Mumbai: It’s been raining deals in India this year—and the rainmakers who help companies merge, acquire, raise capital and restructure are naturally in great demand.
Senior Indian deal-makers are being snapped up by foreign investment banks with a speed and alacrity that is usually reserved for actual corporate deals.
Graphic: Naveen Kumar Saini / Mint
At least nine senior bankers have changed employers in the past three months, making it one of the biggest banker-poaching exercises in India.
Global investment banks from Wall Street, Tokyo and London are aggressively scouting for talent to staff their growing India operations, as the local deal market has roared back to life after being nearly comatose in the wake of the global economic crisis in 2008.
Headhunters say that the demand for investment banking talent comes in the wake of a vacuum that was created a few years ago when senior deal makers left the business to join private equity firms.
In the past couple of weeks, ICICI Bank Ltd has gobbled up the ailing Bank of Rajasthan Ltd, Abbott Laboratories Ltd bought the domestic formulations business of Piramal Healthcare Ltd for $3.7 billion (Rs17,612 crore), Godrej Consumer Products Ltd purchased Brazil’s Issue Group and Mahindra and Mahindra Ltd picked up a majority stake in Reva Electric Car Co.
Indian companies were involved in merger and acquisition (M&A) deals worth $36.7 billion so far this year, according to business information group Dealogic. This number doesn’t include the Godrej and Reva deals.
The current year is also expected to be a bumper one for capital issuance, with companies expected to raise at least $35 billion from local and global investors to fund expansion plans and strengthen balance sheets.
“India is not a one-year or two-year story. The market is here to stay,” said Nipun Goel, who joined Nomura Holdings Inc. as head of investment banking division this March, after working for 14 years at Merrill Lynch India. Nomura has already hired 20 people for its investment banking division in the last one year.
Among the others who have switched jobs in recent months, Vedika Bhandarkar left JPMorgan India after 12 years there to join Credit Suisse India as head of investment banking.
ICICI Bank veteran Sonjoy Chatterjee signed up with Goldman Sachs India as its managing director and chief executive officer.
Former Axis Bank Ltd head P.J. Nayak is now with Morgan Stanley India, which broke off its joint venture with JM Financial in 2007.
Bankers says that these deal makers have extensive knowledge of local conditions and an ability to help foreign investment banks get access to Indian board rooms.
Headhunters say they have a pile of “search briefs” from investment banks.
The current hiring spree is also a result of a change in the nature of investment banking in India, which was traditionally dominated by marquee names such as the triumvirate Hemendra Kothari, Nimesh Kampani and Uday Kotak. Now large teams with global linkages also matter.
There is a perceptible shift from personality-driven to institution-driven investment banking, said K. Sudarshan, country head of London-based EMA Partners International Llp, a global recruitment agency.
The search briefs now demand local managers with excellent client relationships and global perspective, added Sudarshan, who has a mandate to home in on three senior investment bankers soon.
The search for top talent is because of a vacuum that was created over the past decade when senior investment bankers moved off into new pastures, say industry insiders.
“You are seeing a churn because a couple of years back, experienced people with 15-plus years of experience…a bunch of key people, like Rajeev Gupta, Amit Chandra and Sanjay Nayar, left the industry to head private equity funds. This (investment banking) is a relationship-based game…now there is a situation where there aren’t enough experienced people,” explained a senior Mumbai-based banker.
“Big banks are realizing that they need to gear up to the India story and their existing teams are not strong enough as there is a limited number of experienced people,” said the head of a foreign investment bank in Mumbai.
“We look at bankers who have experience in private equity, have cut teeth in M&As and public capital markets, and preferably, have relationships with clients,” said Brijesh Koshal, managing director (investment banking) at Daiwa Capital Markets India Pvt. Ltd, which started operations last year. His firm will double its headcount in the next few months, from the current eight, as Koshal believes that the Indian market will provide a lot of opportunities in global M&A, equities and debt business.
“There has been a ferocious turnaround in the way corporate story has been scripted,” said Nitin Jain, head of fixed income at Nomura India.
The hunt for experienced investment bankers has expectedly sent salaries to stratospheric levels, and while details of salary and bonus offers are being kept under wraps, figures as high as $1 million-plus are bandied around. Mint could not independently verify pay levels.
“This (executive movement) is a bit unusual,” said Rajesh Chakrabarti, a professor at Hyderabad-based Indian School of Business. “Typically, a lot of premium is attached to these people. So, as bankers position themselves in the months and years ahead, I am certain a significant amount of money is being given to these key people.”
The new gold rush into investment banking will not necessarily be painless.
“Five years back, the market was consolidated. There were close to two dozen (investment) banks. The market now is far more fragmented. Most global Investment banks are focused on India and the India growth story,” said Nomura’s Goel.
He feels the market is “ferociously competitive” and one of the biggest challenges ahead of many of the deal makers is to create an identity for themselves.
“I believe there are 8-10 investment banks which are very similar in what they can offer. How the winners will distinguish themselves is through the quality of support for their clients over time, both through hard times as well as good,” said Frank Hancock, managing director (advisory) at Barclays, whose bank advised on three large deals in the past year.
“While we’re seeing a great deal of churn of investment banking teams in India, clients should be cautious about what the new teams can deliver in the initial stages at least,” he added.