Investment banks (I-banks) are back in business after an year-and-a-half of quiet run. And many have started hiring again, which was a strict no-no after the Lehman Brothers collapse in October last year.
Sample this: HSBC recently hired Harpuneet Singh from Nomura as director of its investment banking division. Similarly, Surojit Shome has joined as managing director and CEO of Rabo India Finance from Nomura.
And it’s not just about fresh hirings. Nomura, which granted retention bonuses varying from 40-130 per cent of the basic salary to some employees, has reportedly asked some of the laid-off employees to return back.
Others are also in the hiring game — though selectively — in highly specialised fields. They include Morgan Stanley, JP Morgan, Goldman Sachs and Bank of America-Merrill Lynch for their private client and capital market business. Barclays India is also looking to increase its headcount by 20 per cent every year.
Kalpana Morparia, country head of JP Morgan, said “We will add to our team as the workload has increased.”
Even smaller domestic players such as Edelweiss have added 8-10 people in its investment banking division. The names include Ciby Anthony, Gautam Benjamin and Navneet Soni.
Experts assign several reasons to this. The recent rush of American and global depository receipt issues, qualified institutional placements (QIPs), a spate of big-ticket initial public offerings (IPOs) in the offing and the overall cheer in the stock market are making life much easier for the industry, which was completely starved of deals not-so-long ago.
CG Srividya, partner, Grant Thornton, said, “On the domestic side, companies are looking at consolidation and restructuring to improve operational efficiency, reduce costs and, consequently, get better bargaining power.”
He felt that crossborder deals would also pick up, mainly because of three factors. One, companies would look for inorganic growth. Also, stock markets were beginning to open up as a source of financing and bank funding had also begun to come for large buyout transactions.
Ernst & Young pointed out in one of its recent reports that transactions were likely to pick up in sectors such as pharmaceuticals, telecom, real estate and capital goods on the back of correction in valuations and increased domestic demand.
However, investment bankers are not the only ones in demand. Hiring has started even in consumer banking business. For instance, Ritesh Chandra has moved from Credit Suisse to head Avendus Capital’s consumer group and Centrum Capital hired Rahul Banka from Avendus Capital.
“We have started hiring staff at senior level according to our needs. The stability in markets as well as revival of the primary market, if it happens, will give the much-needed impetus to this process. Once the deal pipeline starts looking strong, there will be more hiring,” said a managing director at one of the foreign investment banks who did not wish to be named.
But banks are still cautious. As a result, the aggression in hiring has not percolated down to junior levels. Only medium and senior level executives are being sought. Industry watchers, however, said that it was only a matter of time before things improve on that front too.
The good news is that the days of layoffs and firings are certainly over. With a number of companies lining up QIPs and private placements, bankers are slogging to stitch deals.
“Avendus Capital is looking at hiring good quality talent in a selective manner. There are a lot of opportunities in mergers and acquisitions, debt and restructuring side allowing investment banks to reconsidering their decisions,” said Kaushal Agarwal, joint managing director, Avendus Capital.
Deal activity has seen a gradual increase since the beginning of 2009. The number of deals rose from 142 in the fourth quarter of 2008 (Oct-Dec) to 152 in the second quarter (April-June) of 2009, according to an Ernst & Young report.
“With more than 80 per cent of transactions being domestic in nature, the second quarter of 2009 points to an environment of increased focus on consolidation and restructuring activities,” said the report.
“The developed world is still in a recessionary phase, so there will be more companies coming to India. Going ahead, there will be more inbound deals as there is a lot of growth happening in India. Also, there will lot of consolidation and restructuring on the domestic side,” said Munesh Khanna, CEO, investment banking, Centrum Capital.
And that could mean more good news for the banking industry.
