Investment Banking in India: The Past, The Present & The Future

Investment Banking is a very intriguing and lucrative field for many students/professionals involved in Finance. Investment Banking not only provides an amazing remuneration package but also provides equally good exit opportunities. Contrary to popular belief, India has its fair share of Investment Banks and branches of the most decorated banks as well.

Investment banking in India can be traced back to pre-colonial times with the advent of new merchant banks established by European traders for their financing needs. Growth of such banks was slow in the country due to the presence of public sector undertakings and a limited scope of business in general. Although the growth was slow till 1991, there was still some action in the industry in the form of State Bank of India known as SBI Capital Markets Ltd. which started operations in August of 1986, this was followed by a few more public sector players stepping in the game; Canbank Financial Services Ltd (1987) , BOB Fiscal Services Ltd., promoted by Bank of Baroda & PNB Capital Services Ltd ³.

After 1991, several international players started their operations in India and several others like Morgan Stanely established their back support offices in India. Along with this, private players in the Investment Banking industry also established their operations to further strengthen the industry in India and cater to the increasing need of business finance. Interestingly, Investment Banks have been roped in for public sector dealings as well; The Haryana State Electricity Board had paid for the services of Arthur Anderson to privatize its operations but the deal plummeted along with the firm involved in the deal¹.Some well known Investment Banks in India include; JM Financial Services, AK Capital Services & Birla Capital Services.


What does an Investment Banker do?

Long story short, Investment Bankers provide banking services to big corporations and help them with their financial needs. They mainly deal in IPO launches, M&A deals, Credit Sources & Debt Financing amongst others. We are soon going to see the launch of the biggest IPO in the country; LIC, they’ve hired more than 3 banks to help with the IPO, Citi Bank, SBI Capital Advisory & Credit Suisse².


Present Scenario and Future Outlook:

Investment Banking in the country has grown leaps and bounds and has moved on from the time where we were a back office for the big dogs. A reason for this was the excess of software engineers and a low level of deal activity i.e how many companies are acquiring smaller companies or the number of IPOs launched in the country.

Slowly, firms like JP Morgan & Morgan Stanely have increased their presence in the country and have recently leased more office space in Bangalore as well (Hint! Hint!).

The finance industry has been heavily leveraging technology in their operations and moving on to quant-based valuations and trading, this is significantly different from how operations used to be conducted earlier.

As it stands, the future of the industry has a positive outlook and as the country becomes more business-friendly, the deal activity will increase and everyone can have a slice of the pie while some big guns like Reliance try to inflate the size of the pie itself, we can already see how they’ve gone debt-free within a span of 2 months while we were all locked up in our houses and scared for our lives.

References:

Investment Banking in India: Rising Stars and their deals.

LIC IPO

The Current State of Indian Investment Banking


Author: Anmol Malik

anmolmalik2016@gmail.com