Investment Banking is the job that acts as a middleman between parties that require capital and the ones that are willing to invest. It is the bridge between companies and investors, offering debt and equity shares for capital investment. Investment banks are different from commercial banks in the functions that they perform. The former is primarily concerned with advisory services in several situations, like mergers and acquisitions, as well as securities underwriting, while the latter handles deposit accounts for clients. To understand properly what investment banking in India is, we need to understand the primary activities.
Primary activities of Investment Banks
The main functions performed as a part of investment banking are the following -
- Underwriting: This is one of the crucial tasks undertaken by investment bankers. Investment bankers fulfil the key role of advisors between companies and possible investors for the exchange of capital. This may involve raising money for their business or going public via an IPO. The exchange between the two parties is usually negotiated by investment bankers. They also assist firms during the IPO process, as well as advise their clients to make investments.
- Trading: Investment bankers also buy and sell stocks, shares and trade on the behest of their client. This involves using the capital of the client to buy shares, selling securities on their behalf, and handling their stock market investments in general.
- Asset Management: Asset Management involves providing equity, money market, fixed income and alternative investment options for clients. This will help the client to manage their wealth, invest wisely and look into the options that they may have in the market.
- Market Research: This involves studying the market trends, the industry or specific companies to create reports and offer recommendations. Thus, efforts are put into offering investment advice and possible share options for their client.
The advisory role of Investment Bankers
Unlike commercial banks which offer to store the money of the client in exchange for interest, transactional as well as other services, investment banking is more about taking up a more advisory capacity. Although there may be varying amounts of freedom, Investment Bankers are ultimately performing the role of an advisor. They recommend investments, help clients buy or sell their equity, manage their assets and research information that they need. Whether the client is a Government body, Private Corporation or any other, the banks act at their discretion.
Being an Investment Banker
Investment banking is a vast field that offers many career opportunities if you learn it from a proper institution. Investment banking can be one of the courses after MBA finance so that you can secure your future in the long run. Here are the basic skills that you need so as to become a successful investment banker.
- Financial Modelling: A key part of your job is to study and analyse the financial state and future of companies, industries or the market in general. Financial Modelling helps to digitally simulate the performance and the possible future of assets and investments. An investment banker must be well versed in financial modelling. This will allow him/her to make more accurate assessments, work faster and also educate his/her client using these models.
- Business Valuation: Before you advise a client to invest in a business or steer clear, you have to base this advice on something. Investment bankers need to be able to analyse and evaluate companies and gain a clear idea of what the stakes are of investing in the same. This will allow you to learn where the business stands on your list of options, advise your client to the best of your ability and provide them with accurate assessments.
- Communication Skills: While performing an advisory role, it is important to be able to get your ideas through to your client. This includes giving presentations and providing briefings to the client, as well as making pitchbooks. The latter is a practice used to sell their services, as well as pitch their products to possible clients. The broad spectrum of communication skills also involves negotiation skills, preparing transcripts and documentation, as well as other practices prevalent in the sector.
There are many more skills that you need to add to your arsenal to be a successful investment banker. However, this covers a lot of ground in terms of what is expected of you as an investment banker. You need to leverage these skills to be successful in the field.