MBA

Semester-3
Finance
Course
Handouts
 IBS Hyderabad
Academic Year (2017 – 2018)
Course Handout
Course Title Banking Management
Semester III
Credits 3

Course Objective:

The purpose of this course is to provide the students an essential exposure to the subject of banking that plays a critical role in the financial system. The course is
designed in such a way as to provide all the required inputs for an understanding of Indian banking system and its management. The Course attempts to throw light on
the topics of contemporary as well as that of scholarly interest.

The Course has the following objectives:

 To provide a managerial perspective by an understanding of the working of the Indian Financial System, the origin and growth of Banking, the importance of
Banker Customer Relationship.
 To develop managerial skills by understanding and analyzing as to how the banks mobilize their resources and deploy them for profit maximization.
 To develop exploratory skills providing useful insights about the techniques of deposit management, Use of Cheques, The importance of Cash management,
Lending Activities, Financing SMEs and the Significance of Credit Policy.
 To inculcate innovation practices by knowing about the innovative approaches in different areas of banking such as Retail Banking, Corporate Banking, Rural
Banking, Microfinance, etc.
 To explain how pricing is done for deposit and Loan products
 To familiarize with various fee-based Services and Plastic Money.
 To create awareness about the importance compliance mechanism and to know how the Banks are monitored by Internal Control Mechanism and governed
by various Acts such as RBI Act, BR Act, and NI Act, etc.
 To create an awareness about non-performing assets and importance of recovery management.
 To make the students aware about risk management and Basel frame work.

Learning Outcomes:

At the end of the course, the student would enhance his/her knowledge of banking and finance industry and gain the required capabilities for assuming the position
of a bank manager.
Pre-requisites:

Recommended Text Book: Banking Principles and Operations by M.N.Gopinath, Snowwhite Publications Pvt Ltd, Mumbai 4th Edition

Suggested books:
1) Bank Management & Financial Services by Peter S Rose and S C Hudgins
2) Commercial Bank Management by Kanhaiya Singh & Vinay Dutta
Reference materials:
1. Bank Quest Published by The Indian Institute of Banking And Finance
2. The Indian Banker Published by The Indian Banks’ Association
3. Websites of RBI, IBA And IIBF

Detailed Session Plan:

:
Sessio Required Additional
Sno n Topic Teaching objectives Learning Outcome Readings & Readings
No. Case Studies
Banking System in India
RBI document on
Origin, nature and structure of Indian To explain the students At the end of the session, Text book Ch2
banking the student will describe: (An overview of Evolution of
Types of Banks and their functions,  Evolution of Banking system in India (i) the overview of banking banking) banking in India
1 1 Types of Banks:  Types of banks system in India (rbi.org.in)
Scheduled banks, Commercial banks,  New bank types – Payment banks, (ii) functioning of different
Public sector banks, private sector banks small banks types of banking groups
(Old and new generation banks), (iii) the role of Reserve Bank
Co-operative Banks, RRBs,  Ownership pattern and classification of India as a regulator, as a
Local area banks, NBFCs, of banks in India development banker, and as
Mutually aided co-operative societies], a banker to banks and
Payment banks, Small banks  Central banking in India – Its governments.
RBI-the Central Bank- Structure, evolution and efficacy
Role and Functions of RBI
Banking Activities To explain
The takeaways from this
 Banking needs of individuals and
Retail Banking, session : Text book Ch2
other small customers.
SME Banking
Corporate banking (Wholesale Banking)  The students will
2  Banking needs of Small businesses
2 Rural Banking and Micro finance comprehend the retail
and enterprises
Wealth management (Private banking) banking activities in India
Treasury management  Banking needs of corporates
 Cash management services,
Merchant banking,
Leasing, Factoring,
Venture Capital, International banking
How banks make money(Spread
business, Fee based business,
Derivative business, principal investment
business)
Bank Financial Statement and
Analysis
Basic structure of Bank Balance sheet
Off-Balance sheet items
Components of the Income Statement of
3 3 a Bank
Bank Specific ratios
Comparison of Bank Statements with
non-bank financial firms
 The banking services
 Banking needs of rural segments made available to micro
 Banking needs of high-net worth- small and medium sized Case : Note on
individuals businesses and the Banking
 Concept of asset-liability enterprises, corporate, Industry -HBS
management in firms and banks and HNIs.
 Concept of cash and liquidity
provisioning  The services and
 Concept of investment banking facilities offered by the
 Concept of cross-border banking and banks to merchants,
international trade and commerce. firms, investors, and
 Different sources of income for industrial borrowers?
banks
 The nuances of
international banking and
its role in international
trade and finance.
 Concepts involved in bank balance
sheet accounting. The outcomes of the session
 Governing principles of bank balance : Text bookCh-28 Additional Material
sheet accounting  The students will be able Financial from “Commercial
 Bank Assets to explain the Asset and Statements, Bank
 Bank liabilities liabilities items of a bank Trading & Profit Management by
 Components of the Income  Differentiate bank’s and Loss Kanhaiya Singh &
Statement: Revenues and Expenses balance sheet from that of account Vinay dutta Ch-10
 Bank specific ratios a business firm
Efficiency and Control ratios( Cost of  Differentiate bank’s
Funds, Yield on advances, Operating income statement from US Bank of
that of a business firm Washington
efficiency, Burden, Productivity per
HBS
employee),  Make performance
case 292057
Liquidity ratios(CD ratio, CASA ratio, analysis of a bank based
-PDF-ENG
Cash Deposit ratio, Credit to Assets on the financial
ratio, Investment-deposit ratio) statements
Risk Ratios( Capital Adequacy ratio,
Provision coverage ratio, Gross NPA
to Gross Advances ratio, Net NPA to
Net Advances ratio, Loan loss
reserve ratios, Leverage ratio)
Profitability ratios(ROA, ROA, NIM,
NII, Profit margin, Spread)
 The important takeaways for
KYC norms and Types of Bank the student: Textbook Ch-3 KYC norms of RBI
Customers The student will be able to Types of ( WEBSITE-
To explain the students,  Explain the significance Customers https://www.rbi.org
Concept of KYC of adhering to KYC .in/)
4 4 Know Your Customer Norms stipulated
norms while opening
by RBI
Rationale for KYC bank accounts
4 elements of KYC(CAP, CIP,  State the care and
Types of bank customers and contractual
transaction monitoring, risk management) caution should the banks
relationships
Broad types of bank customers ought to follow while
dealing with special
Special customers customers.
 List the 4 elements of
Individual, Joint, Special type of KYC
customers (minors, Illiterates, Lunatics,  Explain how banks enter
Drunkards, Pardanashin ladies) HUF - into contractual
firms - companies - trusts - societies - relationships with their
Govt. and public bodies Contractual customers as per the
relationships for various types of laws of the land.
Customers  Define various types of
customers are served by
the banks

