Investment Banking Q&A for Interview Success

Investment Banking_Q&A

1. What do you understand about Investment Banking?

Investment banking is a specialized segment of banking that helps companies, institutions, and governments raise capital and execute strategic financial transactions. It includes services like mergers and acquisitions (M&A), initial public offerings (IPOs), and financial advisory. Investment banks act as intermediaries, ensuring optimal deal structure and valuation. For example, in the acquisition of Flipkart by Walmart for $16 billion in 2018, Goldman Sachs and Morgan Stanley served as key financial advisors. They guided deal structuring, valuation, and due diligence. Investment bankers play a vital role in executing such complex deals and aligning strategic goals between parties.

2. What is your understanding of the Investment Banking industry?

The investment banking industry is a critical part of global financial markets, facilitating capital raising, mergers and acquisitions, and strategic advisory. Globally, it’s a multi-trillion-dollar industry dominated by firms like Goldman Sachs, Morgan Stanley, and J.P. Morgan, with global investment banking revenue reaching over $130 billion in 2023. In India, the market is smaller but growing rapidly, driven by IPOs, infrastructure deals, and private equity. Major Indian players include ICICI Securities, Axis Capital, and SBI Capital Markets. For example, ICICI Securities advised on the LIC IPO, India’s largest ever at ₹21,000 crore, showcasing the rising importance of Indian investment banks.

Investment banks can be broadly categorized into bulge bracket, middle-market, and boutique firms, based on size, service offerings, and deal complexity.

Bulge Bracket Banks are large, global institutions offering a full range of services—M&A, capital markets, sales & trading, and research. Examples include Goldman Sachs, J.P. Morgan, and Morgan Stanley, all of which have active operations in India and have advised on major deals like Flipkart-Walmart and Reliance’s stake sales.
Middle-Market Banks focus on mid-sized companies and regional deals. In India, firms like ICICI Securities, Axis Capital, and Edelweiss Financial Services fall into this category. They often lead IPOs, private placements, and mid-size M&A deals, such as Axis Capital’s role in the Nazara Technologies IPO.
Boutique Investment Banks specialize in niche services, often advisory-led and sector-specific, such as healthcare or tech M&A. Indian boutiques like O3 Capital and Avendus Capital have carved a space in advising startups and PE/VC-backed firms. For instance, Avendus advised Lenskart on its funding rounds and M&A transactions.

3. What services do investment banks provide?

Investment banks provide a wide range of financial services to help corporations, governments, and institutions raise capital, grow strategically, and manage risk. Key services include:

Capital Raising: Assisting companies in raising funds through Initial Public Offerings (IPOs), Follow-on Public Offers (FPOs), private placements, and debt issuance (bonds, debentures).
Mergers & Acquisitions (M&A): Advising on buying, selling, or merging companies, including deal structuring, valuation, negotiation, and due diligence.
Advisory Services: Providing strategic guidance on restructuring, spin-offs, leveraged buyouts, and cross-border transactions.
Underwriting: Guaranteeing the sale of securities by purchasing them from issuers and reselling to investors, thereby assuming market risk.
Sales & Trading: Facilitating the buying and selling of securities for institutional and high-net-worth clients, offering market insights and liquidity.
Equity Research: Producing detailed analysis and recommendations on listed companies to guide investor decisions.
Asset and Wealth Management (in some banks): Managing investments and financial planning for individuals and institutions.

