Deluge of deals to lift i-bank bonuses to a record in 2024

The fee pool at investment banks swelled in 2024 thanks to the large initial public offerings (IPOs) of companies such as Hyundai Motor India, Swiggy, Ola Electric and Firstcry. The year also saw large block deals in companies including ITC, Trent and Bharti Airtel, enabling PE investors take some money off the table. Besides, key sectors such as industrials, consumer and financial services saw mergers and acquisitions.

According to Native, a search firm that also works with the financial services sector, bonuses may cross ₹1,000 crore in 2024, of which ₹700 crore may go to over 350 top executives. These include managing directors, partners and directors at global and domestic investment banks earning an average fixed salary of ₹1.5-2.5 crore.

While some banks may pay bonuses in the range of ₹100-150%, at some others, it may be 300-350%, industry experts said.

“This year has been phenomenal from the deals perspective, and incomes have been commensurate. We are expecting bonuses ranging between 300-375% this year," an investment banker said on the condition of anonymity.

Also read | Investment banks enter startup funding space to diversify revenue streams

Investment banks earned a combined $776.5 million ( ₹6,587.8 crore) in fee income in India, according to data from London Stock Exchange Group, an analytics services and data provider. Among the top in the fee league tables were Axis Bank, Kotak Mahindra Capital, Jefferies, Goldman Sachs, Citigroup and Morgan Stanley. To be sure, fee income includes earnings from equity capital markets, debt capital markets as well as M&A deals.

Over 70 campus hires of 2024 with average annual fixed salary of ₹30 lakh may get at least 100% bonuses crossing together crossing ₹20 crore, Native estimated.

“I-bankers and merchant bankers at Indian firms received bonuses for the September-October period, and global firms will get them in January. While bonuses for 2021 and 2022 were not very good, the ones in 2023 were better. 2024 had all-time high capital market flows and deals which have pushed bonuses for these companies," said a senior partner at one of the Big Four consulting and audit firms. “Since the bonus is dependent on the number of deals, it is often over and above the compensation offered to the bankers," the partner added.

"Record high performance bonuses expected for i-bankers and merchant bankers come on the back of the record number of listings and secondary transactions," said Monica Agrawal, managing director for financial services in the Asia-Pacific region and India lead, board and CEO services, at Korn Ferry, a global organizational consulting firm. 

Also read | New status symbols: How India’s family offices are redefining the investment paradigm

"However, retention is now proving to be a challenge, since companies want more such deal makers and these bankers are now commanding a premium. Concerned about exits, both domestic and global banks are coming up with retention tools in the form of deferred bonuses, long-term incentives and clawbacks to hold on to high performers," Agrawal added.

In previous years of muted deal activity, many investment bankers left the sector for better pastures. While most bankers joined corporates and started up on their own, some were attracted to the private equity and venture capital industry. Calendar 2024, however, saw that trend reverse. As per Native data, unlike 2023, where almost 50% of investment banking exits were towards corporates/PE careers, it is significantly down to 36% in 2024.

“The glorious time for investment banking (IB) as a career is just about to start. From a pre-covid era of negative headcounts, layoffs and sub-par deal activity, we foresee an extremely bright future for talent to pursue IB as a career, be trendsetters as dealmakers and earn unprecedented compensations," said Ruchi Thakkar, head of capital markets and asset management at Native.

And read | Don’t overlook the downside of India’s retail investment boom