Managing Deposit products To explain students : At the end of the session the Model Deposit
student would be able to Textbook Ch-4 Products and
Concept of savings: describe Types of Procedures by
Types Deposit Products offered by Current deposits, Savings deposits,
Banks(Demand, Term, recurring, Deposits Indian Banks’
and term deposits. Association
transaction type deposits, Hybrid  the various types of
Concept of nomination and its Text book Ch-5, (IBA)
deposits, tailor made deposits), deposit products and
significance in deposits Account
Procedure to open a deposit account, related operational
Concept of deposit insurance. opening
Nomination formalities.
Concept and features of operational
Deposit insurance  Deduction of tax on
5 5 instructions by customers to banks
Deduction of tax at source(TDS) interest payment
Deduction of tax at source,
Operational instructions - operations Concept behind renewal, extension,
jointly, severally, letter of mandate, power premature closure of deposits.
of attorney etc. The law and practice in settlement of
Renewal and extension, premature claims of depositors
closure of Deposits, Unclaimed Deposits. Settlement of death
Unclaimed Deposits. claims
Settlement of death claims TDS.
 Pricing of different types of deposits The students will
 Explain pricing of various Material from
Interest rates offered on different types of deposit products “Bank
deposits  Calculate Interest rates Management &
paid on different types of Financial
Deposit mix, deposits Services” by
6 6 Pricing of Deposits Importance of CASA deposits,  Explain significance of P.S. Rose & S
Deposit mix C Hudgins, Ch-
Calculation of Interest on Deposits (SB, 12
RD, FD)

To explain, At the end of the session the TextbookCh-6 :

Bankers rights, viz: general Lien, Setoff student will be able to Banker-
Rights and Duties of a Banker and appropriation; explain and comment on Customer
relationship
Rights of a Banker Banker’s duties :  Rights and duties of
7
Duty of Secrecy and Duty to honour bankers and customers Case :
7 Duties of a Banker cheques in their contractual Banker-
relationships in the Customer
Rights and obligations of a customer Rights and obligations of a customer Relationship
context of banking laws
and practice in India - ICMR CASE
Negotiable Instruments
To explain: Textbook Ch-7
At the end of the session,
Different types of Negotiable Instruments:  Negotiability vs. Transfer
the students will be able to
 Parties to a cheque,/B.E/Promissory Case Negotiable
illustrate
Cheques, Bills of Exchange, Promissory Notes, Negotiability - Instruments Act-
the provisions of the
8 Notes  Salient features of a cheque A technical 1881
negotiable instruments act
Note
and its implications for
ICMR CASE
various types of banking
8
transactions

Negotiable Instruments To explain

(contd..)  Crossings and endorsements
 Payment and collection of Cheque
Crossing of cheques Is Negotiable
Endorsements  Duties and responsibilities of paying Instruments Act Cases Decided by
9 Bouncing of cheques and collecting banker a Boon? Ombudsman &
ICMR CASE Consumer Forum
 Protection available to paying and
collecting banker

