Investment Banking Firm – Overview, Functions and Benefits

 

What is investment banking?

Investment banking is a separate division of the financial sector that arranges debt and deals in securities for all types of corporate organizations. Additionally, it is also responsible for providing other services such as financial advisory services and mergers and acquisitions etc. In simple words, we can sum up that investment banking firm work as a mediator between the corporates looking forward to expanding their business and potential investors.

In modern times the financial needs of business owners have increased tremendously. On top of that, handling such large finances requires the assistance of experts such as investment bankers. Thus investment banks come to the rescue of such people with huge capital needs and help them run their businesses smoothly.

 

Overview of investment banking firm.

While a commercial bank is essential in handling the day to day financial needs of the people/ entrepreneurs and provides the credit requirements, an investment bank works as the backbone of our economy for arranging funds through debt and equity. Capital assessment and price setting are two main contributions of an investment bank towards an increasing economy of any country.

Other than this, these firms keep the present and future needs in mind while performing their role.

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Investment Banking – Functions and Current Scenario in India

Investment banking is a specific banking field connected by some firms, governments, and entities to the production of capital. It is one of the most difficult financial processes in the world. Investment banks perform several positions and undertakings involving own purchase or selling of securities, mergers, and acquisitions by promoting M&A organisations; leveraged capital instruments lending for the production of and distribution of products and restructuring, which involves enhanced organisational structures that improve the productivity of an entity.

The investment banks act as a bridge between major companies and the investor by helping the companies to obtain debt finance through the attraction of corporate bond lenders. Investment banks play a significant function in generating fresh resources by developing loans for raw materials to the producers and fulfilling certain requirements in a nation to contribute thereby to the economic development and investment securities.

Functions of Investment Banking:

Mergers and Acquisitions: Company accounting, strategy, and corporate strategies in regards to buying or associating businesses in the field of mergers and acquisitions. For exchange, an investment firm pays M&A commissions. Investment banks shall take the following moves for M&A: seller or buyer participation are two kinds of investment bank M&A roles. The valuation of a company plays an essential role in M&A. The valuation of a business is determined by the fund. Two companies are designing the Investment Bank's plan for M&A. The investment bank always provides a client with financial arrangements, as M&A would require tons of money. It allows an organisation to raise M&A funds. The bank's key function is to supply the investor with new shares. This investment management role allows a small business to create a partnership when an acceptable target has been identified. This leads to the progress of the acquisition because this is achieved by an investment bank.

Underwriting New Stock Issues: The IPO is an initial public offer, in which a corporation employs an investment firm to file an IPO. The investment manager supports an entity in placing everything in a loan and selling the IPO. IPO is one of the core features of investment banking. In exchange, the bank pays a company's fee.

Sales: Another critical or core aspect is the revenue of an investment fund. They concentrate on naming high-profile persons and organisations for exchange proposals on the grounds of "Caveat Emptor." The traditional supermarket broker, sales representative, or private customer service agent are shaped by retailers. Classic retail brokers are developing and offering individual investors portfolio and commodity recommendations. Investment banks shape alliances with main corporate owners managing large asset groups.

Risk Management: Risk management of the company itself is apparent because risk management requires a continuous cycle because capital means a restriction to deter trade loss. Investment banks control threats at various rates by explaining what hazards are present and how they can be managed.

Current Scenario of Investment Banking in India

The investment bank in India is growing owing to an improved degree of interest and a reduced operating cost model for investors. India is now the fourth-largest economy in the world. It has reached the second position, especially in purchasing power, at its amazing GDP level in all developed countries. It will also demonstrate macro-level financial stability. The key force behind all economic growth is claimed to be financed. A decade after the financial crash, the global banking industry has become firmer. The need for structural reform is prioritised by the banking sector in 2020: Regulatory compliance, technology, risk management, and skills.

With the help of Resurgent India’s Investment Banking in Gurgaon, the clients can get solutions regarding the high-quality strategic advice and creative financial solutions, including mergers and acquisitions, funding, and risk management to choose the right option to meet and surpass your goals.

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What are the Latest trends of Project Finance?

Project finance relies primarily on the cash flows generated by the project serve as the source of loan repayment with the project's assets serves as a pledge for a non-recourse loan. It is the long-term infrastructure and the main characteristic is its non-recourse or limited recourse structure.

