The Rise of Investment Banking Companies in India Over the Years

Investment banking is a huge sector in today’s India. Some of the major investment banking companies in India we know are Axis Bank, Axis Capital, Central Bank of India, Centrum Capital, Chartered Finance Management Ltd., HDFC Bank ltd. Etc. But where did this journey of Invest banking system start in India? For this, we need to trace back to the time when the European merchant banks had first established houses of trading in the Indian subcontinent in the 19^th century. Since then, when it comes to foreign banks, they are the once to have dominated the investment and merchant activities in the country.

It was only in the 1970s that the State Bank of India (SBI) entered the business. It created the Bureau of Merchant Banking, and ICICI Securities, which made it the first Indian financial institution that offered banking services to merchants. A decade later, in around 1980m the number of merchant banks rose to more than 30. This growth then rapidly expanded to commercial banks and many other financial institutions.

However, you would be surprised to know that the merchant banking industry only took off in the 90’s when around 1500 merchant bankers registered with Securities and Exchange Board of India which we popularly know as SEBI. But a system was going to be required to put this new wave of banks that had opened up in governed space. Therefore, the Association of Investment Bankers of India (AIBI) was created. Its duty was to ensure that the members followed follow the rules and banking regulation and their activities are kept in check.

Today, investment banking has become a big source of finance in the country. It deals with many things, from hedge funds, to guiding clients to invest wisely and risk bearing as well. You could look for the list of the ace investment banks in the country.

How is a Hedge Fund Different from Asset Management?

One of the major functions of wealth management firms is not just to help their customer manage their funds and help them decide where to invest how much, but to also help them by providing various other services. They provide you with asset management and provide you guidance when it comes to dealing with credit management and hedge fund. However, it is important to know that there is a vast difference between the two. Let’s explore that today.

In asset management, the company usually takes a strategic approach in managing assets, strictly confining to the investment portfolio of their client just to ensure good returns. But when it comes to wealth management, there is a stark difference between the two. For wealth management firms, the goal is not just to get good returns, but also expand the clients’ wealth. Whereas in asset management, asset allocation becomes a serious factor and service. It needs to vibe with how much risk you can take, the time horizon and the needs of liquidity with the firm’s investment strategy. As opposed to asset management, the portfolio consists of a meticulously chosen balance of fixed incomes and high risk, high reward investment. Mutual funds, private equities, bonds, real estate etc. are very common when it comes to investment options. When the market changes or your personal goals shift, these management aspects come into picture.

But what is a hedge fund that we talked about earlier? It is a pool investment that utilize the strategies of high-risk investments, hoping that they get exponentially good returns. They are usually of limited liability companies or partnerships and acquire financial assistance of individuals. These individuals are almost always HNIs. This is because, they have better risk bearing capabilities that the lower level investors.

The head fund managers usually approach potential clients with a specific investment strategy that they think would be the best to gain success from the funds. In order to show that they are separate, hedge funds often profess to have a well thought strategy, however, t has been found that most of the time it is a repeat of the same philosophy.

These head funds usually charge high rates, which is why, even though this pool of investment may seem attractive (no matter how risky it is), it comes with a lot of precautions. If you wonder about the fees about these hedge funds, then they are usually two parts to these, the management fee and the incentive fee.

What to manage your wealth? Be careful about these things first.

Each of us understands the importance of money and wants to get rich. but there is a lot of difference between being just rich and being wealthy. When you have just money, you aren’t investing in assets. But when it comes to wealth management, it means you manage your money in such a way, to increase your net worth of wealth and ensure good returns in future. The basics on investment of any kind is with the expectations that it will bear some sweet fruit of wealth in the future. But for this to happen, it is very important that you are aware of the basic rules that one needs to follow before starting to invest their hard-earned money to achieve their financial goals.

Knowledge about your net worth

To be able to smartly invest in funds and assets, you will first have to analyze the basic assets and liabilities that you hold. This helps you to get a snapshot of your current financial capabilities and your current financial position also. Realization of this reality is very important if you want to be investing your funds properly. In case you are not heading in the right direction, it acts as a mirror.

Spending judiciously

Our forefathers and our parents have always advised us on this. It may sound redundant, but it can’t be truer. If you want to learn the basics of fund management, then this is what you should learn first. Other than the expenditure that must happen, one should not spend all their income of momentary pleasures and entertainment. We do not suggest that you become stingy but be a little cautious while spending on anything that you might not be needed now. Also, start keeping a track of your monthly spending. This will help you track where you happen to spend your money the most.

Why your business needs Corporate Governance and Credit Management

Raising capital can often be daunting. While you may have a certain flair in offering your business solutions to end consumers, the mismanagement of new capital is something that can derail your business plans entirely. This is where corporate governance comes into play.

Companies with multiple stakeholders such as the public, the investors, the board of directors often have in place corporate governance. This takes care of the framework within which a company conducts its business. The board of directors and others vested in the economic growth of the company will often ensure that there are processes in place that maintains an investors faith in the organization. Why is this important? So that the company can continue to raise capital effectively and over longer periods of time.

The other incidental benefits of corporate governance are the fact that there is ultimate transparency in the way a business conducts themselves on a day to day basis, it also omits the wastages, internal and external corruption, reduces the risk of wasting capital and mismanagement of resources.

Another major factor that forms part of corporate governance is the process of credit management. Credit management involves putting in place all those systems that are responsible for granting credit as well as the process of setting the terms on the basis of which it has been granted. It is ensuring that the customers will be paying for the services that they have availed to. It also sets in place the terms on which the credit will be settled as well as the timelines that are to be followed at each step of the process. The main goal of credit management is to comply with the decided credit policy, amongst all the other credit involving processes and procedures.

When you raise more capital, it is always better to ensure that, together with the board of directors and other decision makers, you have a corporate governance system that has been put together for the smooth running of the organization – and for all the capital and credit that has been raised, there is a credit management process in place as well. 

Some Trends Impacting the Future of Investment Banking Companies in India

Before we get to the rise of investment banking, and the subsequent increase in the number of investment banks in India, we need to understand what investment banking really is. Investment banking focuses on creating capital for other organizations, entities, individuals, governments and more. Investment banking companies have seen a sharp rise in income and relevance in India, mainly because of the growing and striving startup culture that has encapsulated the imagination of the entire nation. However, as is with every aspect of a service industry, there are plenty of factors that can have a telling impact on the future, but moreover the present of the investment banking industry. So, is the future of investment banking all rosy or are we going to see a pause in the go-go period?

As we take a deep dive into factors, both internal and external, that may have an impact on the investment banking, it’s paramount to remember that in an industry as dynamic as this, the factors can constantly change. First up, regulations. The regulations of the banking course in India will result in top asset management companies in India having a flourishing period. However, this growth is expected to be temporary, and a lot of it will depend on the financial abilities of the more noteworthy banks. Another wave that has caught the attention of the investors is new infrastructure. Governments believe that, in order to push domestic financial growth, there has to be a heavy investment in infrastructure. Energy-related and real estate infrastructure spending are bound to make a significant impact on the future of investment banking in India, and the world in general. There are a lot of other factors that will have an impact on this industry, but like we said, these factors can constantly change, and so can their degree of impact.