Bouncing of cheques and its implications

9 10 Internal Evaluation Test-1 (NCP1)
Textbook ch-21
At the end of the session the
Liquidity and Reserve To explain :
student would be able to
Treasury RBI Master
Management  Demand and supply of cash, Management Circular on
explain
currency chest CRR/SLR
 the significance and
Cash management  Demand for and supply of Liquidity,
rationale behind the
11 ALM (https://www.rbi.or
10 maintenance of CRR
Liquidity management , ALM  NDTL, Calculation CRR and SLR and SLR
g.in) already
Statutory Reserves management  Penalty for non maintenance mapped to
 Explain NDTL
 LAF, MSF continue
 Compute CRR
 ALM in banks
RBI Master
Credit Policies Ch- 17 of Text Circulars on
At the end of the session the book, Exposure Norms
student will be able to already mapped
Credit products – To explain:
explain will be continued
Types of loans
 Types of credit products Case :
Credit policy of RBI  Different types of Credit products
Significance of credit policy, Credit offered by banks  Types of loans A Note on Bank https://www.rbi.org
Culture  the significance of credit Loans .in
 Credit policy of RBI
11 12 Exposure norms policy of banks in their -HBS Case
 Significance of credit policy for banks
Delegation of powers lending activity. Additional Material
 Exposure norms from “Commercial
 appreciate the relevance
 Delegation of powers Bank
Take over of advances of RBI norms while the
banks engage in Management by
Loan Review dispensation of credit in Kanhaiya Singh &
the economy Vinay dutta Ch-6 :
Policy, Produres
and Regulations
At the end of the session the
student will be able to
explain Ch-17 of Text
To explain :
Lending Activities  Cardinal principles of book
 Principles of lending
lending
12  Various credit products/ facilities
Lending Principles (Cardinal Principles of  6 Cs of lending
 Credit Appraisal
lending, 6 Cs and 4 Ps of lending)  4 Ps of Lending
13  Credit rating
Credit Information(CIBIL)  the nuances of bank
 Credit scoring
Credit Scoring lending activities
 Review of loans after sanction
Appraisal and sanction of loans  explain DSCR and ICR
Coverage ratios (DSCR, ICR)  Calculation of DSCR, ICR
 Importance of review and
follow up of loans

14 Pricing of Loans Explain : The student will RBI guidelines

  Charging of interest on loans  Define how interest Material
Cost-plus Loan pricing method  PLR and below prime pricing rate is arrived for From “Bank BPLR, Base rate
PLR  BPLR various types of loans Management & and MCLR
Below-Prime pricing  Base rate  explain PLR and below Financial Document
BPLR  MCLR prime pricing Services” by available at
Base rate  Impact of changes in repo rate/MSF  explain BPLR P.S. Rose & S rbi.org.in
MCLR(Marginal Cost of Lending Rate) on lending rates  explain Base rate C Hudgins, Ch-
13 Significance of changes in policy rates  explain MCLR 17 : Pricing
Repo, Rev Repo, MSF on lending rates  how lending rates are Business Loans
linked to policy rates
At the end of the session the Priority Sector
To explain : student would be able to Ch-18 of Credit
appreciate Textbook
 What is priority sector and why is it ( Rural Finance) Report on Trends
required  the concept and and Progress of
 Evolution of priority sector in India evolution of priority Case : Banking in India
and abroad. Policy obligations in sector lending activity YES BANK Already mapped
priority sector lending. Definitions in Indian banking. Mainstreaming to continue
Priority Sector Lending: Rural and targets in priority sector lending.  elucidate the structure Development (WEBSITE-
Banking and Micro Finance Recommendations of various and performance of into Indian https://www.rbi.org
14 committees on priority sector lending rural banking and Banking .in)
15  Rural Credit Delivery mechanism- microfinance sectors in HBS Case
Priority Sector Lending Commercial Banks/ RRBs/ LABs/Co- India.
operative institutions, NABARD,  Define RRB
Rural Banking and Microfinance,  Explain role of RRB
Microfinance  Financial inclusion-BC/BF Model and NABARD and
other financial
organizations in rural
lending
 Explain microfinance
 Explain Financial
inclusion
 BC/BF model
TextbookCh-17 Latest RBI
MSME Banking Explain At the end of the session the : Business Guidelines on
 Micro, Small, Medium enterprises – student would be able to Credit – MSME Lending
definition and classification(MSME explain the nuances of Financing (WEBSITE-
Policy guidelines Act) MSME lending in India and MSME https://www.rbi.org
15 16  Working capital assessment appreciate its significance. .in/) will be
Nayak Committee recommendations  Nayak committee recommendations, discussed
Appraisal and monitoring
Institutional and Infrastructure support  Institutional / infrastructural support
and Nursing of sick industries
 At the end of the session
Explain, students will be able to
 Basics of retail banking  Explain retail banking TextbookCh-16
Retail Banking  Products and services, Retail Credit
 Define retail banking Model Education
 Deposit products, products and services, Loan Policy by
16 17 Concept of retail banking  Personal, Consumer, Housing loans,  Deposit products, Indian Banks’
Educational loans,  Personal, Consumer, Association will be
Retail banking products and services  Plastic money, Housing loans, discussed
EMI calculation Educational loans,
 Gold Loans etc
 Calculation of EMI  Plastic money, Gold
Loans etc
Corporate Banking At the end of the session
To explain Textbook Ch-17 Latest RBI Norms
17 18 Concept of Corporate/Wholesale  what is corporate finance  the student would be Business Credit RBI WEBSITE-
banking  what are Fund based Services: able to https://www.rbi.org
Consortium Finance Working Capital Finance explain the features of .in/
Multiple banking (Tandon Committee ), DP corporate banking
Loan Syndication Bill Discounting
Export Credit  define fund-based and
Short Term Finance non-fund based facilities
Structured Finance offered by banks
Term Lending  make clear distinction
between consortium,
 what are Non-Fund based Services: multiple banking, Loan
Letters of Credit syndication.
Collection of Documents  Explain factoring,
Bank Guarantees leasing, venture capital
 Consortium finance
 Multiple banking arrangements
 Loan syndication
 Take out Financing

18 19 Internal Evaluation Test-2(NCP2)

