Covid-19 pandemic may eat into bonuses of domestic investment bankers

Increments, on the other hand, are likely be shelved altogether considering the bleak outlook for fundraising in FY21

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…Read More