Most people get awed when someone mentions that they are investment bankers. You think of a high-profile corporate professional, decked up in a smart suit making a crisp presentation to the top management. But do we really know what does an investment banker do or what is investment banking? Read on to know more.
What is investment banking
Investment banking is the arm of a bank or any other financial institution that offers financial consultancy and advisory services to entities, government or individuals. They render a wide range of services to their customers which includes:
• Capital Issue Management
Indian investment banks offer public issue management through two routes:
o Fixed Price Method
o Book Building Method
They also offer assistance to firms during IPO (Initial Public Offer), FPO (Follow on public offer), Rights issue, Preferential Issue and debt placement.
• Advisory services during mergers and acquisitions
Investment banks play a crucial role during mergers and acquisitions. They help the entities to make the right deals by checking feasibility, minimizing risk and maximizing ROI. They either represent the seller (target representation) or the buyer (acquirer representation). Some key activities in M&As include:
o Establishing a fair and just value for the involved parties
o Sourcing deals
• Debt Syndication
Investment banks also help companies to look for new finance opportunities and sources. This includes project finance, working capital loan, term loans, commercial borrowing, etc.
Another common activity performed by investment banks is to advise their clients when and how much to buy-back their shares.
• Legal compliance
Investment bankers help their clients in ensuring that they adhere to all the statutory requirements and compliances as laid down by SEBI.
• Corporate Advisory
These services are usually offered to large-scale organizations or corporate bodies. Investment banking includes doing business appraisals, developing business plans, strategic advisory, valuation, corporate restructuring, etc. These services are often tailor-made as per the needs of the clients.
Investment Banking in India
Investment banking in India is not a new concept. The roots of modern day investment banking can be traced back in India to the 19th century. This was the period when European banks created trading banks in the country. Investment banking in India used to be referred to as merchant banking. For many years, foreign (non-Indian) banks continued to dominate the merchant banking scene.
However, in the year 1970 State Bank of India decided to venture into this domain. It created the Bureau of Merchant Banking and many national banks registered in this initiative. The first national financial institution that offered merchant banking services was ICICI Securities. Within a decade, the number of merchant banks grew beyond 30. The rapid growth in the financial industry especially commercial banks further fueled this growth in the later years.
Since its inception, there have been numerous developments in the structure, role and services provided by investment banking.
Association of Investment Bankers of India (AIBI)
AIBI is a SEBI recognised body and acts as the nodal body of Indian investment banks. Its objective is to set in place standard practices, professional benchmarks and guidelines for rendering efficient services in the field of investment banking.
Initially formed as Association of Merchant Bankers of India (AMBI), it has recently undergone a transformation phase to come in sync with the current market scenario. It was during this brand transformation that the name of the body (along with the logo) was updated to Association of Investment Bankers of India (AIBI) as investment banking’s scope is much broader than the erstwhile merchant banking. Currently, there are 59 investment banks (SEBI registered) who are members of AIBI.
Some of their key activities include:
• Code of Conduct
AIBI comes out with the Code of Conduct that needs to be followed by all members. This ensures quality, uniformity and standardisation in the investment banking services. Additionally, a Due Diligence Manual is also shared with all the participating members.
AIBI acts as the watchdog for the Investment Banking industry in India. It ensures that all members follow ethical practices and adhere to all the legal / statutory guidelines.
• Thought Leadership and central repository
AIBI acts as the nodal point for assimilation and distribution of information related to the investment banking ecosystem.
• Representation at PMAC
It represents the investment banking industry at the PMAC (Primary Markets Advisory Committee) formed by SEBI.
• Events, seminars and annual summits
AIBI frequently organises events and workshops on matters related to the investment banking domain.
Types of investment banking
There are different types of investing banking service providers. Such as:
• Full-Service Firms
Full-service investment banks offer the whole suite of services. For instance, underwriting, Mergers and Acquisitions, merchant banking, distribution, brokerage, asset management, structured investments and research.
• Boutique Firms
These are specialist investment banks which offer niche or specific investment banking services. These are relatively newer entrants in the market and have evolved as a result of market demand by smaller entities and start-ups.
