Why Is There A Need For Investment Banking Firms?
March 12, 2020
Investment banking, a special division of banking which is responsible for the creation of capital for companies, governments, and other entities. Investment banking also assists and acts as intermediaries between investors and businesses in negotiations and the structuring of mergers and acquisitions. Companies can raise funding for their projects and grow to provide their own funds for a bigger market with the aid of investment banks. Investment banks act as a bridge between large enterprises and investors. The primary role of an investment bank is to advise the government and businesses on how to meet their financial needs and help procure their finances.
Significance of investment banking firms:
- Role as an Advisor: Capital fundraising is a tedious task for any organization, where an investment bank works. An investment firm may assist in selling the securities by advanced financial models by assessing a good price. Factors such as the productivity and power of the executive team of securities are tracked by financial analysts. Investment banks counsel the management on how the business is deserving and support transforming the company at the time of merger and acquisition.
- Underwriting Stocks and Bonds: The method of lending banks take financial risk in exchange for a sum of a commission is underwriting. This includes analysis and risk assessment in the company of the insurers. An investment bank buys and resells a certain number of bonds at a previously mentioned price. The investment bank is responsible for preparing documents that must be forwarded to the Securities and Exchange Commission before any shares can be sold. Documents such as financial statements, administrative details, current ownership, and future will be included in the paper.
- Other activities: Investment banks do other roles as well as analysis, trading & selling, asset management, wealth management, and securitized goods, in addition to advising and help to raise the capital for businesses.
Commonly classified firms in investment banking:
- Bulge Bracket Banks- The bulk class firms are the best for workplace and staff numbers, as well as for working with the biggest deals and the biggest corporate clients.
- Middle-Market Banks- Middle-Market markets are typically often physically in the middle ground, with a significantly larger footprint than provincial shops but below the global reach of bulge bracket banks as well.
- Boutique Banks- Investment banks in Expert shops are usually completely separate from national shops. This seems more like bulk-size banks, because they typically have hundreds of branches in various countries, both nationally and internationally.
The scenario of Investment Banking Firms in India
In India, the banking sector is adequately capitalized and well-regulated, so India's economic situation is superior to that of any other country. The Indian banking system is not confined only to the metropolitan cities, but it has reached every corner of India that leads towards growth in that area, whether in cities or villages. The investor's high level of trust and lower operating cost model in India improves the scenario for investment banking. India is now the fourth-largest economy in the world. Its impressive level of GDP has ranked second in all developing countries, especially in the purchasing power sector. It will also show macro-level financial stability. The key player behind all economic development is finance. Investment banks along with commercial banks help in determining prevailing market interest rates. Interest rates market helps determine how profitable it is to save and how expensive it is to borrow thereby helping in the coordination of resource utilization at the time of need.
Resurgent India, a growing Investment Bank, and SEBI registered Category I Merchant Bank in India, offers great services to businesses and firms requiring Investment Banking in Bangalore and other major cities across India. Reach out to us for more help and assistance related to Investment Banking Services.