What role does investment banking play for the clients?
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The concept of investment banking Some of the other time in our life, we must have heard of the term, ‘investment banking’. It could have been on news channels, while browsing the internet or simply while you were at your bank or so. But what exactly is investment banking in real sense? Now, an investment bank is a part of the financial system that is hired mostly by giant and high-end firms for their financial advisory services. An investment bank performs various duties, such as being the mediator and over-seeing mergers and acquisitions. Bringing in together the suppliers and long-term fund users in the capital market. www.avendus.com/india
Underwriting In underwriting, investment banks package and sell securities on behalf of their clients. It is also a process in which, the lender of a lending institute scrutinizes the credit worthiness of the customer and delivers the same to the said authorities. When the investment banker sells the securities on behalf of their clients, they are said to first buy them at lower price and then sell at higher. Therefore, underwriting becomes an assurance in which the banker says to bear the risk in case of any adverse fluctuation in price at the time of distribution. www.avendus.com/india
Distribution In this function, the investment banks market the issuance of new securities. Once they acquire these new securities, it becomes their responsibility to make it a part of the investor’s hands. Also, because they specialize with the staff and organization in distributing the securities, they also do physical distribution in a much more efficient manner. This, in fact, is more economical than an individual company.
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Being an advisor For any company to climb up the ladder of their wealth and financial strength they need to hire the right financial advisory services as well. These firms advise them on investment in mutual funds, dealing with hedge funds, long-short and long-only funds, real estate, shares, bonds, gold and other property as well. The investment bank does this by first studying, in detail, the current financial portfolio of the client and then chalking out a path to help them.
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Building a market for the client When a company, a big firm decides to go public, it is the duty and also obligation of the investment banker to make and build market for his client. This is to be done for the shares after they have been issues. They make a market and see to it that it remains liquid. The investment banker also bears the responsibility to maintain inventory, stocks, quotations of bids and be all ready to sell or buy at the prices that have been locked.
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