• Commercial Banks
Some commercial banks have also extended their scope beyond pure banking and offer some investment banking services.
• Brokerage Firms
These firms only offer trading services to their clients. They are often used by underwriting investment banks while placing issues.
Choosing an investment bank
Choosing the right investment bank plays a crucial role in achieving the desired results. Here are some factors that you should take into consideration.
• Capabilities and credentials
Professionals in their team and their skills, market experience and credibility. This also includes support teams such as research, information technology, etc.
Experience with relevant services and your sector / sub-sector needs to be checked.
• Size/Volume of transactions
Details of comparable transactions (basis your requirement) completed in the last five years will help with this information.
• Accessibility and transparency
Level of transparency displayed by the investment bank in their transactions along with their day-to-day accessibility needs to be assessed. Many times, local support or presence is preferred.
• Valuation Methodology
Alignment with your business’s needs and the valuation methodology of the financial partner is important.
IndiaNivesh is a well-known name in the Indian financial solutions industry. It offers a wide range of services including investment banking. Their ability to offer customised solutions and connect businesses enables them to act as a professional navigator for the long-run growth of their clients. They specialise in:
• raising capital (from domestic and global sources)
• facilitating entry of foreign enterprises in India
• globalisation of domestic entities
• corporate finance activities and
• support during mergers and acquisitions.
For a runner, the perfect running shoes can make all the difference. Similarly, the correct investment banking partner can help you get the much needed competitive edge. With a suite of unique products and market expertise, IndiaNivesh can be that partner for you.
Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
Gold Exchange Traded Funds (Gold ETFs) - Overview & how to invest in it
Gold Exchange Traded Funds (or Gold ETFs) combine the two passions of many investors – stock trading and gold investments. They provide a channel through which you can be a part of the bullion (gold) market. The investor’s funds are invested in gold stocks but there is no physical delivery of the yellow metal. They are often referred to as open-ended Mutual Funds that invest the corpus in gold bullion. Key highlights of Gold ETFs: Gold ETFs in India started in the year 2007. Slowly but steadily they have started gaining momentum. Some of the key benefits offered by Gold Exchange Traded Funds are:1. Transparency: Transparent pricing is one of the USPs of Gold ETF. Like stock prices, information about gold prices are easily available to the general public. You can easily determine the value of their portfolio by checking the gold prices for that time or day.2. Ease of trade: Just like shares, Gold ETFs can be easily traded on the stock exchange. You need to buy a minimum of one gram of gold which is equivalent to one unit of Gold ETF. Investors can invest in Gold ETFs from any location in India. Moreover, the difference in price (due to GST) will not be applicable.3. Cost efficiencies: Unlike many investment avenues, there are no entry or exit loads with Gold ETFs. The only cost involved would be the brokerage fees. 4. Risk: Unlike physical gold, there are no storage hassles or theft fears with Gold ETFs. Additionally, gold prices are not prone to frequent fluctuations. This makes Gold ETFs a relatively safer choice. 5. Tax efficiencies: Gold ETFs do not attract any wealth tax or securities exchange tax. Also, if they are held for a period of more than one year, the gains are treated as long-term capital gains. For anyone interested in holding gold, these ETFs provide a tax-efficient alternative. 6. Diversification: Gold ETF investments can help to bring diversity in the investment portfolio. During volatile market conditions, they can help to stabilise or improve the overall returns for you.7. Collateral: Gold ETFs are accepted as security collaterals for loans or capital borrowings by many financial institutions. Why is investing in Gold ETFs better than traditional forms of gold? You do not need to worry about impurities or adulteration in the metal As ETFs are held in electronic form, there are no storage related issues or costs Easy trading on the stock exchanges and hence high liquidity Real-time tracking of investments No mark-ups costs such as making charges, wear and tear involved The price of Gold ETFs remains the same throughout the country. However, the gold prices can vary from one location to another. How does Gold Exchange Traded Fund work? The investment is converted into unit of gold basis the cost applicable at the allotment time. For instance, the cost of gold (per gram) on a particular day is Rs. 3000. Ms. X wants to invest Rs. 60,000 in Gold ETFs. Her investment amount will get translated into 20 gold units. At the back-end, physical gold acts as security for these ETFs. For example, if you invest in Gold ETFs, the entity at the back-end purchases gold. They act as the custodian for the investment and also guarantee