Financing involves the debt, contingent equity, and a variety of limited guarantees through a newly organized company for the purpose of building a capital intensive facility. Project finance is not appropriate for small projects. While it is more expensive and it enables sponsors to finance projects off-balance sheet that makes the form of finance attractive for joint ventures, PPPs, infrastructure projects or other projects where a sponsor wishes to buckler its other assets from the risk of a project failure.

Latest trends of project finance

The significant development has seen in the last financial year in the sectors such as city gas distribution projects, aviation, and renewable energy, India has also witnessed a consolidation of sorts and an increased focus in resolving assets. The RBI, by its circular dated 12 February 2018 has completely refurbished the regulatory framework for the resolution of stressed assets. It supplants all existing restructuring frameworks including resolution under the joint lenders’ forum and strategic debt restructuring and provides for a unified framework for restructuring of stressed assets.

India has also cleared faster adoption and manufacturing of electric vehicles, to increase the push for electric vehicles and energy storage systems in India. there has also been a focus on making infrastructure projects more bankable with the modification being made in standard form concession agreements to make infrastructure projects more appealing to developers. The roads and transportation sector has also seen the introduction of the toll-operate-transfer model.

7 Main Functions of Investment Banking Firm

Investment banks are the intermediary organisations that serve a variety of services such as handling of mergers and acquisition, underwriting of new stock issues, and acts as a financial advisor. They act as a middleman between issuer and investor and helps clients raise capital through equity and debt offering. Some of the investment banks are Goldman Sachs, JP Morgan Chase, Morgan Stanley, Credit Issue, etc.

Functions of investment banking firms are:

1. Advisor : An investment bank serves as an adviser to any company and assists in the best possible way to raise capital, including selling bonds and shares, if necessary. Financial analysts analyse various factors, such as earning potential, before selling their stocks or bonds to determine the value of the company. Banks advise the company’s management on how valuable the company is and how the organisation is likely to benefit from merger and acquisition.
2. Underwriting stocks and bonds: If an individual decides to raise capital through a sale of equity and bonds, the shares will also be underwritten by one or more investment banks. This ensures that the company purchases or re-sells a certain number of shares – or securities – at a fixed value via an auction.
3. Research: Bigger investment firms have analysts who analyse business information and decide how they are likely to benefit from selling or buying. Reports are sold to managers of mutual funds and hedge funds for capital generation.
4. Trading and sales: Various firms have a department for trading that can sell bonds or stocks as per the need of their clients.
5. Asset Management: Companies such as Goldman Sachs and JP Morgan use their asset management division to handle pension funds, insurance companies and charity accounts.
6. Wealth Management: Investment banks also provide funding options for pension and other long-term needs of individuals and families.
7. Securitized Products: Enterprises also pool financial assets these days – from loans to receivables from credit cards – or market them as fixed-income securities to shareholders. An investment bank will propose sources of income to be "secured," arrange the assets, and sell them to institutional investors.

Overview of Financial Services & Advisory Firms in India.

India is experiencing rapid expansion in terms of Economic Diversification. There is a rapid expansion in both existing financial services companies and new financial companies entering the market. Financial services include commercial banks, brokers, not-for-profit financial companies, cooperatives, pension funds, mutual funds, and more. Indian Government has implemented many reforms in order to liberalize, control, and develop the finance sector. The experts in the financial services sector provide the banking and bonds, insurance, and investment management industries with extensive integrated solutions.

Following are the advantages of Financial Services in India:

• Growing Demand: The increasing income drives financial services demand across revenue lines.
• Innovation: India benefits from a broad cross-usage of the financial services network.
• Policy Support: The Indian Government has approved new banking licenses in the insurance sectors, and is increasing FDI quotas. 
• Growing penetration: In rural areas, credit, insurance, and investment penetration are on the rise. In addition, HNWI membership has been increasing in the wealth management segments.

Advisory Firms includes several financial advisors that provide advisory services to clients across the globe. It entirely focuses on strategizing for the success and growth of a business. A financial advisor discusses different investment options: Shares, tax laws, commitments, and insurance. A business can always be benefited from expert advice so its goal is to help show strength and resolve the weakness and can make a difference in business success from its point of view. Advisory Firms provide opportunities to the financial service clients in the following areas: Quality, Operational Excellence, Growth strategy, Informational enforcement technology, Customer loyalty and feedback, Fusions and acquires Performance improvements, Private Equity, and Management change. They both work together by developing and endorsing or implementing transparent, concrete action plans in order to ensure significant and enduring improvements in performance.

