Investment Banking in India and Abroad

Everyone’s heard of investment bankers - but there’s very little understanding of what they do exactly. I’ve been in the investment banking industry (mumbai) for the past three years :: and am planning to go back into this industry in the US. So…

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Everyone's heard of investment bankers - but there's very little understanding of what they do exactly. I've been in the investment banking industry (mumbai) for the past three years and am planning to go back into this industry in the US. So I thought I'd open up this thread to answer questions you may have about what investment banking is all about in India and abroad.

Thanks a lot for the initiative. :cheerio:
Please start from the basic like what is investment baking and what do investment bankers do? Why there is so much hype about the same? etc etc...

and also i request to please answer a query here- http://www.pagalguy.com/forum/career-discussions/24729-investment-banking-3.html#post2450407

Jamiroquai Says
Everyone's heard of investment bankers - but there's very little understanding of what they do exactly. I've been in the investment banking industry (mumbai) for the past three years and am planning to go back into this industry in the US. So I thought I'd open up this thread to answer questions you may have about what investment banking is all about in India and abroad.

Okay, let me start with the fundamentals:

Investment Banking: The process by which money is raised. This money could be in the form of debt (loans, bonds) or equity (IPOs or Private Equity placements). This money may be used for financing the working capital, capital expenditures, dividend payouts, etc.This is what you would call "Execution".

Advisory, the process of advising client on structures and regulatory procedures with respect to raising money is also one of the things that comprises IB.

Balance Sheet: When used in the context of "xyz firm has balance sheet support" (in the simplest sense) means that the firm has the ability to lend money and has the amounts needed for the transaction. This is very important, because a large balance sheet lends credibility to the investment bank raising the money.

Bulge-Bracket (BB) Firms: Large, well-known and very well-respected firms operating in the upper end of the market. They usually engage in transactions that exceed Rs. 2,500 million. Bulge Brackets in India are not clearly defined but the internationals - JP Morgan, BofA-Merrill Lynch, SBI Caps, IL&FS; fit the description. Internationally, the well-known Bulge's are JP Morgan, BofA-Merrill, Citi, UBS, Credit Suisse, Barclays, et al

Boutique Firms: Firms operating in what is known as the SME (Small & Medium Enterprise) space. The transactions are usually smaller than the BB's but are still able to gather enough fees to survive. There are hundreds of boutique firms that clamour for fame in India - they are usually attached to securities broking firms and exist in an attempt to ensure that institutional clients have access to securities broking as well as corporate finance products under one roof.

Middle-Market Firms: Usually firms that operate with companies that have transaction sizes that fall in the gray zone between BB's and Boutique firms.

Back-Office: The part of the IB process which provides transaction, research, reconciliation and number-crunching support for the bank. They usually work out of KPOs and work on processes as complex as financial modelling. Hours are kind of fixed and not very demanding. Skill-set level is minimal compared to the rest of the firm. Pay is better than most places but nothing "Investment-banking"-like... Usually located in India or other developing countries with cheap labor and lots of smart people.

Middle-Office: Usually dealing in risk and having minimal client interaction. They ensure that the investment bank's risk and compliance requirements are satisfied. Hours are either the same as or somewhat worse than KPOs, but not by too much. Usually located physically in the same building as the investment banking front-office. Money is pretty decent and fixed component of the salary is slightly below the front-office.

Front-Office: Fee-generators. The "bankers" sit here - defined as the place with maximum client interaction. Fixed component is pretty okay - but what boggles the mind is the bonuses.

Analyst: Undergraduate level support for the front-office. Not to be confused with back-office, these guys are some of the best undergrad recruits on their campuses and are chosen for their ability to work like crazy. They usually spend 3 years before being "encouraged" to go to business school. Those asked to stay on are turned into Associates and do not require to go to business school. Analysts are not so popular in India; since MBAs come so cheap...

Associate: The post-MBA level bankers. The Associate designation is usually the start of the process to reach MD. They usually handle work on client interactions and manage the Analysts.

Investment Bankers (in India): Usually CA's or MBA's. They work in either debt raising, equity raising or structured finance (lending from their firm's balance sheet). Very rarely will you see a non-MBA / non-CA in this business, unless they've moved in laterally from a bank job.

Investment Bankers (in the US): Usually MBA graduates (there are some undergrads who move from Analyst directly to Associate after 3 years, but they're the best of the best).

The Hype:

The hype's all about the money. Investment bankers work crazy hours but get paid mega-bucks.

