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Introduction to Investment Banking
Learning Outcome
5
Gain basic awareness of investment banking careers.
4
Explain how investment banks help companies raise capital.
3
Differentiate investment banking from commercial banking.
2
Identify the core functions of investment banks.
1
Understand what investment banking is and why it exists.
Recall
Basics of Financial Markets (Stocks, bonds).
Concept of companies needing funds to grow.
Role of banks as financial intermediaries.
A Manufacturing company plans to expand its production capacity by setting up a new plant.
The estimated cost of expansion is ₹1,000 crore.
Can the company rely solely on its internal savings?
Would a single commercial bank be willing to lend such a large amount?
How can the company access funds from a large number of investors efficiently?
- Large capital requirements often exceed internal funds.
- Bank loans alone may increase financial risk and interest burden.
- Accessing capital markets becomes necessary for long-term financing
- Large corporations do not directly approach millions of investors when they need funds.
- Instead, specialized financial institutions design, structure, and manage these transactions efficiently.
Core Concepts
Investment banking is a specialized segment of banking that provides:
- Capital raising services
- Advisory services
Raising Capital
Investment banks assist organizations in raising funds through:
Equity financing (IPOs, Follow-on Public Offers).
They manage pricing, underwriting, marketing, and regulatory processes.
Debt financing (Bonds, Debentures).
Advisory Services
Investment banks advise clients on:
Divestitures
Acquisitions
Mergers
| Investment Banking |
|---|
| Key services include capital markers and M&A. |
| Primary clients are Corporations, Governments etc. |
| Revenue is obtained from fees and other commissions. |
| High risk involved. |
| Commercial Banking |
|---|
| Primary clients are Individuals or Businesses. |
| Key services include deposits and loans. |
| Revenue is only obtained from Interest. |
| Low risk involved. |
Summary
4
It plays a critical role in capital markets and economic growth.
3
It differs fundamentally from commercial banking.
2
Core functions include capital raising and advisory services.
1
Investment banking supports large-scale financial transactions.
Quiz
Which of the following is a function of investment banks?
A. Issuing credit cards
B. Managing IPOs
C. Opening savings accounts
D. Providing ATM services
Which of the following is a function of investment banks?
A. Issuing credit cards
B. Managing IPOs
C. Opening savings accounts
D. Providing ATM services
Quiz-Answer
investment banking
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