The new masters of the universe

Is greed good? I’m sitting at the hallowed turf of cricket, south Mumbai’s Cricket Club of India (CCI).Legends such as Sunil Gavaskar and Dilip Vengsarkar once played here, while Sachin Tendulkar routinely middles balls at its nets. Membership here is expensive (upwards of Rs 25 lakh for 10 years) and scarce (by invitation only). Next to me is Gaurav Pradhan, the 38-year-old managing director of Deutsche Bank, a member. It’s monsoon in Mumbai, the sky is specked with grey, and the orderlies who serve us mint tea and thinly sliced cucumber sandwiches look like relics from the Raj. Genteelness pervades the atmosphere which makes for an unlikely setting to discuss lucre with one of India’s smartest investment bankers. He likens his job to that of Richard Gere’s character in Pretty Woman, someone who buys and sells distressed assets. He comes across as gentle, with a ready smile and a slight drawl, though on the street he has a reputation of being a bold and flinty negotiator who is ever ready to play hardball.

He doesn't disappoint. Of course he is, he says. “I realised I was greedy for certain things since I was very young. If you have greed, work on it. Success, as they say, is 99% perspiration and 1% inspiration.” Not satisfied, he volunteers further. “The incentives to do anything in life are four—love, hate, greed, and fear. Out of these, fear is the greatest stimulus. Then it’s greed. I would say that sometimes these two are greater than even love.”

This is a quintessential Master of The Universe, complete with a 5 Series BMW, faintly superior manners, and a management degree. While he is loath to discuss how much money he makes, headhunters such as Vijay Vaishnav, managing director of Indusion Consulting, who regularly scalp the likes of Pradhan, says that MDs of i-banks who didn’t burn in the slowdown would have made $1 million or double that last year. That’s between Rs 4.5 crore and Rs 9 crore and the money is almost on par with what their peers in any global financial centre would earn. Adjusted for inflation, that’s two to three times what top bankers earned even a decade ago.

Pradhan represents the Gen X of Indian i-banking, the folks who started their careers in the early 1990s and occupy corner offices today. Their careers and attitudes have been shaped by an India with tear away economic growth and a can-do outlook and satellite television. Some of them strayed into i-banking (“I wanted to do a Ph.D. But you know how it is, you get into investment banking, and then you grow and stick to it,” says Harpuneet Singh, executive director, mergers and acquisitions, HSBC India); while others had to educate their families about the profession. “My relatives thought I was a broker,” says Sachin Wagle, executive director of i-banking at Morgan Stanley India.

These people, or, for that matter, others like Rohit Chatterji, managing director and head of investment banking at J.P. Morgan India, or Rahul Chawla, managing director, global markets group, Credit Suisse India, aren’t CEOs of the companies they work for yet, but are a mere rung or two below—a few will ultimately get there. More pertinently, these are the hands-on deal makers, the people who get things done. “Investment banking is a simple concept. It is about bringing capital and opportunities to the best creators of value in any business,” explains Chatterji.

Chatterji and his peers live in a hushed world, one where a stray sentence can cost millions, and, for the most part, rarely interact with journalists. Indeed, the firms they work for prefer that most of them remain faceless. However, Fortune India got a rare glimpse into their world of greed, power, privilege, money, burnouts, conflicts, contradictions, and, ever so occasionally, even high adventure.

Some years ago, there were riots in Jakarta, Indonesia, in the aftermath of President Suharto’s downfall. Caught in the violence were a bunch of i-bankers who were told to leave the city and bundled into cars for the airport. As their motorcade turned a corner, they came upon a stretch of road where the rioting seemed frenzied. “The chaps in the car ahead rolled down their windows and started throwing out cash, hoping that the rioters wouldn’t attack,” says Chatterji. They didn’t.

He is recounting this story at J.P. Morgan’s shiny new office with an extensive glass façade at Mumbai’s Bandra-Kurla Complex. From his room on the seventh floor, you see large swathes of the city’s fastest growing business district, where real estate prices are starting to rival that of downtown Nariman Point which, till recently, was India’s most expensive business district.

Whose cash was thrown from the car? “Who cares,” he says. “Is it more important than life?” “You can’t claim that expense, that’s for sure,” he adds as an afterthought.

DECADE AND A HALF AGO, when most of them started out, the Indian i-banking scene was primitive by global standards. It was mostly about public issues, and the odd disinvestment, all primarily the preserve of outfits such as SBI Capital Markets or J.M. Financial Services. Cross-border mergers and acquisitions (M&As); American or global depository receipts; hybrid instruments such as perpetual bonds or mezzanine financing; structured products such as cross-currency swaps; or the down-selling of packaged instruments, were absent.

