Economic growth, stock market firmness propel drive to retain PE executives. Salaries of executives in Indian private equity companies have risen by 20-40 per cent in 2010, riding on a stable market. The pay packet of a partner or managing director of a fund of above $1 billion touched $1 million (Rs 4.5 crore) this year, up from $800,000 two years earlier, as new PE firms successfully raised corpus. Salaries of top executives shot up as firms tried hard to retain top-level talent with full life cycle investing experience.
A survey by Hunt Partners, a global executive search firm, show salaries for associates, senior associates and vice presidents have risen across the board, reflecting strong hiring at the campuses as well as of lateral entrants into the sector.
Sunit Mehra, founding managing partner, Hunt Partners, said, “Increase in salaries has primarily been driven by the shortage of talent with deep experience in the sector. The biggest change this year has been the wide variance between each band, based on a proliferation of firms over the last three years.” There are more than 200 firms operating in India. “Year 2009 was unique in the history of private equity in India. While several firms folded up in 2008, the current year was one of consolidation and growth,” he added.
Experts say stability in the Sensex and steady growth in the economy have led to an increase in both fund-raising and deployment of capital with PE firms. Domestic funds have raised about $3.6 billion (Rs 16,300 crore) till date in 2010 against $2.9 billion raised in 2009, according to VCCEdge data.
According to the survey, the salary of a partner or managing director has risen by 20-40 per cent, to $1,97,000-3,40,000 in 2010 from $1,64,000-2,42,000 in 2009, where the fund size is $250-500 million. For a fund of above $1 billion, the salary of a partner/MD is up to $4,31,000-9,27,000 from $5,17,000-9,13,000 in 2009. For a fund of $500 million-1 billion, these were up 20-30 per cent, to $2,75,000-5,66,000 from $2,29,000-4,42,000 in 2009. In 2008,the salaries of partner/MD were $1,89,000-2,34,000 ($250-500 million fund), $3,12,000-4,68,000 ($500 million-1 billion fund) and $5,72,000-8,06,000 (above $1 billion fund).
Demand for talent
Several new firms such as CX Partners (Ajay Relan), Steer Capital (Harsha Raghavan), Multiples (Renuka Ramnath), Ascent Capital (Raja Kumar) and Stega Capital (Srini Vudayagiri) established a presence in the country, raising money from both domestic and international sources.
Darius Pandole, Partner, New Silk Route Advisors Pvt Ltd, said, “The perceptible growth in PE activity in India over the last one year is resulting in an increased demand for experienced PE professionals. Given the limited universe of PE professionals in India, a continuation of this trend is expected to lead to salary inflation in the medium term.”
| HEALTHY LEVELS | ||||
| Level | $250-500 mn | $500mn-1bn | >$1bn | Carry(%) |
| Sr Associate | 40-55 | 56-92 | 88-150 | |
| Vice President | 73-102 | 101-170 | 158-278 | 0-1.25 |
| Principal/ director | 120-189 | 167-314 | 261-515 | 1.5-6.5 |
| Partner/ MD | 197-340 | 275-566 | 431-927 | 12-33.33 |
| Figures are in $ ‘000 | ||||
The bonus for a principal, director or partner for a $500 million-plus fund has also gone up to 50-120 per cent from 24-56 per cent in 2009.
Partners and managing directors received a carried interest (share of profit) of 12-34 per cent in 2010 against one of 7.5-27.5 per cent in 2009. Most firms operate on a 2/20 model, where 20 per cent of the gains of the fund are distributed to the team as carried interest and two per cent as managing fee. Institutional funds further break down the 20 per cent between sponsor and team.
At the same time, the system of recruiting executives from other sectors into the PE one has gone down substantially. Says Mehra, “Earlier PEs would be willing to hire from I-banking and consultancy, but now they prefer people with full lifecycle experience from the sector.”
In 2009, the minimum range in several categories reduced by 10-15 per cent, on account of some firms freezing salary growth or introducing pay cuts. In 2009, the maximum range in each case broadly remained the same, representing a flat year from the perspective of upper-end salary growth, except for some of the bulge bracket firms, who promoted a few principals to MDs.
Firms which closed their operations in the past 12 months include AIG PE, Babcock & Brown, Battery Ventures, Candover Capital, Englefield Capital, and First Rand Bank.