4. What are the different divisions within an investment bank?

Corporate Finance / Investment Banking Division (IBD)
This is the core advisory division of an investment bank, responsible for helping companies raise capital and execute strategic transactions such as mergers, acquisitions, IPOs, and restructurings. The team works closely with clients to conduct valuations, structure deals, and manage the end-to-end transaction process. For example, Kotak Investment Banking advised Zomato on its ₹9,375 crore IPO, guiding the company through regulatory filings, valuation discussions, and institutional investor engagement. Globally, firms like Goldman Sachs have played similar roles, such as advising Facebook on its $19 billion acquisition of WhatsApp.
Sales and Trading
This division acts as the market-facing arm of the bank, buying and selling securities on behalf of institutional clients and helping them manage market exposure. Traders execute orders in equities, bonds, currencies, and derivatives, while sales teams maintain relationships with large investors. To give an example, ICICI Securities regularly facilitates large equity and derivative trades for domestic mutual funds and insurance companies in India. Internationally, during the pandemic-driven market volatility in 2020, JP Morgan’s trading desk executed high-volume bond transactions to help global investors rebalance portfolios and hedge risks.
Research
The research division supports both clients and internal teams with in-depth analysis of companies, sectors, and macroeconomic trends. Analysts develop financial models, write detailed reports, and provide investment recommendations. This division is essential for informed decision-making, particularly in equity and fixed income markets. For instance, Motilal Oswal publishes detailed research on Indian stocks like Infosys and HDFC Bank, which is widely used by both institutional and retail investors. Similarly, Morgan Stanley’s global research on companies like Tesla or sectors such as clean energy has influenced major investment strategies.
Asset Management
This division manages investment portfolios for a wide range of clients, including individuals, institutions, and pension funds. Services include mutual funds, alternative investments, and discretionary portfolio management. The goal is to generate returns in line with client objectives and risk profiles. Recently, SBI Funds Management, one of India’s largest asset managers, surpassed ₹8 lakh crore in assets under management, offering a broad mix of equity, debt, and hybrid funds. On the global side, firms like Goldman Sachs Asset Management offer institutional clients tailored investment solutions across asset classes and geographies.
Risk Management
This division plays a critical role in identifying, analyzing, and mitigating financial and operational risks across the bank’s activities. It oversees credit exposure, market risk (such as interest rate and currency movements), and compliance with regulatory norms. To give an example, Axis Capital’s risk team ensures that IPO underwriting deals are appropriately hedged and compliant with SEBI norms. A global reminder of the importance of this function came during the collapse of Archegos Capital, where risk management failures led to significant losses for banks like Credit Suisse.
Operations / Middle Office
Often referred to as the backbone of the bank, the operations division ensures the seamless execution, settlement, and recording of financial transactions. It also handles trade confirmations, regulatory reporting, and acts as the link between client-facing teams and back-office processes. For example, at Edelweiss Financial Services, the operations team manages the timely settlement of trades on exchanges like NSE and BSE, ensuring compliance with regulatory timelines. Globally, banks like Barclays rely on robust operations teams to manage post-trade processes and mitigate operational risk.
Technology / Quantitative Analytics
This division builds the systems and models that support trading, analytics, risk management, and client platforms. It includes software developers, data scientists, and quantitative analysts who develop algorithms, predictive models, and real-time decision tools. In India, ICICI Securities’ development of its ProTerminal platform reflects the growing role of technology in enabling algorithmic trading and data-driven investing. Similarly, Goldman Sachs has developed the Marquee platform, offering institutional clients interactive tools for portfolio analysis, risk monitoring, and trade execution.

5. What trends do you see in Investment Banking in India right now?

In India, investment banking is seeing robust activity driven by strong GDP growth, rising domestic consumption, and investor confidence. The IPO market has revived, with sectors like new-age tech, manufacturing, and renewables attracting capital. PE/VC exits via secondary sales and public listings are gaining pace. M&A deals are driven by consolidation in financial services, EV, and healthcare. Family-owned businesses are also seeking strategic partnerships or partial exits. Regulatory clarity from SEBI is improving capital market efficiency. Additionally, domestic capital is becoming a key driver, with Indian institutions and retail investors actively participating in equity and debt issuances.

Over ₹18,000 crore was raised via IPOs in H1 FY25, led by sectors like manufacturing, tech, and financial services. M&A deal volume crossed $85 billion in 2024, driven by consolidation in BFSI (HDFC & HDFC Bank) and energy. Private equity exits hit a 5-year high, with secondary sales and public listings gaining traction. Domestic investors are fueling growth—retail participation now accounts for 37% of IPO subscription. SEBI’s streamlined approval norms have shortened IPO timelines.ChrysCapital’s ₹2,878 crore investment in Theobroma reflects growing PE appetite in scalable consumer brands.

6. What trends do you see in Global Investment Banking right now?

Globally, investment banking is experiencing a cautious recovery. M&A activity is rebounding, led by consolidation in tech, energy, and pharma, though interest rate uncertainty continues to affect deal timelines. IPO markets in the US and Europe remain selective, with more structured listings like SPACs declining. Banks are increasingly focused on sustainability-linked finance and green bonds amid ESG mandates. Private credit is emerging as an alternative to traditional debt financing, especially in a high-rate environment. Also, AI-driven analytics and automation are changing deal sourcing and due diligence. Geopolitical risks—especially around China and Europe—continue to shape cross-border deals.

