Do capital markets, number crunching, financial statement analysis, and growth projections excite you?
Then, there is a good chance investment banking is exactly the career that will give you the highest rewards for your efforts.
Investment bankers deal with capital raises and deployment for governments, private & public companies, and sometimes even non-profits. So, in essence, if you are an active business and need strategic financing – you would approach an investment bank.
With the growth projections for India soaring every year, the need for fresh capital infusion in businesses has only gone up. And with that, the need for investment bankers has surged. As a result, the investment banks in India have witnessed a substantial hiring spree.
Most investment banking careers have a well-defined career trajectory. You join as a Summer Analyst, get hired as an Analyst, get promoted as an Associate, and then keep going through the promotions lifecycle until you leave investment banking or become a Managing Director.
So, if you have ever targeted a financially and professionally rewarding career in high finance, you are at the right spot.
Investment Baking: Industry Landscape
Investment bankers have a key skill that many other professionals lack – summarizing otherwise complex situations. Let’s use that skill and understand what it means to be an investment banker in India.
1. Salary Range
Investment banking salaries tend to start at ₹12 lakhs per annum for most entry-level roles in the front office and most Associate roles in the back and middle offices. (What are back office, middle office, and front office roles – we will uncover that in a bit!)
How much you make as an investment banking Analyst or Associate depends on where you graduated from and what hiring cycle you were brought in. Generally, summer analysts hired from target schools are paid more than Analysts who have been laterally hired in the firm. However, this trend may not hold in some firms.
So, it is more important to understand the types of firms that hire investment banking Analysts and Associates.
2. Top Firms: Boutiques and Bulge Brackets
When you start looking for investment banks, you will find some common names pop up across the board:
- Morgan Stanley
- JP Morgan
- Goldman Sachs
- Bank of America
And some other banks in the same league. These banks are generally called bulge bracket banks in investment banking hiring circles. A large majority of these banks are American and offer a full range of investment banking services across industries like technology, media, telecom, healthcare, financial services, manufacturing, energy, etc. They also tend to have specialist teams in equity and fixed income securities.
Bulge bracket banks have a structured approach to hiring and promoting talent. And that is where they tend to differ from boutique investment banks.
As the name suggests, boutique investment banks focus on specific industries, geography, or even the type of financing required. They have smaller teams and more distinct cultures. Quite frequently, even the size of deals led by boutique investment banks will be smaller than their bulge bracket counterparts. But, that is not a universal fact.
Here are some of the most successful boutique investment banks in India:
- Avendus Capital
- O3 Capital
- Veda Corporate Advisors
- MAPE Capital Advisors
- Spark Capital
And more. Alongside the bulge brackets and the boutique investment banks, you will find a third category of investment banks prevalent in the Indian capital markets – the investment banking arms of the Indian banks. These are firms like:
- ICICI Securities
- SBI Capital Markets
- Axis Capital
- IDBI Capital
- Edelweiss Financial Services
These investment banks offer similar services with different degrees of expertise in industries and deal sizes.
3. Key Skills
The skills required for becoming a successful investment banker change as you evolve from the Analyst to Associate to Vice President role. However, the foundational skills remain more or less the same:
- Financial Modelling: At every step in the capital-raising process, you will be analysing companies’ financial statements and then preparing forecasts on these statements based on the data you collect from the company owners, investors, and your teammates.
- Equity Valuation: If you look at financial modelling as a process, you will find equity valuation to be an output of this process. There are many approaches to finding the value of a company’s shares. Some of the more common investment banking methods are absolute and relative valuation. (We will cover these in the Smart Way to Become an Investment Banker section in this post.)
- Sales: You can easily survive the first five to six years as an investment banker without worrying about sales. But, as you start reaching the Vice President and Managing Director route, your role will comprise responsibilities primarily associated with bringing in more business. Therefore, strong communication skills are vital to developing an edge in sales.
4. Exit Opportunities
Exit opportunities are the kind of roles you can target once you have been in investment banking for 2-4 years. Many young professionals enter investment banking with the explicit goal of getting an exit opportunity. Depending on the type of investment banking role you have, you can get into any of these roles at the end of your tenure:
- Private Equity and Venture Capital Funds
- Hedge Funds (Alternative Investment Funds – Category III)
- Corporate Development Roles
- Institutional Investing, Family Offices, and Sovereign Wealth Funds
- Management Consulting
- Financial Planning & Analysis Roles
- Wealth Management
Roles in Investment Banking
If you assess an investment bank, you will find a range of departments, functions, and teams. To the untrained eye, this can all seem identical. However, each team in each department has a specific job. And that job can define your investment banking career trajectory.