for the purity of the metal. The stock exchanges assign the responsibility of buying and selling gold to authorised members or participants which in turn can be used to issue ETFs. These are usually large companies. As a result, these authorised members ensure that there is parity between the gold cost and ETFs. How to invest in Gold ETFs? Gold ETF investments are a simple affair.1. Choose a broker or fund manager: Many financial institutions (including banks) offer Gold ETF products. Similar to the online share trading, you would need to reach out to a fund manager or a firm which will trade on behalf of you.2. Demat and Trading Account: In order to invest in Gold ETFs, you need to have a demat account and an online trading. You can apply for these accounts online with the broker or such service provider by providing details like PAN, Identity Proof, residential proof, photograph and a cancelled cheque (for bank account linkage).3. Online Order: Once the accounts are in place, you can select the desired Gold ETF and place the order through the broker’s online portal. You can also opt for Mutual Funds which have an underlying Gold ETF.4. Confirmation: The placed orders are then routed to the stock exchange. The purchase orders are matched with the corresponding sell orders and accordingly executed. A confirmation email or message is sent to you. Who all should invest in Gold ETFs? Gold is a relatively safe and stable investment. Its prices do not fluctuate as much as equities. Hence, Gold ETFs can be a good choice for you, if you do not want to take too much risk. Additionally, since these ETFs are tradeable easily on the stock exchange, they are useful if you are looking for an investment opportunity with high liquidity. Hence, it is a good option for you to diversify your portfolio. So, if you meet the requisite objective of investment, Gold ETF is a good option for you as well. Things to keep in mind while investing in Gold Exchange Traded Funds Here are some tips that you could use while investing in Gold ETFs Gold is generally considered as a stable asset. However, you should not forget that the Net Asset Value (NAV) of Gold ETFs can also fluctuate basis market volatility As an investor, you need to bear brokerage fees or commission charges for Gold Exchange Traded Funds. Hence, you should check these costs while deciding on the broker or fund manager However, you should not make the decision on the basis of price alone. Consider the broker/ fund house’s past track record, services provided, type of clients handled etc. before choosing the service provider Do not over-invest in Gold ETFs. It is usually suggested to restrict investment in these ETFs to 10% of the entire portfolio. Final Words A smart investor knows that all that glitters is not gold. A good fund manager or firm helps choose the best Gold ETF products in India. IndiaNivesh, a well-known financial services company can help in this regard. With their rich experience in the Indian market and in-depth understanding of the financial ecosystem, they have helped numerous customers to grow their wealth and fulfill their financial goals.Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
Online Trading – How does online trading work?
India ranks second in the global list of number of internet users. After all, “Online” is the new place to be. Whether it is ordering groceries, buying furniture, paying your insurance premium or making travel plans, it can be done online these days. In fact, it is increasingly becoming the preferred mode of doing transactions. No wonder, by 2018 Indians had started consuming 1GB data daily as compared to 4GB per month earlier (Source: Nielsen India). And this is just the statistics for smartphones! So, it comes as no surprise that online trading in India has also picked up momentum in the recent times. If you are seriously considering investing in the stock markets, then it is essential to find out about online trading.What is Online Trading?Online trading is the act of making buying and selling transactions for shares and other financial products through a digital or online platform. Anyone with an internet connection, trading account, bank account and sufficient funds can go for online trading. The biggest advantage of this mode of trading is the convenience factor. You can buy or sell stocks and securities from the comfort of your home or even while on the go. Additionally, cumbersome paperwork is possible at the click of a button. Online Trading in IndiaOnline trading in India started in the year 2002. It has brought a paradigm shift in the trading environment. Automation of the trading process has significantly brought down the turnaround time and paperwork involved. It has streamlined the process and made it more flexible, simple and customer friendly. Thanks to this wave of automation, the capital markets have witnessed a 1488% growth in the last decade. Mobile trading has also seen a solid jump in the recent years. Currently 10.15% of the average daily turnover on NSE is through this route. This is a growth of more than 800% in the last five years.How does online trading work?Majority of the stock market trading takes place on India’s two exchanges – National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Before you can understand how online trading works, it is important