An Introduction to Private Equity Firms

Private equity is a company's private ownership, unlike stock ownership. Private equity investors can buy all or part of a private or public company and usually keep their investment for about 5-10 years before selling. Typically, private equity firms look for a return of about $2.50 for every dollar invested.

Private Equity Firms are the firms that share representing an entity’s ownership or interest that is not listed or traded publicly. They raise money to provide their shareholder customers with profitable returns. The business of the enterprise requires large capital expenditure to change the minimum capital requirements for investors depending on the enterprise and the fund. Companies have the ability, ideas, and expertise to take on and strengthen the underperforming organization by enhancing the operational efficiencies that lead to higher profits and creating value by aiming to align the interests of organization management with the investors.

Functions of Private Equity Companies are:-

• Raise Capital: Capital raising companies play a role by acquiring capital obligations by limited partners and external financial institutions, such as pension and pensions funds, insurance companies, wealthy persons and funds.

• Sourcing, due diligence, and deal closing: Public equity companies will consider such things as the business sector, management, financial performance, the possible exit scenarios. Public equity companies will take into account the final terms of the deal are then negotiated and the deal is closed, funds are released and equity transactions are carried out.

• Equipment improvements: Companies offer a variety of strategic support and advice, financial management, operations, business improvement to make the final outcome profitable.

• Profit from portfolio companies: In the end, the objective of a firm is to gain profit, normally over 3-7 years following the initial investment, depending on the time of the strategic location. During exit value, costs are recognized, debt used to fund the transaction is paid down, revenue is increased over the holding period, working capital is optimized and the company is sold at a higher price.

Impact on Private Equity Funding From Demonetization to the GST Tax

From demonetization to the GST tax regime, our Indian economy has seen a lot in the previous 5 years! Consequently, the large institutional investors from around the glove have not started considering this new found economy as a wonderful pasture for the private equity. Any of the small investors in our country can join this bandwagon of these large investors, and mint money in this market that is brimming with opportunities.

United States in 1920 & India in 2020

India’s real estate sector almost collapsed after demonetization! Most firms dealing with private equity declared this economy as a cash-starving industry! Indeed it is! There is definitely no denial to the fact that black market deals were happening in the unorganized real estate sector in the country. Maybe, this was the very reason for serious private equity related firms not been keen on this particular sector. However, the budget came as a respite when the RBI said about bringing down the ROIs; so now the ball is in the court of the banks for them to translate this into some serious business. In 1920, USA economists had also supported such type of a move where the Government was told to bring forth massive infrastructure-based project(s) there. In India’s current development, institutional private equity players are displaying a keen interest again in this real estate sector. 

Let Resurgent Be Your Private Equity Partner

At Resurgent India, the experts constantly watch the moves of these big sharks, and as per that, formulate some of the scenarios, which can facilitate the clients’ interests in this market that is ready to take a great leap.

Everything you need to know about Merchant Banking in India:

Merchant banking, unlike your conventional (retail and commercial) banking, mostly deals with international trade focusing majorly on foreign currency and dealing with global, multinational corporations. For instance, they don’t offer banking services such as different accounts (savings, current, fixed, recurring) and other products that are generally focused on individual consumers and deal with organizational customers such as large financial institutions or organizations which focuses on international trade and commerce.

Merchant banking encompasses all the topics under the international financing and underwriting. Real estate deals, trade financing, foreign currencies & investments, international, multinational, mergers, acquisitions, buyouts, issuing letters of international credits, international fund transfer, international trading, providing consultation on global trading technologies, loan syndications, and other such international transactions are few classic examples which gives you an idea what these merchant banks do. Some of the most popular merchant banks that you may have heard of are Goldman Sachs, J P Morgan Chase, Citibank Group, etc.

