career focus in finance

8/8/2019 Career Focus in Finance

1/24

Career Focus Workshop-2010

SESSION ON FINANCE


2/24

Finance Opportunities

Investment Banking

Private Equity

Hedge Funds / Prime Brokerage

Mutual Funds Insurance

Corporate Finance

Project Finance

Retail Banking Private Banking/ Wealth Management

Credit Rating Agencies


3/24

Career progression

Investment Banking

Analyst

Associate

AVP

VP

SVP

MD

Retail Banking

Area Manager

Branch Manager

Zonal Manager

National Manager


4/24

Investment Banking

M&A, IPO, Bond Offerings

Equity Research/ Fixed Income Research

High Yield, High grade

Trading Equities, bonds, derivatives, commodities, currencies

Proprietary

Institutional sales

Treasury operations overlap with i-banking

Trading

ALM


5/24

Terms to remember

IPO Market Capitalization P-E Ratios Dividend Yield Fundamental Analysis Technical Analysis Stock Split Rights Issue Bonus

Merger & Acquisition Leverage Margins Gross, Operating, Net Cash Flow IRR


6/24

ALM Asset Liability Management

Bank takes 3 years fixed deposit (Rs 100)

Lends for 3 years (Student Loan=100)

After 1 year, student prepays

A and L mismatch after 1 year

What will the bank do withthe surplus funds?

Interest rates have gone down

ALM manages thegaps inthe Balance

Sheet


7/24

Private Equity

Investment in privately held asset classes

Investment in publicly held asset classes with intention totake them private

Terms to remember: LBO

MBO

Angel Investor

Venture capital

Mezzanine capital Prominent companies :

KKR, Blackstone, Carlyle


8/24

Hedge Funds

Similar to mutual funds

Caters to more sophisticated clientele

Higher risk profile

Amaranth, LTCM

Short selling, trading in derivatives, using leverage

Not registered with SEC

Limited number of investors

High level of interest in the Indian stock market


9/24

Hedge fund - Strategies

Event driven

Global convertible bond-arbitrage

Equity market-neutral

Long/short equity Global macro

Commodity/Currency trading


10/24

Mutual FundStructural Framework

Shareholders

Board of directors

Investment

advisor

Principal

Underwriter

Transfer agentAdministrator Custodian Accountant


11/24

Mutual Funds: Terms

Open-end fund

Closed-end fund

NAV

Load fund / No load fund

Schemes

Equity

Debt

Money market

Turnover ratio


12/24

Mutual funds

Money Market: High quality, short-term securities.

Determined by short-term interest rates.

Growth: Common stock of well established cos.

Invest for long-term capital gains.

Aggressive

Growth: Common stock of small companies, orcompanies in new industries.

Higher degree of risk than growth fund.


13/24

Mutual funds

Income: Corporate, government, or municipal debt

Periodic interest payments

Varying degrees of risk

1. Credit quality 0f the debt issuer

2. Maturity of the debt instrument

3. Prevailing interest rates

High Income: Junk bonds.

High degree of riskRisk of loss of principal

Balanced: Both growth and income


14/24

Mutual funds in India

LIC Equity Fund - Growth

Can Emerging Equities - Growth

HDFC Top 200 - Growth

Principal Large Cap Fund - Growth

Birla Advantage Fund - Growth

Prudential ICICI Technology Fund - Growth

SBI Magnum Sector Umbrella - Contra - Growth

Sahara Infrastructure Fund - Growth

Reliance Growth - Growth

ING Vysya Midcap Fund - Growth


15/24

Insurance

Work Profiles

Actuarial

Administration

Finance & Accounts Human Resource

Internal Audit

Investment & Risk Management

Legal & Compliance

Marketing Operations

Sales

Technology

Underwriting


16/24

Insurance

Actuary

Professional statistician

Evaluates medical records and applications to determine longevity

Predicts probability of future events based on past data

Role in premium pricing


17/24

Insurance

LIFE INSURERS:

1. ALLIANZ BAJAJ LIFE INSURANCE CO. LTD.

2. TATA AIG LIFE INSURANCE CO. LTD.

3. BIRLA SUN LIFE INSURANCE CO. LTD.

4. AVIVA

5. HDFC STANDARD LIFE INSURANCE CO. LTD.

6. ICICI PRUDENTIAL LIFE INSURANCE CO. LTD.

7. ING VYSYA LIFE INSURANCE CO. PVT. LTD.

8. LIFE INSURANCE CORPORATION OF INDIA.

9. MAX NEW YORK LIFE INSURANCE CO. LTD.

10. METLIFE INDIA INSURANCE CO. PVT. LTD.


18/24

Insurance

NON-LIFE INSURERS:

1. BAJAJ ALLIANZ GENERAL INSURANCE CO. LTD.

2. ICICI LOMBARD GENERAL INSURANCE CO. LTD.

3. IFFCO TOKYO GENERAL INSURANCE CO. LTD.

4. NEW INDIA ASSURANCE CO. LTD.

5. RELIANCE GENERAL INSURANCE CO. LTD.

6. TATA AIG LIFE INSURANCE CO. LTD.

7. UNITED INDIA INSURANCE CO. LTD

REINSURERS:

1. GENERAL INSURANCE CORPORATION OF INDIA.


19/24

Corporate Finance

Capital Budgeting Decision

Identification of new investment opportunities

Estimation of current and future cash flows

Expenditure control and project Execution

Capital Structure Decision

Sources of Finance ( Equity / Debt / Loans)

Dividend Decision

Working Capital Management

Corporate Valuation & Restructuring

Investment of free cash

Hedging derivative instruments


20/24

Project Finance

Typically for large capital intensive projects

Infrastructure

Public services

Industry

Projects cash flow is used for repayment

Assets held as collateral


21/24

Retail Banking

Mass-market Savings and checking accounts Home loans Personal loans

Vehicle loans Insurance Bancassurance Credit Cards

Securitization Bonds

Ginnie Mae, Freddie Mac, Fannie Mae MBS (Mortgage Backed Securities) CMO (Collateralized Mortgage Obligation)

Class A, Class B, Class Z

CDO (Collateralized Debt Obligation)


22/24

Private Banking

Advisory Services to HNIs

Financial planning

Investment management

Credit facilities

Taxation

Legal issues


23/24

Credit Rating Agencies

Creditworthiness of a corporation or country

Financial History

Probability of default

Assets and liabilities Corporate Credit Ratings

Bonds

High-Yield/ High Grade

Sovereign Credit Ratings

Risk of investing in a country

Personal Credit Rating

Standard & Poors, Fitch, Moodys

ICRA (Moodys) , CRISIL (S&P)


24/24

Some Questions to think about

Profile M&A, Corporate Finance, Retail?

Why?

CV, Know Yourself

Where do you think the stock market is headed?

Reasons behind rise of the Sensex?

High Valuations? KKR, Flextronics?

ET, BW Online, Indian Business Journals

Components of BS, PL, CF

Ratios

Valuation methodologies

career focus in finance

Documents