to understand the various involved components. In order to start online trading, one needs to do the following:1. Demat and Trading Account Anyone who wants to do online stock trading in India needs to have a trading account and demat account. What is a demat account?A demat account is an account which holds the shares or securities in an electronic format. A trading account facilitates the transactions (buying and selling) in the stock markets. All the buy or sell orders are placed through this account. The demat account is similar to a bank account in which all the debit and credit transactions are made. Many service providers offer a 2-in-1 account which combines the benefit of an online trading and demat account. Some banks also offer a 3-in-1 account. This adds demat and trading facility to your savings bank account. We will elaborate more on the steps to open a demat/ trading account in the later part of the article. So, online trading account can be used for or margin trading, delivery based trading and derivative trading. It can also be used for investing in IPOs and mutual fund. However, demat account is not mandatory for making investments in Mutual Funds. 2. Depositories There are two depositories that are registered with the SEBI- National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL). They act as the custodian for dematerialised securities. They have the accountability of safe-keeping the securities/portfolio. Depositories provide their services through Depository Participants (DPs). Banks, trading members and financial institutions registered with SEBI can act as DPs. 3. Learn the stock market terminology Before you begin to tango, you need to know the steps. Similarly, in order to do any online trading, one needs to be familiar with common terminologies and basics. The stock market works on the basic principle of demand and supply. One should keep a tab on financial affairs, market news, etc. How to open a demat or trading account?1) Reach out to a broker / Depository Participant:The first step is to find a registered stock broker. Broadly speaking, there are two kinds of brokers: a) Full Service Brokers: These brokers offer a wide range of services in addition to stock trading. Such as financial research, market updates, tax planning and retirement planning. b) Discount Brokers: These brokers provide only trading facility. Due to their no-frills services, their charges are much lower as compared to full-service brokers.While selecting a broker one should consider the following:i) Account Opening Charges:This is the amount charged for the opening of the demat or trading account. ii) Account Maintenance Charges:This refers to the annual fees for maintaining the demat or trading account. iii) Brokerage:Brokers levy certain fees for processing the orders (buy /sell) placed by the investors. The commission charged varies from one broker to another. They also depend on the type of transaction such as intraday transactions, transactions involving delivery, futures and options, etc. Some also offer discounts basis the number or value of trade conducted. iv) Technical expertise and service record:You should not blindly select the cheapest alternative. The quality and nature of service should be the most important criteria. If a particular stock broker has an exemplary service record, the higher brokerage charges may become justifiable. 2) Complete account opening formalities:The broker provides the trading account application form. The same needs to be filled up and submitted with the necessary KYC documents. These include:i) PAN Cardii) Identity Proofiii) Address Proofiv) Cancelled cheque (for the account that will be linked to the trading account)v) Bank statement for the last six months (only applicable for derivative segment trading)vi) PhotographsDocuments such as Aadhar, Driver’s License, Passport, etc. are considered valid for this purpose.In addition to the application forms, you also need to sign a Power of Attorney (PoA) in favor of the intermediary/broker. This is required for the transfer of securities (margin purposes), settlement of trades and funds from the client's account and for recovery of the amount payable to the broker/DP.After successful verification of all the details provided, the trading account details are shared with you for future reference.There are many online stock trading websites. However, choosing the right one can make the entire process more streamlined, easier and lucrative for investors. IndiaNivesh is a well-known financial services partner in this domain. IndiaNivesh continuously keeps on changing and adapting as per the market sentiments and evolving customer needs. State-of-the art technological tools combined with an experienced team have been delivering customised financial solutions since the last 11 years. A range of services related to broking, institutional equities, portfolio management, investment banking, private wealth and corporate advisory are offered.Final WordsIf you keep all these points in mind, online stock trading can be a non-intimidating, easy and profitable income generator. And above all, you must remember that you must think long to get the best out of the stock markets. Patience is a virtue! Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
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