Investment bankers set to win big bonuses in record-breaking fundraiser

Investment bankers are expected to earn big bonuses this year thanks to strong activity in the equity capital markets in FY21 which saw record fundraising through Qualified Institutional Investments (QIPs), Trusts Infrastructure Investment (InvIT) / Real Estate Investment Trust (REITs)) and rights issues.

Industry players estimate average payments to be between 50 and 75 percent of annual bankers’ salaries. For the top performers, the bonuses could be 100 to 125%.

The Covid-19 pandemic has had an impact on the amount of bonuses paid last year as banks attempt to conserve cash amid a grim fundraising prospect.

“Last year, bonuses were reduced, withheld or deferred due to the uncertainty caused by the pandemic. Thus, bankers received less than they deserved. This year will be different,” said one banker senior investment on condition of anonymity.

“Fees and revenues for the various IB (investment banking) segments in FY21 were good, and bonuses from major investment banks could average 50-75% of annual salaries, with much higher payouts for stars, ”said another investment banker. He added that higher volumes and the shorter one to two month turnaround time for QIPs meant that bankers ended up making more money from such placements than initial public offerings (IPOs). during fiscal year 21.

Bonuses are generally proportional to transaction activity and fees earned. The type of transactions in which bankers have participated and the role they have played are also determining factors. Banks pocket an average of 2 to 3 percent in fees for handling IPOs and 1.5 to 2 percent for processing QIPs. Fees for invITs / REITs could be similar to those for IPOs. Redemptions earn Rs 1 to 2 crore per transaction. The fees depend on the size of the issue and the number of bankers managing the issue.

Fundraising resumed in 2020-2021 after a lackluster first quarter as the pandemic halted transaction activity. While fundraising through QIPs, invITs / REITs, and rights issues reached an all-time high, the amount raised by IPOs was the third largest in the past 11 years, with an average deal size of Rs 1042 crore.

Overall, Indian companies hit a record 2.5 trillion rupees on public stock markets, 70% more than 1.47 trillion rupees in the previous fiscal year, according to primedatabase data .com. Of this amount, the fresh capital raised was 1.36 trillion rupees, 73 percent of the total amount. The highest amount previously raised in a fiscal year was 1.75 trillion rupees in 2017-18.

“Bonuses for ECM (equity market) bankers are a function of transaction activity in a given year. For fiscal year 21, record amounts were raised through IPOs, QIPs, guest / REIT and rights shows, which will translate into healthy bonuses for bankers, “said Pranav Haldea, Managing Director, PRIME Database Group.

He said strong IPO retailer participation, huge listing gains and the highest amount ever raised through QIPs and InvITs / REITs were the main highlights of the year.

Industry players believe the second wave of the pandemic could cause a temporary pause in primary market activity in the coming weeks.

“The fundraising pipeline remains strong but given the uncertainty created by the new wave and volatility in the secondary market, companies may prefer to wait for stability to return before hitting the market,” said Haldea.

In March, 18 companies offering to raise Rs 18,000 crore held valid regulatory approvals to launch an IPO, while 14 others were waiting for a regulatory wink to raise nearly Rs 23,000 crore, according to the database. PREMIUM.

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