Merchant banking To explain At the end of the session

19  How Public issues is managed the student would be able Case:
 Reasons for going public, to Going Public.
Linking Commercial banking and Adventures in
 eligibility norms, describe the various
20 Investment banking – risks  offer document aspects of merchant Capital Markets
 regulatory frame work for public issues banking HBS Case
Managing public issue (SEBI norms), management of public
Regulations  marketing of issues and post issue issues and related
activities. concepts
 Material from
Private Banking & Wealth To explain At the end of the session “Commercial
Management the student will Bank
Private banking, Define Private banking, Management by
20 Market segmentation, Explain the need for Kanhaiya Singh
21 Defining the industry, Private banking and wealth management private banking & Vinay dutta
market segmentation, Services offered by banks Explain Private banking Ch-8 : Private
Service offering, and wealth management banking
Services offered by banks

21 At the end of the session

the student would be TextbookCh-20 :
familiar with the concept, International
importance and types of Banking
To explain
Non Fund Based Services  Letters of credit and types of LCs,
non-fund based business
22 LC, BG, Solvency certificates, Letter of in banks Cases
Bank guarantees,
Comfort Letter of Credit –
 Solvency certificates, Letter of Comfort
ICMR Case

Bank Guarantee
ICMR CASE
To explain At the end of the session impact of
 Core Banking, the student would be able Ch-10 and Technology in
 Cash dispensers, ATMs to describe the new Ch-15 of Text Banks- Bank
 Home banking (Corporate and technological aspects in book : Service Quest- Oct-Dec-
personal), present day banking in Channels & 2010
 Online/Internet banking India and aboard. operations By IIBF
22 Technology in Banking management
23  Electronic Payment systems
ECS(Credit), ECS(Debit), EFT, RTGS,
NEFT,
 Cheque truncation,
 MICR technology,
 Tele banking/Mobile Phone banking,
DSA/DMA
To explain The student will be able to Ch-15 of
Innovations in Banking
Describe innovative Textbook
23 Innovative products and Services products offered by banks (
Product and Service innovation offered by banks deposits and loans basing
Channel innovation New and innovative banking Channels on the needs of the
24 Internal process innovation customers)
CRM,
Payment Innovation Explain innovative banking
Predictive analytics
Analytics channels apart from
Green banking, branch banking
Green banking,
 Explain the importance of
CRM in banks
Explain usefulness of
analytics in banking

To explain
 Remittance of funds: D.D/MT/PO
 Collection of Cheques and Drafts
 Clearing House At the end of the session
TextbookCh10 &
the student will be familiar
 Safe Deposit lockers and safe Ch-14 of Text
24 with various types of Para
Para Banking Services and custody articles book
25 banking business that aid
Innovations  Banc assurance
the income of banks and
 Sale of mutual funds
provide a variety of service
 IPO/FPO selling platforms
 Leasing
 Factoring
 Venture Capital
Documentation
At the end of the session
Stamping of documents TextbookCh-17
the student will be familiar
Execution of documents (Security)
with the typical aspects of
25 26 Legal aspects of Lending Charge creation(Lien, Assignment,
bank lending that is
Hypothecation, Pledge, Mortgage),
essential to legally protect
Charge registration(ROC)
the interests of banks
Limitation Act
To explain At the end of the session Innovations in
Recovery Management Importance of Loan recovery the student would be to Ch-17 (Risk Recovery
Importance of Recovery Prudential norms of Income recognition describe the importance of Management, Management -
Assets classification ( recovery management in Income - Bank Quest- Oct-
26 Prudential norms of Income recognition Standard, Sub Standard, Doubtful, Loss banks and explain the recognition, Dec-2010
27 Assets classification Assets) and Provisioning, Stress Assets prudential norms Asset
Repayment Culture Classification) RBI document on
Repayment Culture Nursing and Rehabilitation, CDR, SDR, Explain Nursing & prudential norms :
Nursing and Rehabilitation, OTS DRT, Lok Adalats rehabilitation rbi.org.in
Legal measures of Recovery Explain DRT and Lok
Adalat
To Explain At the end of the session
the student would be able TextbookCh-16
Securitization & Asset The Securitization and Reconstruction of to describe securitization, Retail Credit –
27 Financial Assets and Enforcement of Securitization
28 Reconstruction, Bankruptcy Asset Reconstruction, and
Security Interest Act, 2002 (SARFAESI), Enforcement of Security
Act Insolvency, IBBI, Bad bank without the intervention of
the Court

Regulatory Frame Work
28
29
RBI Act 1934, Banking
Regulations Act 1949, Onsite and
Off-site surveillance
Basel framework and
regulatory Capital
30
29 Basel I/II/III guidelines
Managing of bank Capital
CAR
To explain
 Salient features of RBI Act & B.R. Act At the end of the session
 Supervision of the Indian banks – the student will describe
Textbook Ch24 :
offsite and onsite various regulations – BR
Regulatory
 CAMELS –vs- Risk based Act and RBI act
supervision Explain Onsite and off-site
Environment-
General
To explain,
At the end of the session
Basel (I, II and III) norms and its impact on the student would be
TextbookCh-25
Indian banking familiar with the revised
Regulatory Capital capital regulations in banks
CAR based on Basel guidelines

30 31 Internal Evaluation Test-3 (NCP3)

