Significance of Investment Banking Companies in India
October 04, 2019
Investment banking, a special division of banking, is responsible for the creation of capital for companies, governments, and other entities. Also, investment banks assist in the negotiations and structuring of mergers and acquisitions and act as intermediaries between the investors and corporations. With the help of investment banks, companies can raise funds for their projects as well as expansion to make themselves available for a bigger market.
Investment banks employ trained bankers for the execution of transactions to maximize revenues. Investment banks act as a bridge between large enterprises and investors. The primary role of an investment bank is to advise government and businesses on how to meet their financial needs and help procure their finances. Following are the significance of investment banking companies in India:
- Role as an Advisor: Raising capital funds is a tedious task for any organization, where the service of an investment bank comes into play. An investment firm can help sell the company’s shares by determining a good price using sophisticated financial models. Financial analysts look after factors such as earning potential, the strength of the management team while selling shares. Investment banks offer advice at the time of merger and acquisition by advising the management on how worth the company is and helping in the restructuring of the company.
- Underwriting Stocks and Bonds: Underwriting is the process wherein the investment banks take financial risk in exchange for a fee. It involves conducting research and assessing the degree of risk involved in insurers’ business. An investment bank buys a certain number of bonds/stocks at a previously discussed price and resells them through an exchange. It is the job of the investment bank to prepare the documentation which must go to the Securities and Exchange Commission before the company can sell any share. Documentation will comprise of details such as financial statements, management information, current ownership, and future plans.
- Other activities: Apart from advising and helping raise money for the companies, investment banks perform other functions as well such as research, trading and sales, asset management, wealth management, and securitized products.