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STRATEGIC

MANAGEMENT
[2009]
SUBMITTED TO: Dr. Vidushi
Sharma

SUBMITTED BY:
Daizy Choudhary (101)
Anuradha Gupa(10!)
Vi"as #api$ (10%)
Vinay "umar a&&ar'a$ (11()
) *GDM III S+m
S,N-*SIS -. INVESTMENT
/AN#
Motivation of Research
To know the strategic gap in the field of investment banking
Giving our contribution towards the growth and
development of investment banking
Understanding the current and potential client for the
investment bank their need and wants
Analysis of future growth and prospects of investment
banking
Finding out the major player of investment banking and the
leaders
To in-depth study of investment banking and corporate
finance
Molding our career in the field of investment banking like
financial analyst and associate
Understanding the reuired ualification in the field of
investment banking
To learn how the investment banks underwrite new debt
and euity securities for corporations and also how they
provide guidance to issuers regarding the issue and
placement of stock!
Understanding help to facilitate mergers and
acuisitions" reorgani#ations and broker trades for both
institutions and private investors!
Understanding that what type of strategy used by these
organi#ation!
2
INVESTMENT BANKING
Introduction
$nvestment banking is a specific division of banking related to the
creation of capital for other companies! $nvestment banks
underwrite new debt and euity securities for all types of
corporations! $nvestment banks also provide guidance to issuers
regarding the issue and placement of stock!
$n addition to the services listed above" investment banks also
aid in the sale of securities in some instances! They also help to
facilitate mergers and acuisitions" reorgani#ations and broker
trades for both institutions and private investors! They can also
trade securities for their own accounts
Introduction of the Industry
$nvestment %anks help companies and governments issue
securities" help investors purchase securities" manage financial
assets" trade securities and provide financial advice! The top
investment banks including Goldman &achs" '(
Morgan and Morgan &tanley are said to be in the bulge bracket!
)ther investment banks are regionally oriented or situated in the
middle market *e!g! (iper 'affray+! )thers are small" speciali#ed
firms called boutiues which might be oriented toward an
industry vertical" bond-trading" M,A advisory" technical analysis
or program trading! Firms have lots of different areas and groups
within them! $n most firms" there is sales and trading which
works with owners of securities" investment banking which works
with issuers of securities *firms and governments+ and capital
markets which goes in between the other two!
3
Industry coverage
Corporate Finance
$n a 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 -ebt .apital Markets or /uity
.apital Markets */.M+!
Mergers and Acquisitions
&etting up deals where one company buys
another is an important source of fee
income for many investment banks!
Project Finance
(roject finance involves funding infrastructure and oil
capital projects off of a company or government0s main
balance sheet!
Structured Finance
(ositions in structured finance involve the creation of
financing vehicles to redirect cash flows to investors *known
as asset-backed securities!
Derivatives
Equity and Fixed Income esearc!
&ecurity analysts are usually assigned to an industry or
region! 1ou could be responsible for making buy or sell
recommendations to investors about a stock or bond!
4
Institutional Sales
$n institutional sales you would be responsible for conveying
information about particular securities to institutional
investors!
List of major investment bank
Investment banks in the world Investment bank in India
Barclays Capital ICICI Securities
Blackstone Group Ambit Corp Finance
CIBC SBI Capital Markets
Citigroup Kotak Mahinra
Creit Suisse !nam
"eutsche Bank Merrill #ynch
!$ercore %artners &SBC 'Blr(
Golman Sachs "eutsche Bank '"elhi) Bangalore )
Mumbai (
&SBC Morgan Stanley 'Mumbai((
*% Morgan A+,
#a-ar #ehman Bros
Moelis . Co Golman Sache
Morgan Stanley /BS'&y . Mumbai(
+ikko Securities *% Morgan 'Mumbai . Bangalore
Bank o0 America 1eliance Money
Merrill lynch
2
Evolution o" investment #anking in India
The origin of investment banking in $ndia can be traced back to
the 23
th
century when /uropean merchant banks set-up their
agency houses in the country to assist in the setting of new
projects! $n the early 45
th
century" large business houses followed
suit by establishing managing agencies which acted as issue
house for securities" promoters for new projects and also
provided finance to Greenfield ventures! The peculiar feature of
these agencies was that their services were restricted only to the
companies of the group to which they belonged! A few small
brokers also started rendering Merchant banking services" but
theirs was limited due to their small capital base!
$n 2367" A89 Grindlays bank set - up a separate merchant
banking division to handle new capital issues! $t was soon
followed by .itibank" which started rendering these services! The
foreign banks monopoli#ed merchant banking services in the
country! The banking committee" in its report in 2374" took note
of this with concern and recommended setting up of merchant
banking institutions by commercial banks and financial intuitions!
&tate bank of $ndia ventured into this business by starting a
merchant banking bureau in 2374! $n 2374" $.$.$ became the
first financial institution to offer merchant banking services! 'M
finance was set-up by Mr! 8imesh :ampani as an e;clusive
merchant bank in 237<! The growth of the industry was very