Global Banking To explain At the end of the session a
student will be able to: Case : Additional Material
Global banking and its significance Nomura's From “Bank
Global banking Services global
Regulations for global banking define global banking Management &
Regulations Nostro, Vostro and Lore accounts explain how global banks growth HBS Financial Services”
Global banking-structures Exchange rates for INR against other are regulated case 210017- by P.S. Rose & S
Global payment and savings currencies explain Nostro, Vostro and PDF-ENG C Hudgins, Ch-20:
services Basket of Currencies Lore accounts
31 32 Interest rate risk and hedging Currency Risk and hedging Define basket of currencies
Explain currency risk
Exchange rates GDR exposure
Off-shore banking
Foreign Currency risks & hedging
Tax havens Define off-shore banking
Depository receipts Explain tax havens and
Off-shore banking related issues
Tax havens

The Ombudsman
At the end of the session
Scheme- 2006
the student will be familiar
Customer Service in banks Goiporia & Damodaran Committee Textbook Ch-22 Damodaran
with the importance of
32 33 recommendations,
customer service in banks
: Customer Committee
Ombudsman scheme Service
and the various norms and
Consumer Forums RBI WEBSITE-
recommendations
https://www.rbi.org.in/
 HBS = 7
ICMR= 5
Total Sessions = 33 Total no. of Cases RBI & other documents =11

Evaluation Timeline:
Component Component Expected slot/ Due date Marks declaration by Weightage
Number
Class Participation 1 Session 11 Session 11 10
Class Participation 2 Session 22 Session 22 10
Class Participation 3 Session 33 Session 33 10
Test-1 1 Session 10 Real time 10
Test-2 2 Session 19 Real time 10
Test-3 3 Session 31 Session 32 10
End exam At the end of the semester 40
Total 100

------------------------------------------------End of BANK MANAGEMENT Course Handout-------------------------------------------------------------

 IBS Hyderabad
Academic Year (2017 – 2018)
Course Handout
Course Title INVESTMENT BANKING
Semester III
Credits

Course Objective:
1.To introduce investment banking their role of investment bankers in the areas of assisting the
individuals, corporations, and governments in raising financial capital by underwriting or acting
as the client's agent in the issuance of securities (or both) and the other ancillary services provided
by them

2. To introduce different methods of firm and equity valuation using 1. Asset-Based Approaches

2. Earning Value Approaches and 3. Market Value Approaches

3. To introduce Blackstone Celanese simulation to the class to apply to practical situation gives on
hand experience on valuation
4 To provide the students with conceptual foundation in the realm of investment banking with in-
depth discussion of regulations

Learning Outcomes:
At the end of the course, the student will be able to:
1. Gain an understanding of the role of investment bankers in financial sector
2. Appreciate the difference between price and value.
3. Students will understand how valuation is to be done and different models of valuation
4. Through simulation technique students will be gain practical exposure to apply valuation
principles.
5. Students will understand the regulations of investment banking

Pre-requisites: (In case of any prior subject/s to be taken)

Recommended Text Book: Investment Banking: Valuation, Leveraged Buyouts, and Mergers
and Acquisitions, University 2nd Edition by Joshua Pearl, Joshua Rosenbaum, Wiley Publishers

Suggested books:
 1. Damodaran on Valuation: Security Analysis for Investment and Corporate Finance by Aswath
Damodaran
2. Investment Banking Explained: An Insider’s Guide to Industry by Michel Fleuiret
3. Investment Banking: An odyssey of high finance by Pratap G Subramanyam

Detailed Session Plan:

S.No Session Topic Teaching Learning Required Additional

Number Objectives Outcomes Readings & Case Readings
Studies
1 1 Introduct 1.The role of After Note on History of Chapter 1
ion to investment completing Investment Investment
Investme bankers To this Topic, Banking (9-902- Banking: An
nt distinguish the students 168) odyssey of high
Banking between will be able finance by Pratap
investment to G Subramanyam
banking and understand
merchant banking The role of
2.business investment
portfolio of bankers To
investment banks, distinguish
characteristics and between
structure of Indian investment
investment banking and
banking industry, merchant
3.regulatory banking,
framework of business
investment portfolio of
banking investment
4.anatomy of some banks,
leading investment characteristi
banks and recent cs and
trends in structure of
investment Indian
banking investment
. banking
industry,
regulatory
framework
of
investment
banking,
anatomy of
some
 leading
investment
banks and
recent
trends in
investment
banking.
2 2-10 Valuatio 1. Asset-Based Students 1.Free Cash flow 1.An Introduction
n Approaches will Valuation Models to Cash-flow
Techniq understand (9-288-023) (sess- Valuation
ues different 3) Methods (9-295-
2.Discounted models of 155) (ses-2)
cash flow valuation 2.Valuing Equity
methods and and Cash flows (9-
appreciate 295-085) (Sess-4)
3.Relative the
valuation differences 3. Valuation in
between Private Equity
models and Settings (9-297-
when to 050)(sess-7)
apply which
model
depending
on the
situation
11 NCP1 test
on 10th
session

3 12-13 Equity Private Equity Students 2.Pharmacyclics: 1.Mezanine

Financin Fundraising will Financing Money for
g-Private process understand Research and Smaller
equity what is Development (9- Businesses (HBR
private 201-056} 87313) (sess-13)
equity and (Sess-12) Note on Private
when it is Equity
required to Fundraising
be raised Process (9-201-
042)(Sess-13)

4 14-16 Equity To introduce To 1.United Parcel 1.Note on IPO

Financin equity model of understand Service’s IPO (9- Process (9-200-
g financing and the IPO and 103-015)(Sess-15) 018) (Sess-14)
regulatory FPO
process processes
5 17-19 Debt To introduce Students How much
Financin 1 debt financing will debt is right for
g and its impact on understand your company
cost of capital the (HBR 82413)
2.various debt importance
instruments like of debt
structured models financing
3.Regulatory and how
framework much debt is
optimum for
a company
and what are
the various
instruments
by which
debt is
raised