Here are the more common roles in investment banking:
Mergers & Acquisitions are the bread and butter of investment banking. When most people talk about the high-paying investment banking jobs, they are talking about M&A. As an Analyst or Associate in this team, you will prepare pitch books that contain financial models, projects, and due diligence reports on companies that are being acquired or want to be acquired.
2. Equity and Debt Capital Markets
Apart from M&A, investment bankers also help companies raise fresh capital from the equity and debt markets. You can raise money by issuing new shares or by taking a loan from the market in bonds, debentures, and other fixed-income securities. Investment bankers help companies prepare the pitch books and financial documents to go through the process and even place them with institutional investors who can be on the buying end of this purchase.
3. Sales & Trading
Sales & Trading once used to be the most rewarding jobs in investment banking. Now it has changed. Most S&T roles now focus on computer models driven by AI and big data used for trading stocks, commodities, derivatives, foreign currencies, and other financial securities in a fraction of a second. In addition, unlike your free online brokers, investment banking S&T teams focus exclusively on large investors.
4. Investment Banking Operations
When your cousin, who got her MBA from some business school, talks about her new investment banking job, there is a good chance she is talking about an investment banking operations role. Like most operations roles, the IB operations role focuses on supporting the job of the front office investment bankers. Here is where the front office, middle office, and back-office dichotomy becomes important.
Front office roles tend to focus on working directly with the clients. Hence, the front office roles at major American investment banks are in the United States of America. On the other hand, back-office roles focus exclusively on supporting the front office roles. That is why many of these roles are in India.
IB operations have responsibilities quite similar to front office roles, but their tasks are more predictable and might not focus on specific industries.
5. Risk Management
Risk management is the practice of using computational risk models to minimize volatility. Such roles tend to fall in the middle office function. They work in partnership with the compliance team and ensure that each transaction is within the defined risk parameters of the bank and does not expose the bank to any substantial and unnecessary financial obligations.
How to Become an Investment Banker in India?
Becoming a front-office investment banker in India has been well-defined for decades now. Most investment bankers are alumni of IITs and IIMs, and hence have easier access to the major investment banks in India. Here are the common steps to becoming an investment banker in India:
1. Applied Skills
The first thing you have to learn are the key skills – financial model, presentations, communication, and financial statement analysis. If you are in a four-year undergraduate role, you should start acquiring these skills during your second year. Most students take up online courses to acquire these skills.
While skills give you a good start, you will need a strong network of professionals who can vouch for you to get a shot at the Summer Analyst internships. In addition, most such internships are offered to students a year before they graduate, so they have an Analyst’s job available right when they graduate.
Suppose you are a student at an IIT or a prestigious undergraduate institution. In that case, all you have to do to get into these roles is get in touch with your career development cell or reach out to your seniors on LinkedIn. Since you are a part of the ‘target school’ cohort, you will get a fair chance to apply.
3. Analyst and Associate Roles
You will have to understand the difference between Analyst and Associate roles. Analyst roles are entry-level roles largely hired from the Summer Analyst pool of applicants. Associates are hired from a wider range of applicants, including former Analysts and people entering the industry from different industries. Some of the more common industries that people come from are management consulting, accounting, and financial services.
Suppose you did not go to the right undergraduate target school, did not have a Summer Analyst role, did not have an Analyst role, and are not in a directly relevant industry. In that case, you might need an MBA to have a decent shot at becoming an investment banker. Generally, investment banks hire from the top 30 business schools like the IIMs, FMS Delhi, XLRI, JBIMS, SP Jain, NMIMS, Symbiosis, etc.
The Smart Way to Become an Investment Banker
You did not go to an MBA or even a target school. Does that mean you have no chance of becoming an investment banker? We live in an age where you learn nuclear physics from the comfort of your home. If you have the ambition and the work ethic, you should be able to become an investment banker.
Here is a smart way to become an investment banker, no matter what educational, professional, or life experience.
1. Set a 12-Month Goal
You might have heard about training boot camps that can teach you anything from coding to trading in a few months. But unfortunately, you cannot take the same approach to build a career in investment banking.
In theory, you can acquire applied skills like financial modelling and financial statement analysis in a few weeks. But, what differentiates novice investment banking analysts from those who add value and make accelerated progress is that the latter have a deep understanding of the concepts they apply.