slow during this period! %y 23=5" the number of merchant banks
rose to << and was set-up by commercial banks" financial
institutions and private sector! The capital market witnessed
some buoyancy in the late eighties! The advent of economic
reforms in 2332 resulted in sudden spurt in both the primary and
secondary market! &everal new players entered into the field!
The securities scam in may" 2334 was a major set back to the
industry! &everal leading merchant bankers" both in public and
private sector were found to be involved in various irregularities!
&ome of the prominent public sector players involved in the scam
were .an bank financial services" &%$ capital markets" Andhra
bank financial services" etc! leading private sector players
involved in the scam included Fairgrowth financial services and
.hampaklal investments and finance *.$F.)+!
3
The market turned bullish again in the end of 233< after the
tainted shares problem was substantially resolved! There was a
phenomenal surge of activity in the primary market! The
registration norms with the &/%$ were uite liberal! The low entry
barriers coupled with lucrative opportunities lured many new
entrants into this industry! Most of the new entrants were
undercapitali#ed with little or no e;pertise in merchant banking!
These players could hardly afford to be discerning and started
offering their services to all and sundry clients! The market was
soon flooded with poor uality paper issued by companies of
dubious credentials! The huge losses suffered by investors in
these securities resulted in total loss of confidence in the market!
Most of the subseuent issues started failing and companies
started deferring their plans to access primary markets! >ack of
business resulted in a major shake out in the industry! Most of
the small firms e;ited from the business! Many foreign
investment banks started entering $ndian markets! These firms
had a huge capital base" global distribution capacity and
e;pertise! ?owever" they were new to $ndian markets and lacked
local penetration! Many of the top rung $ndian merchant banks"
who had string domestic base" started entering into joint
ventures with the foreign banks! This energy resulted in
synergies as their individual strength complemented each other!
4
SC$PE
&cope for growth of $nvestment %anking in $ndia as planning and
industrial policy of the country envisaged the setting of up of new
industries and technology" greater financial sophistication and
financial services are reuired! There is a well proven link
between economic growth and financial technology! /conomic
development reuires specialist financial skills@ savings banks to
marshal individual savingsA finance companies for consumer
lending and mortgage financeA insurance companies for life and
property coverA agricultural banks for rural developmentA and a
range of speciali#ed government or government sponsored
institutions! As new units have been set up and business is
e;panding" they reuire additional financial services! A public
euity or debt issue is the logical source of fund in this situation
and investment banks can tap this opportunity of growth! The
areas of great scope could be"
%ro&t! o" Primary market'
$f the primary market grows and number of issues increases" the
scope of investment banking will be enhanced!
Entry o" Foreign Investors'
8ow $ndia capital market directly taps foreign capital through
euro issues! F-$ is increased in capital market! &o investment
bankers are reuired to advice them for their investment in $ndia!
The increasing number of joint ventures also reuires e;pert
services of investment %ankers! $f more and more 8B$s
participate in capital market" there will be great demand for
investment banker services!
C!anging policy o" Financial Institutions'
8ow the lending policies of financial institutions are based on
project orientation" so the investment banker services will be
needed by corporate enterprise to provide e;pert guidance!
5
Development o" de#t markets'
$f the debt market is enhanced" there will be tremendous scope
for investment bankers! 8ow 8&/ and )T./$ are planned to raise
their fund through debt instruments!
Corporate restructuring'
-ue to liberali#ation and globali#ation .ompanies are facing lot of
competition! $n order to compete" they have to go for
restructuring" merger" acuisitions or disinvestments! They may
offer good opportunities to merchant bankers
(!e scope could #e extended to'
2! Advising the company on designing of its .apital &tructure!
4! Advising the company on the instrument to be offered to the
public!
<! (ricing of the instrument!
C! Advising the company on >egalD regulatory matters and
interaction with &/%$DB).D &tock /;changes and other
regulatory authorities!
E! Assisting the company in marketing the issue!
6! $n channeli#ing the financial surplus of the general public into
productive investment avenues!
7! To coordinate the activities of various intermediaries to the
share issue such as the registrar" bankers" advertising agency"
printers" underwriters" brokers etc!
=! To ensure the compliance with rules and regulations governing
the securities market
THE F!T"R# "$ %HI!H &R"%TH "F I$'E#TME$T
($)I$& *E+E$*#,
2! (lanning and industrial policy of the country i!e! $ndia in this
case
4! (revailing /conomic condition of the country
<! Begulatory system of the market and economy prevailing in
$ndia
6
C! .onfidence of the people" traders" buyers" marketers" business
houses" financial institutions etc
E! The economic environment of the outside world!
6! .ompetition among the e;isting players and the upcoming
entrant
ENVIRONMENTAL SCANNING
)PES( A*A+,SIS- $F I*DIA* I*.ES(ME*( /A*0I*%
I*D1S(,