6 20-22 Leverage To introduce the Students 1.Technical Damodaran on

d Buy- will Note on LBO Valuation LBO
concept of LBO
out understand valuation (A)
its effect on
how LBOs and (B)
capital structure
work
And LBO
valuation
7 23 Mezzani To introduce the Definition 1.Mezzanine
ne concept of of Money for Smaller
financin mezzanine mezzanine Businesses (HBR
g financing 87313)
.how is it
different
from a
regular loan
.Who
provides
mezzanine
finance and
what are the
advantages
24 NCP-2
8 25-28 Mergers To introduce the Students 1.Acquisition of 1.Valuing a
and concept of merger, will Consolidated Rail Business
synergy valuation understand Acquisition
of target company
 Acquisiti with and without when should Corp. (A) (9-298- Opportunity (9-
ons synergy mergers take 006) 289-039)
place, what 2.Acquisition of
is synergic Consolidated Rail
effect and Corp. (B) (9-298-
how to value
the target
company by
understandin
g the
synergic
effect of
mergers
29
To
introduc
e
Blacksto
ne
Celanes
e
finance
simulati
on

9 30 Hedge Introduce hedge Understand The Hedge Fund

Funds funds ,how they of hedge Industry (9-208-
impact the stock fund 126)
market and industry
regulations hedge fund
strategies.

10 31-32 Venture To introduce the To How Venture

Capital concept of understand Capital Works
and venture capital, how venture (HBR 98611)
angel venture capital capital and
financin industry in India angel Note on angel
g and regulatory financing Financing (9-298-
framework and works 083)
angel financing raising of
venture
capital,
startup firm
vs green
field firm,
 start up
cycle,
rounds of
venture
capital
financing,
investment
banking
structure for
raising
venture
capital and
angel
financing
33 NCP 3

Evaluation scheme:

Component Component Expected slot / Marks Weightage

Number due date declaration by
Class Participation 1 Session 11 Session 11 10
Class Participation 2 Session 22 Session 22 10
Class Participation 3 Session 33 Session 33 10
Test-1 1 Session 10 Real time 10
Test-2 2 Session 24 Real time 10
Test-3 3 Session 33 10
End Term Exam 40
Total 100

--------------------------End of Investment Banking Course Handout---------------------------------

 IBS Hyderabad
Course Handout

Course Name: Global Capital Markets Semester: III Credits: 3

Faculty Name: Vivek Turaga Room No: 210 Wing No: F

Course Objective:

Global Capital Markets course is aimed at giving a perspective to the students on

 Evolution & Integration of capital markets through globalization.

 Overview of Financial Innovation in Capital markets.

 The role of private players & government on different facets of capital markets.

 Role of Central banks in Capital Markets

Learning Outcomes:

 Classification of global capital markets (Equity, Debt, Commodity, etc…).

 Role & features of instruments, issuers, investors, intermediaries and regulators in the development of capital markets.

 Structure of Primary & Secondary markets, exchanges, Indices, etc…

 Implications of financial engineering or innovation on capital markets

 Affects of crisis & recessions on capital markets & role of government in times of crisis.

 QE (Quantitative Easing) & its implications

 Chapters in
NOS Chapter Contents Cases / White Papers
FM

* International Capital
Markets and Sovereign Debt:
Crises Avoidance and
Resolution (9-707-018)
* Origin of global capital markets
Overview of Market *The role of investors, issuers, instruments, and
* IDFC India - Infrastructure
8 Participants and Financial intermediaries in the development of capital markets 1,2,3,4,5,6
Investment Intermediaries (9-
Innovation * Role & Functions of Depository Institutions, Asset
210-050)
Management Firms & Investment Banking Firms
* The Role of Capital Market
Intermediaries in the dot-com
crash of 2000 (9-101-110)

NCP - I

* Tapping the global markets for funding needs - Primary

* The Major Global Stock
and Secondary Markets
Organization & Structure exchanges (9 – 902 – 169)
* Major Stock Exchanges
5 of Capital Markets - 7, 13, 14
* Trading, Settlement & Clearing mechanisms
EQUITY * Exchange traded funds at
* Types of trading systems
Vanguard - A (9-311-134)
*Types of Indices (index building methodologies)
 * Introduction to Islamic
Finance (9-200-002)

* Money Markets * Two Key Decisions For

Organization & Structure
* Treasury & Agency Securities 20, 21, 22, 23, China’s Sovereign Fund (9-
4 of Capital Markets - DEBT
* Corporate Debt Instruments 24 311-137)
I
* The US Government Debt
Market and the Structure of
Interest Rates (9-285-186)

* Savings and Loans and the

Organization & Structure * The Mortgage Market - Commercial & Residential
25, 26, 27, 28, Mortgage Market (9 – 297-
5 of Capital Markets - DEBT * Market for Asset-Backed Securities
29 090)
II * International Bond Markets

NCP - II
* Lehman Brothers and the
Market for Interest rate * Credit Derivatives & CDO's : Market for Credit Risk securitization of American
1 32
risk transfer vehicles Transfer Vehicles express Charge Card
Receivables (9 – 293- 121)
 * PIMCO & West bridge
Articles & White papers