For instance, anyone can teach you a discounted cash flow model in under an hour. But, selecting the growth rate for the company and calculating a reasonable weighted average cost of capital would require some subjective assumptions. The better your understanding of the underlying concepts, you can derive better conclusions. And getting a good grasp on such concepts will require some work from your end.
Hence, it is better to have a 12-month plan that you can execute over a 2-3-month crash course that takes you nowhere.
2. Prepare for Professional Credentials
Since investment banking is a highly sought-after career, any form of differentiation you can bring to the table will help you stand out.
One of the most common professional credentials taken up by investment bankers is an MBA from a top business school. However, since we have already discussed this possible route, we can skip to other more rewarding and less obvious channels.
You can prepare for your CFA or FRM credentials. CFA prepares you to be a better credit or equity research analyst and eventually a portfolio manager. But, it also gives you a solid grounding in quantitative analysis, corporate finance, economics, and different asset classes.
FRM is a comparable designation ideal for people seeking roles specific to risk management. The only challenge with CFA and FRM is that these designations can reasonably take anywhere between 18 months to several years – depending on how much time you need to clear each level.
The other possible route is to focus on professional diplomas and certificate programs that give you directly applicable skills. You can find many such programs on the IMS ProSchool website or get in touch with one of our career experts to find the program that fits your needs.
The good thing about online programs is that they allow you to learn at your own pace while still helping you acquire the much-needed applied skills. As a result, you are not bound by a long timeline and are moving closer to your goal of becoming an investment banker each day.
3. Get Core Expertise: Corporate Finance, Economics, and Quantitative Methods
Now that your 12-month calendar is in place, your primary focus should be on developing expertise in three areas – corporate finance, economics, and quantitative methods.
Here is how each subject matter area will pan out:
- Corporate Finance: The subject focuses on how a company raises and deploys capital to increase shareholder value. You should have a good understanding of the balance sheet, cash flow statement, profit & loss statement, and how each line item on these financial statements is connected.
- Economics: The subject is taught at the high school level across India. But, you will have to dive deeper into micro and macroeconomics and how they are linked with monetary and fiscal policy. Such understanding will help you assess the interest rate regime and use it for your financial models later.
- Quantitative Methods: Finally, you should have a good understanding of time value calculations and basic statistics. Both the skills will help you analyse data with greater confidence and understand the difference between the different interest rates for comparable financial securities.
4. Acquire Applied Skills: Financial Modeling, Equity Valuation, and Communication
Economics, corporate finance, and quantitative methods are a good start. But you have to tie it all together and be able to use your newly acquired expertise to add value to your clients.
For this, you will need a good grasp on:
- Financial Modelling: You should be able to use the company’s current and historical financial statements and model them out to compare them with industry peers and project growth for various scenarios. Some investment banks have financial modelling tests baked into the hiring process. As a result, financial modelling is one of the most prioritized skills for young investment bankers.
- Equity Valuation: With your financial modelling skills and corporate finance expertise, you should be able to ascertain the reasonable and justifiable value of the common stock of private and publicly listed companies. The day you can do this without errors, you will be 50% ready to be an investment banker.
- Communication Skills: You might be wondering – even after understanding financial modelling, equity valuation, and corporate finance, you are only 50% prepared to be an investment banker? Yes. The other often-ignored skill is – communication. You will be working several hours alongside successful Vice Presidents, Managing Directors, CFOs, and CEOs. You should be able to effectively communicate your insights in both writing and spoken formats.
5. Get Industry Mentors
Even after you acquire all the skills – you will need some guidance in navigating the application process and career progression. This is where you can have an edge, as far as you have an industry mentor to help you learn the ropes of the business. Industry mentors can steepen your learning curve and ensure that you do not make any fatal mistakes. Moreover, they can help you accelerate your career growth for several years at a time.
If you have reached here – congratulations. You have the ambition to be a great investment banker. All you need is a structured resource that can deliver every point discussed in this post. But wouldn’t that be asking for too much?
Not really. This is exactly what our community of 100+ faculty members worked on to design the Post-Graduation Program in Investment Banking & Capital Markets. The program is taught by industry leaders with credentials like CFA, CA, and more. As a result, you can develop expertise in the core subjects like corporate finance, economics, and quantitative methods along with applied skills like financial modelling, equity valuation, and communication – all with one program that costs less than 10% of most MBA programs in India.
If you have decided to become an investment banker, all you have to do is click here and connect with one of our industry experts.