The last financial year (FY22) was an unprecedented one for investment bankers. Bonuses for bankers increased by up to 200 percent in FY22 saw the highest fundraising by way of initial public offerings (IPOs) and record fees for equity offerings, a report by Business Standard highlighted.
Citi, ICICI Securities, Kotak Mahindra Bank, Axis Capital, and JP Morgan were the top five investment banks by way of equity capital market issuances for FY22, BS quoted data from Bloomberg.
“It’s been one of the best years for investment banking, with large-sized deals and all-time high revenues. It’s not surprising that bonuses have been the best across the board, with top performers getting up to 200 percent of annual pay,” said a senior banker told the market daily on condition of anonymity.
FY22 saw a mop-up of ₹1.12 lakh crore through IPOs. Investment banks netted record fees of nearly ₹2,600 crore via IPOs and follow on public offers (FPOs), higher than the combined fees garnered in the previous four years, the report added.
“FY22 was quite good in terms of revenue generation and it is important to retain talent by rewarding them appropriately in a year when the organisation does well,” said a senior banker told BS on condition of anonymity.
It is important to note that bonuses are typically commensurate with deal activity in any given year and are paid out in April-May for domestic banks and January-February for foreign banks. Investment banks, on average, pocket 2-3 percent as fees for managing an IPO and 1.5-2 percent for handling qualified institutional placement (QIPs). The fees vary depending on the issue size and the number of bankers managing the deal, informed the report.
In 2021, average bonus payouts ranged from 50-75 percent of the bankers' annual salaries while in the year before, the outbreak of the pandemic had impacted the quantum of bonuses paid out for 2019-20 as banks wanted to conserve cash amid the bleak outlook for fundraising, the report pointed out. 2021 had seen an uptick in hiring by investment banks amid an increase in the number of deals and worries of attrition, it added.
“Bonuses are a function of fees generated, which in turn are a function of deal activity. Last financial year saw record IPO issuances, with new-age companies paying out above-average fees to bankers,” said Pranav Haldea, managing director, PRIME Database told BS.
The largest IPO in 2021-22 was from One 97 Communications, the parent of Paytm, for ₹18,300 crore. This was followed by Zomato ( ₹9,375 crore), Star Health ( ₹6,019 crore), PB Fintech (Policybazaar) ( ₹5,710 crore), Sona BLW ( ₹5,550 crore) and FSN E-Commerce (Nykaa) ( ₹5,350 crore). Four out of the top six IPOs were from new-age technology companies which together raised ₹38,734 crore.
However, uncertainty in global markets, Fed tightening and the Russia-Ukraine conflict may impact equity capital market activity this year.
“Given the volatility in the secondary market, some slowdown in primary market activity and IPO launches is expected. The overall liquidity, especially from foreign portfolio investors, has also taken a hit following rate hikes by global central banks and this could impact sentiment as well,” Haldea told BS.