The Scenario of Investment Banking in India
The history of Investment Banking in India traces back to when European merchant banks first established trading houses in India in the 19th century.
Since then, foreign banks have dominated the investment and merchant banking activities in India.
The first Indian Bank to enter the business of Investment Banking was the State Bank of India. In the 1970s State Bank of India created the Bureau of Merchant Banking and ICICI Securities became the first Indian financial institution to offer merchant banking services.
The growth of the Industry was slow during the 1970s. But with the advent of economic reforms in 1991 in India, there was a sudden spurt in both primary and secondary markets.
What is Investment Banking?
Investment Banking is the division of a Bank or Financial Institution that provides underwriting (capital raising) and mergers & acquisitions (M&A) services to corporations, governments, and institutions.
Investment Banks in India act as intermediaries between Investors (who have surplus capital to invest) and corporations (who require capital to grow and run their business).
What is Boutique Investment Banking?
Boutique Investment Banks in India generally work on smaller deals involving middle-market companies and usually assist on the sell-side in mergers and acquisitions transactions.
What do Investment Banks do?
A full-service Investment Bank offers a wide range of services that include underwriting, sales & trading, equity research, M&A, asset management, and retail banking.
The Investment Banking Division of a Bank provides only the underwriting and M&A advisory facilities.
Association of Investment Bankers of India
In India, the Association of Investment Bankers of India (AIBI) has been recognized by SEBI to set up professional standards for providing efficient services and establish standard practices in Investment Banking in India.
AIBI’s purpose is to ensure members' institutions follow its ethical and legal practices, as well as to promote the industry of investment banking in India and the business interests of its members.
AIBI has recently created and released a due diligence manual for its members which can be downloaded from here.
Investment Banks vs Merchant Banks: what's the difference?
Both types of banks operate within the financial realm, there are some key overall distinctions.
Generally, Investment Banks focus on large public companies going for Initial Public Offering (IPO) and private share offerings.
Whereas, merchant banks offer their services to companies that are too big for venture capitals to properly serve but are still too small to make a compelling public share offering on a stock exchange.
Who is a Registered Valuer?
A valuer is an individual (or entity) who does the work of Business/Enterprise Valuation.
A Registered Valuer is an individual (or entity) registered with the Insolvency and Bankruptcy Board of India (IBBI) in accordance with the Companies (Registered Valuers and Valuation) Rules, 2017 as a valuer.
Role of a Registered Valuer
A registered valuer can undertake the valuation of assets only for the class which he/she is registered for. There are namely three different asset classes for valuers to register for:
Land and Building
Plant and Machinery
Securities and Financial Assets
Under the Companies Act, while raising funds a Startup has to obtain a valuation report by a Registered Valuer before issuing following instruments under Private Placement or on Preferential basis:
a. Equity Shares
b. Partly or Optionally or Compulsory Convertible Preference Shares
c. Partly Optionally or Compulsory Convertible Debentures
An Investment Bank provides capital raising and M&A services to corporations, institutes, and governments.
Merchant Banks offer the same services to smaller companies.
A Registered Valuer is an individual (or entity) registered with IBBI in accordance with the Companies (Registered Valuers and Valuation) Rules, 2017 as a valuer.
A registered valuer can undertake the valuation of assets only for the class which he/she is registered for.
Note: DGM Capital is an Investment Banking and Wealth Management firm in India focusing on M&A, private equity, and investment advisory services in India.