Assessing the Market Potential for Investment Banking

in Bangalore
Nitin Pathania, Sameer Deshpande, Svati Goyal, Uthara Padmanabhan, Varun Ganesh, Vatsal Shah

I.INTRODUCTION
The Investment Banking sector of the
Banking and Financial Services industry in
India is still in the nascent stages with bulgebracket investment banks just beginning to
establish a front-office presence in a few
financial hubs. Most cities in India are catered
to by niche regional boutique investment
banking firms that handle small deals in the
range of 50-100 crores or middle-market firms
that facilitate medium deals in the range of
100-500 crores.
Investment banking products availed in
India mostly revolve around equity
syndication, debt syndication and structured
finance. The shortage of large deals creates a
highly competitive environment. Since
investment bank revenue is commission based
it is imperative for a bank to garner significant
market share in all Tier-1 cities.
The Context
HSBC currently only has one investment
banking front office in India, which is located
in Mumbai. With the overall goal of increasing
revenues and market share, it is of interest to
assess the feasibility of doing so by opening up
a branch in Bangalore.
Recent Trends
Bangalore has recently witnessed a growth
in small investment banking firms. Though few
in number, these reputed boutique firms have
seen Bangalore as a prospective market for
investment banking products and services, and
have slowly begun to tap into its unrealized
potential. Firms such as Spark Capital,
Copalamba, Nuvent Capital, Sprout, Mosaic
Capital and, Vivaan Capital cater to the smaller
deals and advisory services for smaller
companies. Veda, Mape Advisory, Kotak
Mahindra, RSVP Advisors, Creador, Singhi
Advisors, CreedCap Advisors Pvt.Ltd., O3,
and Edelweiss are some of the larger players.
The most significant indicator of a lucrative
investment scenario is the presence of Signal
Hill and Martin Wolfe who are boutique firms

specializing in large scale mergers and

acquisitions.
II.APPROACH TO RESEARCH
We are adopting a two-pronged approach to
the research. First, it is essential to assess
whether location of the bank branch plays an
integral role in access and acquisition of that
regions customer base. Secondly, it is
important to evaluate how much potential
market share exists solely based on the banks
brand image.
A lot of research has been done in the field
of location theory. The proposition is that the
firm chooses a location based on potential
profitability. For more traditional forms of
banking the profitability is driven by the level
of income, the level of spending, the quantity
of business, [1]. Even with investment
banking these factors play a large role in
choosing branch location.
From the competitive positioning angle
location is one of the prime variables in play.
The competitiveness is a function of not just
the banks market position but also difference
between the competitors market position and
market proximity. The proximity to the market
reinforces the banks competitiveness as it
caters to the clients time and space constraints
[2].
However, considering the scarcity and
magnitude of the deals in the market it is
necessary to evaluate whether one can operate
from a single base of operations and allow for
remote communication with the client.
The second aspect of brand awareness is
also to be considered. If HSBC were to setup a
new branch would its brand equity translate
into a lower barrier to entry? The obvious
answer would be that HSBCs brand awareness
is high enough to be attractive to the customer
base which is more used to smaller firms.
Customer perception is however more dynamic
and isnt always as clear cut. Market research
shows that a widespread popularity can strain

scarce resources and diminish perceived

quality.[3] While HSBC has a larger network
and platform to offer clients, there may be
doubts about their ability to deliver a more
personalized level of service.
III.REFERENCES
[1] Hong Jae, Weon, Eui Hong Won, and Sik
Kwak Yoon. 2010. "The Study of
Location Strategy for Bank through the
Analysis of Inter-regional Financial
Transaction Network." International
Journal Of U- & E-Service, Science &
Technology 3, no. 1: 21-30.

[2] Miliotis, P., M. Dimopoulou, and I.

Giannikos. 2002. "A Hierarchical Location
Model for Locating Bank Branches in a
Competitive Environment." International
Transactions In Operational Research 9,
no. 5: 549-565. Research Starters
Business
[3] Hellofs, Linda L., and Robert Jacobson.
1999. "Market Share and Customers'
Perceptions of Quality: When Can Firms
Grow Their Way to Higher Versus Lower
Quality?." Journal Of Marketing 63, no. 1:
16-25. Research Starters - Business