* Quantitative Easing - Tapering * Kinyuseisaku: Monetary

* Negative Interest Rates Policy in Japan (A) (9-708-
Central Banks & Capital
4 * How Economy Machine Works - Deleveraging Process 017)
Markets:
* Understanding debt cycles - Interest Rates &
currencies * Necessity & Invention:
Monetary policy innovation
and the Subprime crisis (9-
709-041)

* Can Euro zone Survive? (9-

713-034)

* China "Unbalanced" (9-711-

* Sub-prime crisis - Euro zone Crisis - Russian Crisis - 010)
Understanding Dynamics
3 Sovereign Debt Crisis - China Turmoil 25, 26
of Financial Market Crises
* The Role of Volatility * Currency Crisis (9-799-088)

* U.S. Subprime Mortgage

Crisis: Policy Reactions (A & B)
- (9-708-036) & (9-709-045)
Course Material

Text Book: Fabozzi, F. J. & Modigliani, F. Capital Markets: Institutions and Instruments. 4th Edition, Prentice Hall India, New Delhi, 2009. (FM)

Reference Books: Liaw, K. T. Capital Markets. Thomson South Western, 2004.

Evaluation Timelines

Component Component Expected slot / Marks declaration Weightage

Number due date by
NCP - I 1 Session 11 Session 11 3.3
NCP - II 1 Session 22 Session 22 3.3
NCP - III 1 Session 33 Real time 3.3
CP 2 Real time 30
End exam At the end of the semester 60
Total 100

Brief profile of the Faculty Member

Vivek Turaga, CFA (USA).

 Is Managing Partner of a SEBI registered Investment Advisory firm managing long term
equity portfolios for clients.
 Has relevant experience of 10 yrs in Indian capital markets.

------------------------End of GCM Course handout----------------------------------------------------------------------------

 Course Description – Financial Analytics and Modelling

The ability to demonstrate concepts and ideas using interactive models is an important skill for
finance professionals. In this course, students will develop this skill by building interactive,
foolproof, and well documented models with Microsoft Excel.

Grading
The course grade will be based on six projects:
Project Weight
1. Capital Budgeting 10%
2. Bond Valuation and Interest Rate Sensitivity 15%
3. Optimal Capital Structure 15%
4. Forecasting Financial Statements and Valuation 15%
5. Financial Planning 20%
6. Portfolio Selection 25%
Students will work on the first five projects in teams of two or three. The last project will be
worked on individually. Each project will last about two weeks. At the completion of each
project a team will be picked randomly and asked to make a 15 minute presentation of its model
to the class.
Teams will be changed randomly every project. Anonymous peer evaluation will be conducted
after each project and will be an important factor in determining the course grade.

Prerequisites
Specifically, Instructor will assume that students are familiar with financial theories and concepts
related to the projects.
Instructor will assume that students have intermediate level skills in Microsoft Excel (building
formulas, relative and absolute addresses, basic statistical and mathematical functions, lookup
and if functions, naming ranges, charting). Advanced techniques will be explained in the course.

Materials
There is no required textbook for this course. A list of recommended financial modeling texts
and websites will be provided. For finance knowledge, students consult finance books and web
sites. For Excel, students use video tutorials on YouTube or on my web site.

Other Useful Information

Building models requires a much deeper understanding of the issues than students may have
learned in their prior courses. They may have to pick up this depth as they build the models. The
course requires a mathematical and programming mindset.

Syllabus – Financial Analytics and Modelling

Catalog Description
Build models for financial statement analysis, valuation, capital budgeting, capital structure,
portfolio selection, interest rate risk, option valuation, and other areas of finance using a
computer tool such as Microsoft Excel.

Synopsis
The ability to demonstrate concepts and ideas using interactive models is an important skill for
finance professionals. Financial models allow finance professionals to gauge the effect of
important decision variables and parameters on the final outcome. Many finance books come
with pre-programmed models which allow students to solve some problems and do what-if
analyses. These models expose students to the power of financial models, but do not teach them
how to build models that will be used by others. Most graduates end up having to learn this skill
on the job through trial-and-error and a lot of hard work. This course is intended to fill that gap.
Financial models can be built using programming language such as C++ or applied software
such as MatLab and Microsoft Excel. In this course, students will build interactive, fool-proof,
well documented models using Microsoft Excel starting with a blank workbook.
Learning Objectives
By the end of the course, student will learn
1. to break down a financial problem into manageable pieces
2. to build well documented, fool-proof, interactive financial models
3. to perform what-if analysis
4. the subtler aspects of finance

Topics
We will design and implement the following financial models:
D01. Stock Valuation
P01. Capital Budgeting
P02. Bond Valuation and Interest Rate Sensitivity
P03. Optimal Capital Structure
D02. Option Valuation
P04. Forecasting Financial Statements and Valuation
P05. Financial Planning
P06. Portfolio Selection
Students will work on six projects.

Materials
 There is no required textbook for this course. The following three books are strongly
recommended.
o Simon Benninga, Financial Modeling, Latest Edition.
o Chandan Sengupta, Financial Modeling Using Excel and VBA, Latest Edition.
o Mary Jackson and Mike Staunton, Advanced Modelling in Finance using Excel and
VBA, Latest Edition.
o Software: We will use Microsoft Excel 2010 for this class. The student will also need
to access data from other sources, primarily Yahoo! Finance
(http://finance.yahoo.com).
 o Websites: A list of websites for finance, financial modeling and Excel will be given
to the student.

