Investment banking sits at the heart of the global financial ecosystem, orchestrating some of the most complex and high-value transactions. These activities are often undertaken on behalf of corporations, governments, and large institutions. In India, the growth of capital markets and the expanding ambitions of corporate entities have placed investment banking in sharp focus. To appreciate its role, it is important to ask what is an investment bank, what does an investment bank do, and how does investment banking work in the context of both domestic and international finance.
An investment bank is a specialised financial institution that assists organisations in raising capital, managing financial risk, and executing strategic transactions such as mergers, acquisitions, and corporate restructuring. Unlike commercial or retail banks, investment banks do not accept deposits from the public or provide savings products. Their expertise lies instead in capital market activities, underwriting debt and equity securities, facilitating secondary market trades, and providing advisory services for significant financial undertakings.
The investment banking meaning extends beyond the narrow function of fundraising. In India, investment banks serve as both engines of capital formation and catalysts of industrial growth. By linking investors with businesses or public entities that require funds, they ensure the seamless flow of capital into productive sectors of the economy. This, in turn, facilitates infrastructure creation, job generation, and sustained economic progress.
To understand how investment banking works, one must examine its varied functions. The functions of investment banking in India encompass a series of interconnected activities:
| Function | Description | Example |
| Underwriting | Guaranteeing sale of shares or bonds, managing IPOs | SBI Capital Markets – IPO of LIC |
| Mergers & acquisitions | Advisory on mergers, acquisitions, and restructuring | Kotak Investment Banking – M&A deals |
| Capital raising | Raising equity or debt for enterprises | ICICI Securities – Bond issuances |
| Corporate finance advisory | Strategic consulting and restructuring advice | JM Financial |
| Market research | Equity research and sectoral analysis | Motilal Oswal Research Desk |
| Sales and trading | Execution of financial market trades | Edelweiss |
| Risk management | Structured products and derivatives for hedging | Axis Capital |
Investment banks vary in scale, scope, and specialisation. They can broadly be categorised into:
| Type | Key characteristics | Indian examples |
| Bulge bracket | Global scope, extensive offerings | None headquartered in India |
| Boutique | Specialised in M&A or industry-specific advisory | Avendus Capital |
| Full-service domestic | Broad suite of services, India-focused | ICICI Securities, Kotak Investment Banking |
The functions of investment banking are central to economic stability and growth. In India, their role extends to:
By fostering transparency, efficiency, and global alignment of financial markets, investment banks also strengthen investor confidence.
Beyond their core functions, investment banks provide a wide range of services tailored to client needs:
Prominent Indian and global investment banks have shaped the financial landscape through their notable work:
| Bank | Area of expertise | Notable deals |
| ICICI Securities | IPO, debt, M&A | Multiple large IPOs |
| Kotak Investment Banking | M&A, equity, advisory | Acquisition of Mindtree |
| Axis Capital | Equity and debt capital markets | Strategic block deals |
| JM Financial | Capital raising, M&A | Multiple cross-border transactions |
| Avendus Capital | New-age and technology transactions | Flipkart-Walmart deal |
| Global players | Cross-border M&A and fundraising | JP Morgan, Goldman Sachs, Citi |
| Feature | Investment banks | Commercial banks | NBFCs |
| Main activity | Capital raising, M&A, advisory | Deposits, loans, payments | Loans, leasing, funding |
| Clientele | Corporates, institutions, HNIs | Retail, SMEs, corporates | Retail, SMEs, corporates |
| Accepts deposits | No | Yes | No |
| Regulatory body | SEBI, RBI (in certain areas) | RBI | RBI, SEBI |
| Risk profile | Deal, market, credit risk | Credit risk | Credit risk |
The presence of investment banks offers several advantages:
Although central to the economy, investment banks face challenges:
The Indian investment banking industry has expanded considerably in recent decades. Annual fee income grew from less than 100 million US dollars in 2000 to more than 1.3 billion US dollars in 2023. Drivers of this growth include:
The future of investment banking in India will be shaped by:
Investment banking is a cornerstone of India’s financial architecture. By facilitating capital mobilisation, supporting corporate restructuring, financing innovation, and ensuring efficient market operations, it plays a critical role in shaping the nation’s economic journey. From managing landmark IPOs to enabling transformative projects, investment banks continue to reinforce India’s integration into the global financial system.
As the industry embraces technology, sustainability, and regulatory sophistication, the outlook for investment banking remains promising, offering exciting possibilities for businesses, investors, and the broader economy.
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