The coronovirus pandemic is likely to put a cloud on the bonuses to be received by domestic investment bankers this year.
Based on the deal activity, experts reckon that the bonuses could have ranged between 30-60 per cent of annual salaries for 2019-20 (FY20). The actual payouts --- to be doled out by the end of this month or the next --- may be a lot lower as banks look to conserve cash in an uncertain environment. Increments, on the other hand, are likely be shelved altogether considering the bleak outlook for fundraising in FY21.
Bonuses for foreign bankers, however, have not been impacted by the current pandemic. That’s because these banks typically follow a calendar year cycle and were handed out their variable pay in January or February, much before the impact of the pandemic became clear.
“The overall bonus pool for domestic banks may shrink this year as investment banks would want to conserve capital in the backdrop of the coronavirus pandemic,” said Pranav Haldea, managing director, PRIME Database.
Last year, bankers took home 30-50 per cent of annual pay as bonuses, far lower than the 100-200 per cent they pocketed in the year before. The sky-high bonuses for FY18 correlated with the record fundraising by way of IPOs and QIPs that year.
Bonuses are typically commensurate with deal activity in any given year and the fees earned. The kind of deals the bankers were a part of and the role they played are also a deciding factor. Banks, on average, pocket 2-3 per cent as fees for managing IPOs and 1.5-2 per cent for handling QIPs. Buybacks fetch Rs 1-2 crore per deal. Fees vary depending on the issue size and the number of bankers managing a deal.
“Bonuses will be linked to the deal activity in FY20 and but there is likely to be some rationalisation in payouts,” said a senior investment banker, on condition of anonymity. “Most of the domestic banks have done well in terms of revenues. But given the bleak outlook, it will be up to the individual managements to take a call on the bonuses,” added another banker.
FY20 witnessed equity fundraising to the tune of Rs 91,670 crore through public markets, 62 per cent higher than that raised in the previous year but 48 per cent lower than in FY18, according to PRIME Database. Fresh capital raised accounted for 61 per cent of the total equity fundraising.
Thirteen main-board IPOs came to the market collectively raising Rs 20,350 crore in FY20, a 38 per cent rise from the previous year. SBI Cards & Payment Services’ offering of Rs 10,341 crore was the largest during the year. The average deal size was Rs 1,565 crore.
Thirteen companies mobilized Rs 51,216 crore through QIPs, 388 per cent higher than the previous year. The largest QIP was from Bharti Airtel, which raised Rs 14,400 crore. QIPs were dominated by banks, NBFCs and telecommunication companies and accounted for 79 per cent of the overall amount.
According to market players, the pandemic may upset company’s equity fundraising plans in the coming months, and it is likely that Q1 and Q2 may see little or no activity whatsoever. “While the IPO pipeline continues to remain strong with more than 30 companies wanting to raise over Rs 30,000 crore, it is highly unlikely that any of these issues will hit the market till such time the uncertainty around coronavirus ends,” said Haldea.