In India however, merchant banking began in 1967 when the Reserve Bank permitted Grindlays Bank. They started consulting the then entrepreneurs and other large financial institution on management, planning, production, investment, and other economic issues. The success of Grindlays spawned many international and domestic players such as Citibank Group, State Bank of India, ICICI, Bank of India, Bank of Baroda, Canara Bank, Punjab National Bank, UCO Bank, to name a few noteworthy banks. Most of these banks also cater to individual customers under a separate business unit.

Now, if you are a merchant banking institution or any other financial body, we at Resurgent India have designed and developed automated, specific, AI back tools which can make most of your activities simple, quick, effective, and efficient. Our strong industry knowledge and deep experience make us an ideal partner to you in your journey towards fulfilling not just your short-term goals, but longer term goals too. 

Corporate Finance for Political Funding – Real Picture & Propaganda Picture

Please bookmark this page under the portfolio where you save the write-ups related to corporate finance. Read it today and read it again on the 23rd of May, when the results of the election will be out. During this period please consult certain other literature as well, for instance, famous novelist Ravi Subramanian presented a dark picture of the allies of the corporate finance world. His narrative presents a glamorous picture of the corridors of corporate finance. Please read to the article that published in Bloomberg on March 17 where they raise some issues related to the corporate finance in political funding. In this article, they have listed the top 10 corporate finance donors in the year 2018. In order to do it, they took the support of an electoral trust (Chaudhary, 2019).

Anybody who understands the jargon of corporate finance can make a hypothesis about the role of these electoral trusts. Can we consider them as an investment in the ideologies of a political party by a corporate giant? In order to understand the nitty-gritty of corporate finance, book a free consultancy with an expert working in RESURGENT INDIA, they are always keen on imparting client education; you can brush up your knowledge about corporate finance, right from the horse’s mouth.

Corporate finance is a matter subjected to the financial markets; it is an administrative domain where political ideologies cannot do much. Another point of view says that corporate finance is an issue which is dependent on a PESTAL analysis and this donation through electoral trust is an attempt to gain better control over certain political factors associated with the business?

Corporate finance is an area where huge stakes of money exchange hands to attain long term gains. The corporate finance in India has already reached to the new levels where small investments can fetch huge profits if as an investor, you are aware of some "out-of-the-box" factors that are far beyond the spreadsheets and signals coming out of the projections made by the companies. 

The introduction of the electoral trust is a new chapter in this book. If you are planning to invest money in an area where corporate finance activities also hold a stake then, you need to keep an eye certain new areas as well. After 23rd May this article will serve as a reminder for you to go for a PESTAL analysis prior to investing in the market.

Bibliography

Chaudhary, A. (2019). A Murky Flood of Money Pours Into the World’s Largest Election. Bloomberg, https://www.bloomberg.com/graphics/2019-india-election-funds/.

Benefits of Debt Syndication

The aim of every business is to prosper and grow for which it has to continuously meet its working capital and growth finance needs. Debt syndication proves to be a great funding tool for such companies and is even considered better than other debt options such as bank loans and bonds. In debt syndication, the borrower gets funds from two or more lenders, who generally entrust the lead lender with the responsibilities of origination and administration of the loan. This debt mechanism has been around for a long time, but its popularity has simply exploded in the past few years.

Win-Win Situation

Debt syndication not only benefits lenders but also borrowers who need capital to fund their continued growth. Lenders prefer debt syndication as it limits their risks and even enables them to give more loans to different portfolios. Besides, the administration of loan is done proficiently by the agent that manages the whole process on behalf of all the syndicate members, saving other members’ time and effort. 

Borrowers, on the other hand, don’t have to negotiate with individual financial institutes, which can be quite taxing. The time and effort that they save can be channelized in other productive tasks. Along with the consolidation of efforts, debt syndication helps borrowers in making new contacts with financial institutes that are part of the syndicate. Debt syndication is also cost saving as funds are cheaper in the syndicated loan market in comparison to a series of bilateral loans. In addition, it provides them the flexibility in shaping their syndicated loans as well as greater visibility in the market.

Thus, debt syndication has not only benefited several borrowing companies by contributing to their growth but also proved beneficial for lending financial institutes. 

Choose Resurgent India

Resurgent India provides customized financing solutions with a thorough understanding of the debt syndication process. The debt syndication managers here can arrange debts at competitive rates by assembling a group of financial institutes to form a syndicate to effortlessly meet the requirements of the borrowers.