Globally, M&A deal volume stood at $2.5 trillion in H1 2024, up 20% YoY, with tech and pharma dominating. IPO markets saw a muted rebound—$71 billion raised globally, largely in US and Middle East, while SPACs declined 60%. Rising interest rates have shifted focus to private credit, now a $1.5 trillion market. ESG-linked debt hit $500 billion, reflecting the push for sustainable finance. Investment banks are deploying AI to streamline diligence and sourcing. Pfizer’s $43 billion acquisition of Seagen in oncology showcases the strategic push in biotech consolidation.

7. What do investment bankers do on a daily basis?

Investment bankers work on a mix of client-facing and execution-heavy tasks daily. Their work includes preparing pitchbooks for potential deals, conducting financial modeling and valuation (DCF, comps, LBO), and coordinating due diligence with legal and tax teams. They monitor markets for deal opportunities, draft investment memos, and support senior bankers in negotiations and client meetings. Analysts and associates often handle Excel models, PowerPoint decks, and data analysis, while managing tight deadlines. A typical day involves long hours, multitasking across live deals and pitches, and constant communication with internal teams, clients, and external advisors to drive transactions forward.

8. Why do you want to join Investment Banking?

I want to join investment banking because it offers the unique opportunity to work on high-impact financial transactions that shape industries and economies. The fast-paced, analytical, and client-driven environment aligns with my strengths in problem-solving, financial analysis, and execution under pressure. I’m drawn to the steep learning curve, exposure to CXO-level decision-making, and the ability to contribute meaningfully to M&A, IPOs, and capital raising. The dynamic nature of the role, combining strategy, finance, and relationship management, excites me.

9. What is the deal lifecycle?

The deal lifecycle in investment banking refers to the end-to-end process of executing a transaction, such as an M&A deal. It begins with origination, where bankers pitch ideas to clients through presentations and industry insights. Once engaged, the process moves to due diligence, valuation, and deal structuring. This is followed by negotiation, regulatory approvals, and finally, deal closure and post-deal integration support. Throughout, bankers coordinate with lawyers, accountants, and client teams.

10. How is Investment Banking different from Private Equity?

Investment Banking (IB) and Private Equity (PE) differ in their roles, mindset, and involvement in deals:

Role: Investment bankers act as advisors to clients during transactions like M&A, IPOs, or debt issuances. They help structure, value, and execute deals. PE professionals are investors who deploy capital to acquire ownership in companies, aiming to improve and exit profitably.
Engagement: IB is transactional—bankers move from deal to deal. PE is long-term and operational—investors stay involved post-acquisition.
Revenue model: IB earns fees per transaction; PE earns via investment returns (IRR, MOIC).
Example: Morgan Stanley advised on Blackstone’s $1.1 billion acquisition of Aadhar Housing Finance, while Blackstone invested its own capital and will remain involved in driving the company’s growth over several years.

11. How is Investment Banking different from Conventional Banking?

Investment banking and conventional (retail or commercial) banking serve very different purposes within the financial system.

Conventional banking involves accepting deposits, offering savings and current accounts, and lending money to individuals and businesses. It focuses on managing liquidity, interest margins, and credit risk. The relationship is ongoing and service-oriented.

Investment banking, on the other hand, helps companies raise capital through equity or debt, advises on mergers and acquisitions, and provides services like underwriting and IPO advisory. It is transaction-driven and project-specific.

Example: HDFC Bank offers home and business loans to retail customers. In contrast, Kotak Investment Banking advised Adani Ports on its $1.18 billion acquisition of Haifa Port in Israel.

12. What’s the difference between buy-side and sell-side?

The buy-side and sell-side represent opposite ends of financial transactions and have different objectives, roles, and clients.

Buy-side refers to institutions that invest capital to acquire securities or companies. These include corporates, Insurance companies, private equity firms, hedge funds, mutual funds, pension funds, and sovereign wealth funds. Their goal is to generate returns on invested capital through strategies like acquisitions, portfolio management, and long-term investing.

Sell-side refers to institutions that advise, sell, or facilitate transactions for clients and the clients themselves. This includes investment banks, brokerage firms, and research providers. Their role is to originate deals, underwrite securities, perform valuations, and connect buyers and sellers.

In an M&A deal, Goldman Sachs (sell-side) might advise a tech company on selling its business, while KKR (buy-side) evaluates and potentially acquires it using its investment fund.