A first-year Associate at a bulge-bracket could earn (starting, including bonus) about Rs. 40-65 lacs in a decent year in India.

A first-year Associate at a bulge-bracket could earn (starting, including bonus) about $ 300,000 - 400,000 (Rs. 1.35 - 1.8 crores) in a decent year in the US.

However, before the lure of the money begins to blind you, you must keep in mind that bankers work 85-100 hour weeks on an average. That means over 15 hours a day / 7 days a week! Very often, you will end up sleeping on the floor at your desk!

Based on this, or anything else, I would be happy to answer questions

hi

would you pls mention the B-schools which are worth joining for an i-banker aspirant ?

And since u say the 15hrs/day work, i want to ask if it remains the same after say 5-7 years. Bcoz then family will come into picture.

Which B-school you should join depends on which bank you would like to be a part of.

The Bulge Brackets require you to be amongst the smartest from the best b-schools in India. You know their names - IIM A/B/C/L, ISB, XLRI, JBIMS. Those are the ones that pay amazingly well but at the same time drain your time like crazy. However, after 3 years, (if and) when you make VP, the hours get better and more respectable. If you make it to MD in 7 years, your life gets wayyy wayyy better for tons more money.

The Boutique Banks require just an MBA from a city-level respectable college. Names like Dalmia, NMIMS and SP Jain are not unheard of when it comes to these banks. However, the pay usually maxes out at 1/3rd of what a BB is willing to pay. On the positive side, a Boutique gives you a lot more free time - and going home at 6pm is not impossible! :drinking:

Hi can u tell what qualities one need while working in IB apart from MBA degree

Qualities that are looked for ideally:

1. The ability to be smart and presentable. This includes the way you dress yourself, communicate and think. If you're sloppy in the manner in which you come across, have your hair in disarray, shirt with stains / smells, etc, thats a definite no-no. I know this sounds silly, but trust me - investment banking is a relationship business and you have to come across as someone who the client can look up to and trust for the best quality services.

2. A strong sense and keen eye for numbers. This means you know your finance and accounting WELL. No messing up. There is a saying about never being late or wrong in banking. But mistakes are worse than being slightly late. So, you must have your technical skills really sharp.

3. A friendly and pleasing personality. A lot of banks say that you are being hired not as an Associate, but as a future MD. This means you will be involved in bringing in business - which means you will need to have cultivated relationships with clients and be on good terms with them. This would require you to have a personality that would allow you to gel well with them. Also a friendly personality is a must because your colleague would not want to work with a prick for 17+ hours / day, right?

4. Love for the field within banking: Having a genuine interest in the financial work really helps. If you don't love what you do - you will slack off, hate your job and act irresponsibly (have seen so much of this!). This happens when you work purely for the money. Banking is an amazing career which teaches you so much about the industry in a really short time frame. I love the industry because of this. If it were just the money, staying on for more than a year would be impossible.

5. Strong MBA degree

6. The ability to work very very long hours and have little sleep

What wud you rate better :Investmentbanking or Consultantcy ?? I am asking this question because these are the most sought after jobs at a Bschool......And how does someone who has a choice between the two wud ultimately decide upon?Just need an opinion...

Both are solid and impressive work areas. What you find more attractive depends on what you enjoy doing and what your skill sets are.

Here are the differences:

Hours: At the top investment banking firms and top consulting firms, hours are the same

Pay: For the top firms, investment banking can pay anywhere from 20% more to 500% more depending on how many years of workex you get

Required: Banking requires a decent GPA and a strong financial skill. Consulting requires fantastic overall GPA.

Travel: Almost nil for banking. Consulting means you're travelling 4 days a week. You end up spending more time at the airport than in the airplane after a while. Airports are no fun. After a while, hotel rooms lose their sheen.

Software Apps you need to master: Excel for bankers. Power point for Consultants. As consultants, you need to be prepared to make 200-300 page presentations sometimes...

Exit Options: Bankers to PE. Consultants move to senior management roles in regular firms. Both are great options. PE pays more than banking, tho. So bankers still make more money. Burnout rate is the same for both.

Personally: I find the case method of consulting boring (this is just my opinion). But I know a lot of people who love it. I love finance because the value I create is tangible - consultants love their job for a variety of other reasons.

What you choose is dependent on your own liking. Hope this helps!

Thank you for taking this initiative, I'm sure many here will appreciate it.

The question i have is very fundamental, how do you get into investment banking? and do you have to be from an IIM or XLRI or can you graduate from a average Indian b-school and still find a way into the vocation?

