All you wanted to know from an investment banker!
Many of us, including both B-school students and aspirants often have their eye balls bulge out when we hear the word investment banking. The instant words which come to our mind on hearing the name are glamour and high pay packages. But very few of us actually know what investment banking actually is, what it deals with day-in day-out and the reason for the high pay and high glamour. Media Cell, IIM Kozhikode, recently held a short interview with Mr. Hitesh Raghavan, an investment banker from Wall Street, who was in campus for an interactive session arranged by the Industry Interaction Cell. Hitesh, having done his B.Tech from IIT Bombay, did his MBA from Kellogg’s School of Management in the U.S before finally becoming an investment banker in the Wall Street. We had the opportunity to get his views and insights on the recent trends in the M & A scenario and its future along with some general ideas about careers in investment banking.
Q: Sir, our first question to you as a stakeholder and as future participants in the global economy would be, has the economy really recovered from the sub-prime crisis and euro crisis? Are we safe now?
Ans: That’s a great question and it requires a more detailed explanation than the one which I would give now. I think that the recovery is for real. The recovery in terms of stock markets and investor sentiments and all the other metrics that you learn are all real. But is it resilient? I think that is the question. I think that resiliency is shattered somewhat. And any who says that the future that in the next couple of years is safe is either lying or haven’t really thought through enough. But overall the recovery has been good. But if you analyse it sector-wise, industry-wise and geography-wise, you will find soft spots. That’s where you have to be careful.
Q: Sir, talking specifically about the American market, a lot of big-ticket M& A deals that closed in the technology sector in the past couple of months did not have a big I-Bank advisor. Do you see a trend here, the way banks have been marginalised in these transactions?
Ans: The question is which banks have been marginalised and in which sector. Recently, a lot of boutique investment firms have developed the same kind of core competencies as that of the large banks. They are now offering the same quality of service as the larger ones. This has also been made possible due to the fact that there has been a considerable shift of talent towards the boutique firms. The question that arises then is that if you can get your job done by the smaller firms then why do you need to approach the bigger ones. Also, a lot of bankers, folks like me have been frustrated for being held responsible for the world crisis in 2008, whereas what we are essentially responsible for is providing advice to organizations, and facilitating them. Hence the reason for the significant shift of talent towards smaller banks.
Q: Sir, coming to India, the year 2014 has seen a spike in M&A activity. The volume of transactions has reached $24bn which is more than twice of last year. Further, the growth has been sector agnostic- whether it be telecom, healthcare, e-commerce etc. What is your overall outlook on this ? Do you feel the energy will be sustained in the coming months?
Ans. I’m fairly positive about it. This is the trend that has been observed in the US as well, that is the coming back of M&A in general. That is the sentiment that is prevalent in Europe, in South East Asia, and has been seen in India. It is part of this general framework, that it is better for the M&A activity to happen now. Because there is some amount of wheels on the recovery happening now in the world, and since you don’t know what is going to happen tomorrow, so it is better to act now. For the last 2 years, people have been thinking about doing an M&A but have not acted upon it. You have listened to pitches upon pitches from bankers about how a particular transaction makes sense, but they have not pulled the trigger. Now they are putting the trigger. So I am quite positive about it.
Q: Sir, another question that comes from this, why do you think top global investment banks haven’t really hit it off in India? In comparison a lot smaller banks have been coming in. Is there a trust issue here? What are the key challenges that you see?
Ans: I think the fundamental challenge lies with the structure of the business environment. Most of the global firms like transactions happening in a structured format. They want to break down everything into black and white, and then explain, no matter how complex the deal is and even if it involves hundreds of dimensions. In America it is possible, because of a mature market presence. Here in India, a lot of transactions happen in a unstructured way which is both an advantage and disadvantage. It is an advantage because unstructured means more creativity and speed. This is something that large I-Banks don’t understand. So what they have had challenges is with respect to customizing their business model here in India to be relevant. And its all about maintaining relationships. Investment banking is a trust based relationship business. So if you want the CEO’s from small companies in India to call them here, you have to build the trust based relationships first. If you are going to tell them that these are the 10 things we need and that’s the only presentation I am going to give you and he is thinking that what is in it for me, he would be frustrated with the structure of the working environment. He is going to call the smaller banks and get things done instead of coming down here. So it is a challenge for the global firms to get adjusted with the way business has been done here.
Q: Sir, your job is often associated with high pay and glamour. Many of us fall for this bait with limited knowledge of the actual substance. Can you give us a realistic picture of where the glamour ends and the gruelling starts?
Ans: (Laughs) There are two ways of looking at it. One might be very satisfied with all the A-class facilities provided to him or one might feel absolutely frustrated with the gruelling work hours one has to put in everyday. I have worked for more than 100 hours a week. But then again, I had this long term goal in mind of where I want to be after 15 years may be. I have always not tried looking very far beyond. Instead have focussed on the short –term plans more. That is how I landed up in Investment banking anyways. But yes the job demands huge dedication and lot of effort. If one dichotomises the words work and life and tries to balance the two, then he or she would never be able to balance the two. Your work is your life and vice –versa. One should be very passionate in order to sustain and excel in this profession.
Q: So moving away from the technical questions to the more interesting aspects, you have been living the Big Indian dream- from IIT Bombay to MBA from Kellogg’s school of management and finally landing up with the golden job on Wall Street. How has been your experience till now and what message would you give to us the finance aspirants?
Ans: There are a couple of things I would like to tell you. First of all I did not have this grand strategy to land up in investment banking. My dad wanted me to write the IIT –JEE, and since I was basically good at maths and science, I landed up in IIT Bombay, honestly. During my IIT days it turned out to me that even though engineering is exciting, this is not something that I necessarily wanted to build my career on. I found more interest in the business and financing world and what was happening around me in the economy. But I did not know much about either business or finance. What I did know was that I wanted to work in the American market where there were opportunities and where the market was booming. So, I went to the US and started working there. It so happened that I landed up with the financial services industry. That again was not a conscious decision. And there I developed knowledge about various sectors and industries over the next 7 years. The next question was how do I become an expert in this. I could have either become a consultant or a investment banker. I went ahead with the second. That’s how my career has panned out so far.
For the student cohort here, I can only say just stay focused. Don’t have a myopic vision and lose out on the long term benefits. Take informed risks in life, figure out your passions and do your best to chase them.
Interview conducted by:
Tanya Gupta and Koustav Pal, Media Cell, IIM Kozhikode
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