Investment bankers to receive hefty bonuses as deal activity surges

Investment bankers from top domestic firms could take home, on an average, 100-150 per cent of annual salary as bonuses — much higher than last year when payouts ranged from 30-40 per cent.

FY24 saw robust equity capital market activity that resulted in a fee collection of over ₹2,000 crore. Total equity fundraising stood at ₹1.86-lakh crore, underpinned by a roaring secondary market. This is 142 per cent higher than FY23, a year in which a series of interest rate hikes and geopolitical tensions marred fundraising.

India Inc raised ₹61,915 crore through 76 main board IPOs in 2023-24 — 19 per cent higher than the ₹52,116 crore mobilised by 37 IPOs in 2022-23, according to primedatabase.com. The amount raised through qualified institutional placements stood at ₹78,089 crore, more than seven times the amount raised the year before. Bulk and block deals totalled ₹5.25-lakh crore, which is 55 per cent higher than the previous fiscal.

• Also read: Fees for investment bankers from IPOs zooms 94% in FY24

Healthy IPO pipeline

“The pot has grown bigger,” said Munish Aggarwal, Managing Director Head – Equity Capital Markets, Equirus. “Equity fundraising activity was buoyant last year, with a sizeable number of block deals apart from IPOs. The deal pipeline remains robust and every organisation knows that they will have to give a decent payout to retain as well as attract talent.”

Another senior banker, on condition of anonymity, said: “The bonuses could range from 100 per cent to 150 per cent of annual salaries depending on performance. The healthy pipeline of IPOs and QIPs will also have a bearing on the payouts.”

The bonuses are directly correlated to the fees collected. The overall fee pool, in turn, is directly related to the amount of deal activity and the volume of funds being raised. Investment bankers earned ₹1,685 crore in fees from IPOs alone.

Banks pocket 2-3 per cent as fees, on average, for managing IPOs, and 1.5-2 per cent for handling QIPs, depending on the issue size and the number of bankers. They can earn up to 1.5 per cent on block deals. For small blocks on liquid counters, the payout could be as low as 25-50 basis points. For large blocks in liquid counters or blocks in illiquid names, which almost become like a marketed placement, the fees could be up to 150 bps.

The IPO pipeline remains strong. Nineteen companies proposing to raise nearly ₹25,000 crore hold SEBI approval, while another 37 companies looking to raise about ₹45,000 crore are awaiting the nod. Of these 56 companies, nine are new-age technology companies with an estimated issue size of ₹21,000 crore.

Hiring trend

Large investment banks are looking to hire mid-senior bankers given the churn seen in the past few months, said industry officials.

Axis Capital, for instance, recently appointed Atul Mehra as its MD & CEO. Its Co-Chief Executive Officer Salil Pitale has quit the firm. Pratik Loonker, the head of equity capital market at ICICI Securities, has quit and is said to be joining Axis Capital.

Notably, according to reports, US banking regulators are planning to revive a proposal that would require big Wall Street banks to defer compensation for executives and take back more of their bonuses if losses pile up.

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