The coronovirus epidemic is likely to put a cloud on the bonuses received by domestic investment bankers this year.
Depending on the activity of the deal, experts believe that the bonus can range between 30-60 percent of the annual salary for 2019-20 (FY20). Actual payments — by the end of the month or on the next day – can be very low as banks conserve cash in uncertain environments. On the other hand, the growth is likely to be completely sheltered in FY21 given the bleak outlook for fundraising.
Bonuses for foreign bankers, though not affected by the current epidemic. This is because these banks generally follow a calendar year cycle and their variable payments were handed over in January or February, before the epidemic took effect.
“The overall bonus pool for domestic banks may shrink this year as investment banks will seek to conserve capital against the backdrop of the coronovirus epidemic,” said Prime Database managing director Pranav Haldia.
Last year, bankers took home 30-50 percent of the annual salary as a bonus, down from 100-200 percent in the prior year. That year was associated with sky-high bonus record fundraising for FY18 through IPOs and QIPs.
The bonus usually corresponds to the activity given in any given year and the fees earned. The type of deal that bankers used to do and the role they played is also a deciding factor. Banks, on average, charge 2-3 per cent as fees for managing IPOs and 1.5–2 per cent for dealing with QIPs. 1-2 crore per deal from buyback. Fees vary depending on the size issue and the number of bankers managing a transaction.
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A senior investment banker, who did not wish to be named, said, “Bonuses will be linked to deal activity in FY15, but the payoff is likely to be rational.” “Most domestic banks have done well in terms of revenue. But given the bleak outlook, it would be up to individual management to take a call on the bonus, ”said another banker.
According to the PR20 database, equity funds through the public markets averaged Rs 91,670 crore in FY 2020, which is 62 per cent higher than the previous year but 48 per cent lower in FY18. Fresh capital was raised which is 61 per cent of the total equity funding.
Thirteen main-board IPOs came to market collectively in FY20 at Rs 20,350 crore, an increase of 38 percent over the previous year. SBI card and payment services offering was the largest during the year at Rs 10,341 crore. The average deal size was Rs 1,565 crore.
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Thirteen companies raised Rs 51,216 crore through QIP, an increase of 388 percent over the previous year. The biggest QIP was that of Bharti Airtel, which raised Rs 14,400 crore. QIP was dominated by banks, NBFCs and telecom companies and accounted for 79 per cent of the total amount.
According to market players, the epidemic may be troubled by the company’s equity fundraising plans in the coming months, and it is likely that Q1 and Q2 may see little or no activity. Haldia said, “While the IPO pipeline remains strong with over 30,000 companies raising more than Rs 30,000 crore, it is highly unlikely that any of these issues will hit the market, unless coronovirus “The uncertainty of it does not end,”