Course Format
The objective of this course is to give students guidance and experience in designing financial
models intended for use by other finance professionals (\users"). As the model builder, students
have to not only known the theory and subtle details underlying the model but also the ways in
which different users may use it. The model should be correct, fool-proof, well documented, and
aesthetically pleasing. Due to the aesthetic considerations the model design process becomes part
science (or math) and part art, much of which can be learned and developed by practice. This
course provides a forum for this learning and development.

Instructor will use the first week of the semester to demonstrate the model building process for
stock valuation. In the middle of the semester, Instructor will use another week to demonstrate
the option valuation model. In the rest of the classes, student teams will work on their projects. In
every class in which students work on their projects, Instructor will take the first few minutes to
review and explain the project and provide ideas and hints and then walk around assisting
student teams in their projects.

Teams and Peer Assessment

Students will work on projects in teams of two or three. Different projects will have different
team compositions. Instructor will form teams randomly for each project and announce them
when the project is assigned. While student teams are free to work on the projects in a manner
that suits their style, but it should be made sure that majority of the work is done with all team
members sitting side by side and discussing how to implement the model. Team members
working on their individual spreadsheets and combining them before submission is unproductive,
even counterproductive. Remember, an Excel spreadsheet is not at all like a Microsoft Word
document where different people can work on different parts independently and combine them at
the end. Student can pass the spreadsheet back and forth if it becomes necessary for team
members to work on the file individually. Make frequent and multiple backups because things
can and do go wrong. It is expected every student to contribute equally to every project. Team
members will be asked to submit peer evaluation at the end of each project. Final grades will be
adjusted taking peer evaluation into account.

Session Plan
Session No(s) Topics to be covered
1-2 D01 (Demo 1) - Stock Valuation
3-6 P01 (Project 1) - Capital Budgeting
7-11 P02 (Project 2) - Bond Valuation and Interest Rate Sensitivity
12-16 P03 (Project 3) - Optimal Capital Structure
17-18 D02 (Demo 2) - Option Valuation
19-23 P04 (Project 4) - Forecasting Financial Statements and Valuation
24-28 P05 (Project 5) - Financial Planning
29-33 P06 (Project 6) - Portfolio Selection

Evaluation
The evaluation will be based on 6 graded projects and one end semester examination:
Project Weights
P01. Capital Budgeting 10%
P02. Bond Valuation and Interest Rate Sensitivity 10%
P03. Optimal Capital Structure 10%
P04. Forecasting Financial Statements and Valuation 10%
P05. Financial Planning 10%
P06. Portfolio Selection 10%

End Semester Examination: 40%

Project Guidelines
 Projects must be submitted before the class start time on the due date at my email
(kwadhwa@ibsindia.og). Late projects will be assessed a 25 point penalty (out of a total
of 100 points).
  The project should be submitted in one Excel file named PXX-TeamYY, where XX is the
project number (01, 02, etc.) and YY, is the team number (01, 02, etc.) For example, the
file for Project 3 for team 7 should be named P03-Team07.
 Every project file must have a cover sheet showing the team and project numbers, names
of the team members, and some other information.

Project Grades
Each project will be graded out of 100 points. Instructor will grade the projects using the
following four criteria:
 Correctness (70 points): To be considered correct, the model's logic should be
implemented correctly and the spreadsheet should work as intended, i.e., should not result
in errors or give wrong answers in response to user interaction. To ensure that your model
is correct, do a lot of testing of the model.
 Documentation (10 points): To be considered well documented, there should be a
description of the project for the user which should explain the purpose of the model, the
various aspects of the model, how it works, how to use it, and how to interpret the results.
There should also be documentation of technical aspects of the model so that someone
trying to evaluate the model is able to understand how the model's logic has been
implemented. The documentation can be provided in many different ways, e.g., text in
cells, textboxes, cell comments, or embedded MS Word documents.
 Layout (10 points): To be considered well laid out, the spreadsheet should be
aesthetically pleasing, not too busy, and have a logical and easy to follow structure. By
the way, too many colors and fonts is not my idea of a well laid out spreadsheet.
 Innovation (10 points): To be considered innovative, the model should use some
extension (conceptual or software related) not presented in the class.

Some Grading Related Issues for students

Instructor will have the twin responsibilities of helping a student learn the subject matter and
evaluating how much you have learned. Accordingly, Instructor takes grades and grading
seriously. Instructor will try hard fair to the students as well as the prospective employers who
may use your grade as an indicator of your knowledge and abilities related to this course. Some
of my grading related policies are listed below:
 Instructor will not use the class time to discuss grades.
 Instructor will not negotiate grades.
 If there is an obvious calculation error in your grade on a project please write to instructor
a note within one week of the date it was returned to the class.
 If you feel that your project has not been graded fairly, you may ask me to review your
grade. To do so, you must submit a brief memo stating your case within one week of the
date the project is returned to the class.
 While reviewing your grade on a project, Instructor will reexamine the entire project
paying special attention to the disputed item(s). Since Instructor will review the entire
project, the review may change your grades on items other than those under dispute.
 Instructor will not give extra credit work for grade improvement. Please don't put
instructor in an awkward situation by asking for extra credit work.
 Grades will be posted on the campusnet and will be updated frequently.
 Please retain all graded projects until well after the semester. This will help restore your
grades in case there is a problem with my grades database or if there is a disagreement
between us about your grade.

----------------------End of FA Course Handout----------------------------------------