That was a great piece of information.....Also one more question Which are the major Indian players involved in Investment Banking? Are PSUs also involved in Investment banking?

Thank you for taking this initiative, I'm sure many here will appreciate it.

The question i have is very fundamental, how do you get into investment banking? and do you have to be from an IIM or XLRI or can you graduate from a average Indian b-school and still find a way into the vocation?


You must understand that I am being very pragmatic when I speak of these things. There are two principal ways in:

1. Great B-School: Works in the US. Works in India. You need to not just be a part of a great b-school but also a part of the upper quartile of the class

2. Family Connections: Got an uncle's friends aunt's mother who's grand-nephew is a managing director or senior vice president or something along those lines? Congrats - and welcome to investment banking in India. Works in India. Very tough to use this in the US unless your connection is ridiculously powerful.
Thaks Says
That was a great piece of information.....Also one more question Which are the major Indian players involved in Investment Banking? Are PSUs also involved in Investment banking?


Instead of exhaustively naming the banks - why don't you hop along to VCCircle | Mergers, Acquisitions, Private Equity, Venture Capital, Investment Banking and check out the banks listed there (I know, prima facie, this seems to be a PE site - but trust me, there are tons of references to indian banking and financial service players on it!)


A PSU which could be called an Investment Bank would be SBI Caps. The pay is shitty but moving to the Corporate side after a while will yield great money for the experience you get with SBI Caps. They also take on tons of transactions.
mohd_k Says
Thanks a lot for your insights. There s another profile offered in B-Schools ie General Management profile. TAS, M&M;, AB Group, Reliance Group, Olam, GE, etc., offere these profiles. Can you throw some lights on these too. There s very less information about these. What are the career and growth prospects for these ? And what's expected out of an MBA in these roles. Not intending to deviate the discussion, but felt GM is at par with IB and Consulting profiles.


To be completely honest, I've never seen it as anywhere close to IB or Consulting. In competitive top-tier business schools, GM is looked at as many steps below investment banking and consulting. This is usually what the tiers look like - in terms of job competitiveness, salary, popularity, et al

==> IB / Consulting ==> Financial Consulting (the weird half-breed child of IB & Consulting) ==> Managerial Finance ==> General Management & Operations
As you can see, I am basing these tiers on how they're perceived, how tough they are to get into and how people who're in these fields view themselves in a hierarchical order.

However, if you love what you do, why should you care where it falls in terms of image, right? I believe that in the end, all that matters is your own opinion, no one else's - so if you like GM, go for it!

As for throwing light on what corporates like Olam offer in terms of Gen Mgt opportunities, I can't really say because I am not a product of an Indian B-school. I could always ask a couple of peers in my school who're pursuing GM to give you a US perspective.
You must understand that I am being very pragmatic when I speak of these things. There are two principal ways in:

1. Great B-School: Works in the US. Works in India. You need to not just be a part of a great b-school but also a part of the upper quartile of the class

2. Family Connections: Got an uncle's friends aunt's mother who's grand-nephew is a managing director or senior vice president or something along those lines? Congrats - and welcome to investment banking in India. Works in India. Very tough to use this in the US unless your connection is ridiculously powerful.


Thank you for your honesty. I really do appreciate it.

I also have one follow up question, is it at all possible to change your employer from a boutique bank to a bulge bracket bank in IB? Is there scope for such upward mobility? and if so how many years of experience would one require in a boutique bank before a bulge bracket bank would consider him/her.
Thank you for your honesty. I really do appreciate it.

I also have one follow up question, is it at all possible to change your employer from a boutique bank to a bulge bracket bank in IB? Is there scope for such upward mobility? and if so how many years of experience would one require in a boutique bank before a bulge bracket bank would consider him/her.


Its tough - and happens only at a junior - middle level. Also depends a lot on the kinds of deals you've been fortunate to see while at your boutique. Greater experience usually counts against you.

Small request - don't call me sir. I know it's a big thing in the southern part of india, but you can address me by my screen name here...

hi Jamiroquai..nice initiative...I have a generic query..I am a mechanical engineer working in Manufacturing Industry..Say if I do an MBA in Finance or any finance related course, then would the companies be willing to offer me profiles in IB considering I would have had no prior exposure to the same??
P.S. Please excuse my ignorance, but I was initially attracted to the IB profile mainly due to the Salaries. But I have developed an interest in numbers & analysis through six sigma in due course now.