Investment bankers set to take home hefty bonuses on record fundraising

Investment bankers are set to take home sizeable bonuses this year on the back of robust equity capital market activity in FY21, which saw record fundraising by way of qualified institutional placements (QIPs), infrastructure investment trusts (InvITs)/real estate investment trusts (REITs), and rights issues.
 
Industry players estimate the average payouts to be in the range of 50-75 per cent of the bankers' annual salaries. For the top performers, the bonuses could be 100-125 per cent.
 
The Covid-19 pandemic impacted the quantum of bonuses paid out last year as banks tried to conserve cash amid the bleak outlook for fundraising.
 
"Last year, the bonuses were cut, held back or deferred owing to the uncertainty caused by the pandemic. So, bankers got less than what they deserved. This year will be different," a senior investment banker said on condition of anonymity.
 
"Fees and revenues across different IB (investment banking) segments in FY21 have been good, and bonuses among top investment banks could average 50-75 per cent of annual salaries, with much higher payouts for star performers," said another investment banker. He added that higher volumes and the shorter turnaround time of one to two months for QIPs meant that bankers ended up earning more money through such placements than initial public offers (IPOs) in FY21.
 

Bonuses are typically commensurate with deal activity and fees earned. The kind of deals the bankers were part of and the role they played are also deciding factors. Banks pocket 2-3 per cent as fees, on average, for managing IPOs, and 1.5-2 per cent for handling QIPs. Fees for InvITs/REITs could be similar to that for IPOs. Buybacks fetch Rs 1-2 crore per deal. Fees depend on the issue size and the number of bankers managing the issue.
 
Fundraising picked up in 2020-21 after a lackluster first quarter as the pandemic halted deal activity. While fundraising via QIPs, InvITs/REITs, and rights issues climbed to a record, the amount garnered through IPOs was the third-largest in the last 11 financial years, with an average deal size of Rs 1,042 crore.
 
Overall, Indian corporates raised an all-time high of Rs 2.5 trillion through public equity markets, 70 per cent higher than Rs 1.47 trillion in the previous financial year, the data from primedatabase.com shows. Of this, fresh capital raised was Rs 1.36 trillion, 73 per cent of the total amount. The previous highest amount raised in a financial year was Rs 1.75 trillion in 2017-18.
 
"Bonuses for ECM (equity capital market) bankers are a function of deal activity in a particular year. FY21 saw record amounts being raised through IPOs, QIPs, InvITs/REITs, and rights issues, which shall translate into healthy bonuses for bankers," said Pranav Haldea, managing director, PRIME Database Group.
 
According to him, strong retail participation in IPOs, huge listing gains, and the highest-ever amount raised through QIPs and InvITs/REITs were the key highlights of the year.
 
Industry players believe the second wave of the pandemic may lead to a temporary pause in primary market activity in the coming weeks.
 
"The pipeline for fundraising remains strong but given the uncertainty created by the new wave and the volatility in the secondary market, companies may prefer to wait out till stability returns before hitting the market," Haldea said.
 
As of March, 18 companies proposing to raise Rs 18,000 crore held valid regulatory approvals for launching an IPO, while another 14 awaited regulatory nod to raise nearly Rs 23,000 crore, according to PRIME Database.