Marooned Analysts Seek Local Lifebuoys

The heat is on the analysts. The downsizing and consolidation process sweeping the investment banking industry has hit the analysts hard.

Fed on huge pay packages over the last few years, research is the last thing on their minds now. It is simply a question of survival for the research clan who are searching for new havens at smaller foreign and domestic brokerage houses.

A random check by Business Standard shows that at least 40 research analysts from storm-hit investment banks are seeking jobs in other outfits at substantially lower packages.

At least six analysts each from BZW, NatWest Markets and W I Carr Securities, 12 from Peregrine Capital and six from Deutsche Morgan Grenfell (DMG) are not only willing to work at lower packages but are also seeking alternate avenues in corporate finance, software engineering and foreign banks.

 

Broking houses which are still on the look out or have already recruited analysts to consolidate their research teams include Kleinwort Benson, UTI Securities and IL&FS Broking. The number of analysts required by each broking firm varies from 2 to 4. Among domestic brokerages, Motilal Oswal Securities is reported to have hired a couple of analysts recently.

A very miniscule percentage of analysts have actually managed to land up new jobs. A junior analyst with 2 to 3 years experience in an FII broking house receives anywhere between Rs 9-15 lakh per annum plus bonus. For senior analysts with 4-5 years experience, salaries range from Rs 25-30 lakh per annum.

It may be noted that Barclays Bank had, last year, taken a worldwide view that its investment bank, BZW, would move out of the equity markets. NatWest Markets had decided to downsize operations, and was looking for new buyers. Peregrine Investment Holdings faced the full brunt of the South East Asian crisis and filed for liquidation while DMG also altered its focus across Asian/Indian markets.

Compared with analysts employed with FIIs, their counterparts at local broking houses are paid between Rs 2-Rs 5 lakh per annum. At the higher end of the spectrum are analysts who receive as high as Rs 9 lakh per annum. But very few domestic broking houses pay that kind of money.

Since the analysts at the top broking houses are highly qualified (many being IIM graduates), there is no dearth of jobs for them. But they can never receive the same kind of money they used to get earlier as no other field can match the returns offered by the broking business, said a source at an FII brokerage.

There is still good demand for quality analysts. However, due to the supply overhang, the kind of salaries offered by the erstwhile FIIs will no longer be available. It is not as if the value of analysts have come down. It is just that salaries are coming down to realistic levels, the source added.

The boom started in 1992-93 when FIIs were allowed to start their operations in India. FIIs hunting for equity research analysts began hiring analysts engaged in project financing advisory services from UTI, IDBI and ICICI at astronomical salaries.

At a time when research analysts at local brokerages were paid about Rs 1.5 lakh per annum, FIIs were offering nearly 10 times more.

This led to distortion of wage structures within the industry. Research analysts felt that their market value had grown 10 times overnight. To compete with the existing FIIs, newer entrants started paying even higher salaries to attract fresh talent. A fresh graduate from any premium management school was considered a good prospect irrespective of his experience in capital market, said a leading BSE broker.