Churn gets feverish for investment banking

An investment banker working with a foreign bank got a call from a head-hunter, offering him the top job in a foreign fund setting up operations in India last week. The banker politely declined the offer on the plea that he had joined the organisation only few months back.

He could not refer anyone's name to the head-hunting agency because all his close friends had switched jobs in the past few months. Churning has never been so intense in the investment banking industry.

Almost all big investment banking firms have lost one or more of their top guys in the past few months. To name a few "� V Anantharaman, managing director (corporate finance & advisory) Standard Chartered is joining CSFB as head of investment banking; Anil Chawla has joined the world's second largest hedge fund DE Shaw, leaving GE; Sunil Sanghai has left JM Morgan Stanley to join Goldman Sachs; Muneesh Khanna has left Enam and ready for his new assignment.

It's just the tip of the iceberg. If the managing director of the investment banking division of a foreign bank is to be believed, the demand for quality investment bankers has exceeded the supply and there is no chance of restoration of the demand-supply equilibrium in the near future.

In the process, salaries of top honchos in investment banks have increased nearly three-fold. Foreign institutions are offering Rs 3 crore a year for top jobs beside offering share in organisation's profit.

Three big foreign entities "� CSFB, Lehman Brothers and Goldman Sachs "� are either setting up shops or increasing their presence in India.

Entities such as Blackstone, Carlyle, Macquaire Bank and DE Shaw have already set shops and a whole lot of new private equity funds are making a beeline to the country while Hong Kong and Singapore-based entities are launching multi-product funds.

Faced with the severe shortage of human capital, unique tie-ups have been taking place to bypass the problem. Recently, Standard Charted has signed up an arrangement with India 2020 Fund wherein it would refer potential mid-market deals (in the range of $2-10 million) to the fund.

Standard Chartered stands to get referral fee if the deal materialises. In the process, India 2020 saves on zeroing on potential investment destinations while Standard Chartered provides guidance in the area where it does not operate (Standard Chartered normally does deals worth more than $10 million).

Will this upturn continue? According to the head of the investment banking division of a public-sector undertaking (this sector remains unaffected during the churn), it will.

"You just can't create an investment banker with 20-year experience overnight," he points out. Will the salary packages get fatter? As long as foreign institutions are interested in the India story, the packages will not shrink.