78
%olitical
%olitical
7( Financial Institutions are
more in0luence by
%olitical Stability .
correctness9
2( :hreats o0 Internal
1ebellion9
!conomic
!conomic
7( "ollar ; Appreciation9
2( Fre<uent Fluctuation in
Market9
3( !mergent market
Social
Social
7( !ucation=> Financial
Kno?lege
2( @orking Age %opulation

77
:echnological
:echnological
7( Internet Backbone 0or
kno?legeable In$estors9
2( Booming So0t?are Inustry
0or the ease o0 the In$estor9
SWOT ANALYSIS
Strengt!s' 2
a+ /readt! o" Financial Services $""erings' investment
banking provides various types of services such as trading"
private euity" venture capital" M,A" joint venture" and project
finance etc!
b+ Pro"icient Employees' the major strength of any sector is its
employees! $n investment banking all the workings are done by
professionals because it reuires deft and proficient personnel!
c+(ec!nological Advancement@ -ue to technical advancement"
working efficiency has been increased and works are done
uickly and easily!
d+ Advance In"rastructure' The country is euipped with all
the latest and advances amenities such as better
telecommunication" transportation" potable water" internet" land
etc!
3eaknesses'

a+ 1na&areness o" Investors@ the major weakness is the
unawareness of its services among investors" due to which after
C5 years of odyssey it could not reach to the level where $t
should have been!
b+ Excessive Dependence on (rading Sectors@ As per the
data collected by the team and e;periences shared by &r!
managers" it is uite apparent that investors are more dependent
on the trading sector for their investments rather than any other
field!

72
$pportunities' 2
a+ %ro&ing demand "or Investment /anking@ The knowledge
of investment banking is increasing among investors and they
are diversifying their investment into many sectors besides
trading! $t can be seen by looking at the number of mergers and
acuisitions" various projects in the countries and the level of
&ense; in the country!
b+ emoval o" International (rade /arrier' 2332 reform
policy and recent amendments in international trade have
widened the area and scope of investment banking in $ndia!
c+ Financially Attractive Country' $ndia is a financially
attractive country! Becent e;perience of FBecessionG shows that"
$ndia is among the few countries *.hina" %ra#il and $ndia+ who
not only survived in this difficult era but shows the path to
developed countries to overcome this calamity!

(!reats' 2
a+ Increasing competition@ competition in investment banking
is increasing day by day! 8ew players are foraying to the market
due to this market share of each e;isting company is getting
affected and profit as well!
b+ Decentrali4ed management@ each branch manager in a
company is given the authority of taking decisions in their
respective branches! The decisions made by different managers
are diverse and any wrong decision may lead to heavy losses to
the company!
73
RE#ER!H METH"*"L"&-
+roblem *efinition,
Strategy Implications in In$estment Banking
(ype o" esearc!'
*E#!RI+TI'E RE#ER!H
&urveys , fact-finding enuiries
Try to discover causes
./LITTI'E RE#ER!H
A $nvolves uality or kind
A ?elps in having insight into problems or cases
*ature o" Data Collected'
)nly PIMA, DA(A is used! (rimary data are those which are
collected fresh and for the first time and thus happen to be
original character!
Data Collection Met!od'
For the collection of primary data a set of logically seuenced
Huestionnaire Method was adopted seeing the objective of the
research!
Sampling (ec!nique
Cluster Sampling@ if the total area of interest happens to be a
big one" a convenient way in which a sample can be taken is to
divide the areas into a number of smaller non-overlapping areas!

Sample Si4e' 78
74
Functional Areas o" Investment /anking


A00+pan0
+ o1
R+spond+
ns
R+s
p. 1
R+s
p. 2
R+sp.
3
R+sp.
4
R+sp.
(
R+sp.
!
R+sp.
%
R+sp.
5
R+sp.
6
R+sp.
10
Tradin
&

*ri7a+
E8uiy

In7+sm
+n
/an"in&
Ad7iso
ry
S+r7i0
+s

*ro9+0
.inan0
+

72
:raing %ri$ate !<uityB
Centure Capital
A$isory
Ser$ices
%roDect
Finance0FinanceFin

In$estment
Banking
73
/C% Matrix'
It Involves 0eo0le those who are dealing with the *ifferent Financial
reas1

The Financial reas of Trading 2
dvisory #ervices falls in the
category of #tars


+rivate E3uity 2 +roject
Finance comes in this #egment of
the (!& matri41
5

74
A'ar+n+ss
amon&
R+spond+n
s
Total
R+s
p. 1
R+s
p. 2
R+s
p. 3
R+s
p. 4
R+sp.
(
R+sp.
!
R+s
p.
%
R+s
p.
5
R+s
p.
6
R+s
p.
10
Tradin
&
6
*ri7a+
E8uiy
7
In7+sm
+n
/an"in&
Ad7iso
ry
S+r7i0
+s
8
*ro9+0
.inan0
+
7
75
Following is the list of those $nvestment %anks which are
providing services to Bespondents@
a9 )otak #ecurities
b9 Reliance Money
c9 I!I!I (ank
d9 I!I!I #ecurities
e9 #(I !a0ital 2
f9 H#(!
76