other documents

2 Determining financial structure

3 Tie-up of financiers

4 Appropriate pricing and marketing of the issue

5 Final allotment and refund of subscription


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MERCHANT BANKERS REGISTERED WITH SEBI


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SEBI (MERCHANT BANKER) REGULATIONS, 1992

Should be a body corporate other than a non-bankingfinancial company

Being a primary dealer registered with RBI, applicantshould not accept or hold any public deposit

Should have necessary infrastructure

Should not be guilty of any economic offence

The applicant should comply with thefollowing requirements:


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APPOINTMENT OF LEAD MERCHANT BANKERS

Number of lead merchant bankers depends onthe size of issue and may not exceed as below:

Size of Issue No. of Merchant Bankers

Less than Rs. 50 Crores Two

Rs. 50 Crores but less thanRs. 100 Crores

Three

Rs. 100 Crores but less than

Rs. 200 Crores

Four

Rs. 200 Crores but less thanRs. 400 Crores

Five

Above Rs. 500 Crores, five ormore

As may be agreed by theBoard


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MERCHANT BANKING

Responsibility of Lead Managers No lead manager shall agree to associate unless his

responsibilities are clearly defined, allocated anddetermined

Acquisition of shares on the basis ofunpublished price-sensitive information isprohibited

Information to the board about acquisition ofsecurities

Disclosures to the SEBI

Appointment of Compliance Officer


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PRE-ISSUE OBLIGATIONS

1. SUBMISSION OF DOCUMENTSOffer document

Memorandum of Understanding

Inter-Se Allocation of Responsibilities

Due-diligence certificate

Certificates signed by the CS or CA

2. SUBMISSION OF UNDERTAKING

Transactions in securities between the date of filing theoffer documents and the closure of the issue will bereported to the stock exchanges concerned within 24hrs


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3. SUBMISSION OF LIST OF PROMOTERSGROUP

The issuer company shall issue the list and the individualshareholding to the SEBI

4. APPOINTMENT OF INTERMEDIARIESA merchant banker shall not lead manage the issue if he is a

promoter or a director or an associate of the issuercompany

5. APPOINTMENT OF OTHERINTERMEDIARIES

The lead merchant shall ensure that the other intermediaries

are duly registered with the Board; that issuer companiesenter into MoUs with the intermediaries concerned


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6. APPOINTMENT OF UNDERWRITERThe lead merchant shall satisfy himself about the ability of the

underwriters to discharge their underwriting obligations; also heshould ensure that the relevant details of underwriters are

included in the offer document

7. MAKING OFFER DOCUMENT PUBLICThe draft-offer document filed with the SEBI shall be made public for

a period of 21 days, from the date of filing the offer documentwith the SEBI

8. FILING A NO-COMPLAINT CERTIFICATEAfter a period of 21 days from the date the draft offer was made

public, the lead merchant banker shall file a statement withh theboard


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8. APPOINTING AUTHORISEDCOLLECTION AGENTS

The issuer company can appoint authorised collection

agents according to the discretion of the leadmerchant banker

9. ENTERING INTO AN AGREEMENT WITHDEPOSITORY(IES)

The lead manager shall ensure that the issuer companyhas entered into agreements with all the depositoriesfor dematerialisation of securities


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POST-ISSUE OBLIGATION OR REQUIREMENTSThe following are the post-issue obligations:

Receiving of application forms.

Screening of applications.

Deciding allotment procedure.

Mailing of allotment letters.

Shares certificate or demat account entriesand refund orders.


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MONITORING REPORTSThe lead merchant banker ensures the submission of the post-issue monitoring

reports based on the formats, irrespective of the level of subscription.

3-day monitoring report for book-built portion

The due date for this report is the third day from the date of allocation, or one day

before the opening of the fixed price portion.

3-day monitoring report in other cases

Fixed price portion of the book-built issue. The due date for the report is the third

day from the date of closure of the issue.

Final post-issue monitoring report for all issues

The due date for the report is the third day from the date of listing of the report, or

78 days from the date of closure of the issue subscription, whichever is earlier.


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ALLOTMENT PROCEDUREThe Executive Director or Managing Director of the Regional Stock Exchange

consults with the post-issue lead merchant banker and the registrars

regarding public issue of securities.

Proportionate allotment procedure

The lead banker must ensure that the allotment is made on a proportionate

basis as explained below:

The applicants are divided into separate category based on the number of

shares they have applied for.

The total number of shares to be allotted to each category is done on a

proportionate basis. This is based on the product of the total number of

shares applied for in that category and the inverse of the oversubscription

ratio.


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REDRESSAL OF INVESTORS GRIEVANCES

The post issue lead merchant banker mustinteract on a regular basis with the post-issueactivities such as allotment and refund. The

merchant banker must regularly monitor theredress of investors grievances arising from

the activities.


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COORDINATION WITH INTERMEDIARIESClose co-ordination with the registrars to an issue,

and also arranges to assign the officers of

intermediaries at regular intervals after the closure

of the

Finalization of the basis of allotment

Sending off the security certificates

Completion of refund orders

Listing of securities.


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POST ISSUE ADVERTISEMENTS Advertisement gives the details regarding oversubscription, basis of

allotment, number; value and percentage of applications received

with the stock invest.

The post-issue lead merchant banker ensures the advertisement

circulates in at least three publications in English, Hindi and a

regional language at the place, where registered office of the issuer

company is situated. This is applicable for all issues.

The post-issue lead merchant banker ensures that the issuer

company, advisors, brokers or any other agencies associated with

the issue do not publish any kind of advertisement describing the

status of the issue.


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OTHER RESPONSIBILITIESThe post-issue lead merchant banker is responsible

for post issue activities till:

The subscribers have got the shares or debenture

certificates or refund of application money

The listing agreement is entered into by the issuer

company with the stock exchange

The listing or trading permission is received


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REALIZATION OF STOCK INVESTS

The post-issue lead merchant banker must

submit a certificate within two weeks from the

date of allotment to the board. The certificate

must certify that the stock invests are

released on the basis of the allotment

finalised.


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CHANGING LANDSCAPE

Investment banking was a lucrative business till2007

Sub prime crisis took toll of the global investment

banks.Investment banks were not under control of eitherFederal reserve bank or the US securities andExchange Commission.


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Impact on Indian Investment banks

Drop In big deals and revenues

Growth rate slowed down but comparativelygood


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FUTURE OF INVESTMENT BANKING

More Stringent Laws and Restrictions

Claw-back Provisions-

This provision requires those whose trades cause

subsequent losses, to pay back all or part of theirbonuses

Emphasis on Equity Derivatives and

Currency trading Fewer big banks and more small

boutiques


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FUTURE OF INVESTMENT BANKING (CONT.) Lesser Dependence on Short-Term Funding

As the investment banks are largely financed with short-termfunding, a massive asset/liability mismatch is created which isdifficult to manage

It is also probable that more investment banks will be pushed into thearms of banking acquirers with large and stable deposit bases

This will provide solution to the investment banks which aregenerally financed for the good times, not the bad ones

Potential conflicts of interest:Some of the conflicts of interest that can be found in investment banking

are Credit Rating: Historically, equity research firms were founded and

owned by investment banks Market Manipulation: Many investment banks also own retail

brokerages.


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CHALLENGES AHEAD Align their product capabilities and cost structures to

exploit their competitive advantage

Move towards more integrated client relationship andservice models

Adopt new performance measurement and rewardsystems

Understand the product life cycle and manage theirproduct portfolio more aggressively

Adopt a more segmented approach to serving clients

Build scale on an operational level to cut costs


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THANK YOU!

Group4_Invst&MerchantBanking

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