Description

Investment Banking

Sep 2026 Examination

 

 

Q1. A healthcare platform completed a firm-commitment IPO at the top of the range. In the first trading week, thin order book depth and risk-off headlines drove elevated volatility. The stabilization manager has partially used the greenshoe; the middle office flags remaining capacity and disclosure limits. Research is under quiet-period restrictions but preparing initiation. Sales reports tepid long-only demand; the trading desk observes limited natural two-way flow and hesitant market makers. The issuer’s CFO is anxious about reputational impact and asks the bank for targeted actions that can steady the stock without breaching regulatory guidelines or signaling undue weakness. Apply primary market offering mechanics and post-offering stabilization tools to propose a coordinated stabilization plan that protects price discovery and client relations. Use a leadership model to orchestrate sales, trading, research, and compliance, outlining communication protocols, use of the greenshoe, liquidity support tactics, and timing for research initiation within regulatory constraints? (10 Marks)

Ans 1.

Introduction

This healthcare platform’s rocky first trading week, thin order book depth, risk-off headlines, tepid long-only demand, and hesitant market makers, is exactly the scenario the greenshoe and coordinated post-offering stabilization tools exist to manage. A firm-commitment IPO priced at the top of the range leaves little cushion for adverse sentiment, and once broader risk-off headlines compound thin secondary liquidity, the resulting volatility can quickly become self-reinforcing if left unmanaged. The CFO’s request for targeted, compliant actions requires the

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Q2. ZenithGroup, a diversified conglomerate, owns ZPay, a high-growth digital payments subsidiary requiring substantial capital for expansion. The parent is deleveraging after an acquisition spree. Option A: spin off ZPay to existing shareholders to unlock value and managerial focus. Option B: carve out 25% through an IPO to raise Rs.1,500 crore while retaining 75% control. Concerns include market window volatility, SEBI scrutiny, cross-charging of shared services, minority rights, and ensuring parent capital allocation discipline. Analysts flag that a minority carve-out may not fully reassure the market on independence, while the spin-off raises no cash for deleveraging. Evaluate whether a pro rata spin-off or a 25% IPO carve-out would better maximize long-term shareholder value and strategic flexibility for both entities. Justify your choice on valuation uplift, control implications, regulatory/tax considerations, governance for minorities, and execution risk. Recommend safeguards to ensure disciplined use of proceeds and mitigate related-party conflicts? (10 Marks)

Ans 2.

Introduction

ZenithGroup’s choice between a pro rata spin-off of ZPay and a 25 percent IPO carve-out is really a choice between two different strategic priorities: the spin-off maximizes independence and long-term value unlocking but raises no cash for the parent’s deleveraging need, while the carve-out raises meaningful capital and retains control but risks not fully convincing the market of ZPay’s independence. Both routes are well-established in global capital markets practice, but the right choice here depends heavily on ZenithGroup’s specific balance sheet position following its acquisition spree, since a company under active deleveraging pressure cannot treat a cash-

 

Q3 (A). A Latin American fintech with rapid growth seeks $500 million for technology and loan-book expansion. Dollar funding via a Yankee bond is attractive but market windows are narrow. Alternatives include a Bulldog bond in GBP or a Matador bond in EUR to diversify demand. The firm can securitize its performing consumer receivables (ABS) to lower funding costs and free capital, and deploy surplus cash in short-term government T-bills pending disbursement. Currency risk, interest rate volatility, and geopolitical headlines could affect pricing, covenants, and investor appetite. Develop a financing architecture that combines a primary foreign bond issuance strategy with receivables securitization and short-term liquidity management. Specify tranches, currencies, covenants, investor targeting, ABS structure, and the role of T-bills for liquidity, optimizing WACC and risk under geopolitical and FX uncertainties? (5 Marks)

Ans 3A.

Introduction

This Latin American fintech’s $500 million funding need, set against narrow dollar market windows, calls for a financing architecture that diversifies currency and investor risk rather than depending entirely on a single Yankee bond, while using securitization and short-term instruments to optimize the overall cost of capital.

Concept and Application

Structuring the Primary Bond Issuance Across Currencies

 

Q3 (B). A regulated utility seeks $600 million to finance grid modernization and new solar capacity. The treasury team aims to issue a green bond to secure better pricing and diversify its investor base. Investors are wary of greenwashing and demand credible eligibility screening, measurable impact, and transparent reporting. The investment bank recommends a labeled framework aligned with market standards and an active investor education campaign. Management needs a structure that integrates with existing internal controls, survives scrutiny from rating agencies, and supports future sustainable financing. The utility wants clear, consistent KPIs that link to operational improvements and demonstrate long-term climate benefits. Design a green bond framework and issuance plan that sets eligible project criteria, use-of-proceeds governance, impact KPIs, reporting cadence, second-party opinion, pricing approach, and investor outreach, ensuring environmental integrity while achieving a cost-effective placement and expanding the ESG investor base? (5 Marks)

Ans 3B.

Introduction

This regulated utility’s $600 million green bond for grid modernization and solar capacity needs a framework robust enough to satisfy investors wary of greenwashing while achieving cost-effective pricing, and the ICMA Green Bond Principles provide the internationally recognized structure for building this kind of credible issuance.

Concept and Application

Defining Eligible Project Criteria and Use-of-Proceeds Governance