What mattered in those days was who you knew. Heavy-hitters such as Nimesh Kampani (J.M. Financial), Hemedra Kothari (DSP), and Uday Kotak (Kotak Mahindra), who ruled the 1990s and early 2000s were legendary for the intimate relationships they shared with the big guns of India Inc. Deal making was driven by individuals, rather than institutions.

Credit Suisse’s Chawla, who was involved in some of the Tata Group’s recent refinancing deals for Tata Motors and Tata Steel, recalls that age. “When I was at the Indian Institute of Management Calcutta in the mid-’90s, there were three banks that had come to interview us and all they wanted were polished guys, chaps who could talk and present themselves well. That, in my opinion, was a major part of banking in that era.”

All that changed with the arrival of the big American firms such as Morgan Stanley (first through a JV and then alone), Goldman Sachs, and J.P. Morgan, along with their European peers such as Credit Suisse and Deutsche Bank. While the Rolodex still mattered, it mattered less: What mattered more was the ability to identify new pools of investors, perfectly execute road shows around the world, or back-stop large deals.

“This isn’t the mid-’90s, when relationships were key to get you mandates,” says Sourav Mallik, senior executive director, M&A, Kotak Investment Banking. “While relationships are important, today everybody has them. You can make money if you come up with a new generic idea, but after that, everyone will have them. You have to come up with a customised solution that fits the client’s needs from among those ideas before anyone else does.”

Sipping tea in the new lobby of The Oberoi at Nariman Point, Mallik talks about Tech Mahindra’s buyout of Satyam Computer Services in 2009. Tech Mahindra had emerged as the highest bidder at Rs 58 a share. It first paid close to Rs 1,756 crore to buy fresh shares for a 31% stake in Satyam. Then it needed to make an open offer (which it finally did for Rs 1,134 crore) to buy another 20%. But given that Satyam shares had collapsed after its chairman, L. Ramalinga Raju, admitted to fudging the books, pricing the open offer became tricky. Meanwhile, Tech Mahindra had to float a special-purpose vehicle to raise debt to buy Satyam. This was all orchestrated by Kotak Mahindra.

“You are no longer merely financing things; you are fuelling dreams and aspirations. And if you can’t, you risk losing a client,” says Morgan Stanley’s Wagle, adding: “You have to continuously give the client a sense that you are providing value. Send a research report or give them a new idea for financing.”

A senior banker who remembers the earlier era says that “As deals get more complex, today’s bankers are getting hungrier. They get more opportunities and are eager to make the most of them,” adding: “India has finally begun mimicking the ‘winner take all’ culture on Wall Street.” Pradhan says he tells his team they should have red eyes, from the “fire burning within”.

Another ex-banker says that today’s i-bankers find it difficult to turn down business, particularly because their compensation is so intrinsically tied to the number of deals they pull off. “What was great about the Hemendra Kotharis and the Uday Kotaks was that clients would call them for their opinions even if they were not on the deal. Their ability to say both yes and no to a deal was what made their opinions so valuable.”

Some, like Chawla, would prefer to characterise this as impatience. “Admittedly, the newer generation of bankers is entering the trade for more money. But more than that, they are impatient. I-banking is also about patience, creativity, and experience. Guys today are running ahead of themselves.”

THIS TAKES ITS toll. Every single banker interviewed for this story was under 40, in a sort of golden band between 34 and 40. And every one of them has grey hair. All of them complain about the days spent travelling (going abroad at least twice a month seems mandatory), hours spent at airport lounges, and constantly eating hotel food. But through all this, they try to maintain their own images of who they are.

Deutsche Bank’s global markets centre head Anirban Lahiri defines this best. He says he made it to MD in “six years, five months flat”, after joining the bank’s trading floor in London in 1999. “Most take close to 14 years,” he says, sitting in his glass room in the middle of Deutsche Bank’s sprawling back office in Goregaon, with open floors and miles of trading terminals. “My wife keeps telling me that I have achieved a phenomenal amount in a relatively short time. She asks why I don’t slow down.”

Few are on Facebook or Twitter; for them these are time wasters. “BlackBerry and e-mail are great productivity tools, but that does not necessarily apply to social networking,” says Wagle.

These are people with acute career anxiety. Lahiri’s colleague Radha Dhir, who heads Deutsche Bank's corporate treasury business says she volunteered for every “nightmare project that came up” to compensate for lost time when she returned from maternity leave in 2002. She managed to lead the first foreign exchange sales team, the first derivatives sales team and so on. In 2008, she became an MD, a year before her peers. She had joined Deutsche Bank in 1995 and is one of the few women heading sales in a large bank. “I got it (the promotion) because I was best suited, not because I am a woman,” she says. “I wanted to go abroad to study. But after passing out of IIM, Bangalore, I started working and the adrenalin rush was hard to resist. I could have joined my dad’s business. But I wanted to sustain my lifestyle on the dint of my own efforts.” The price: She has missed some of her daughter’s school functions in the last three years. Her family vacations have stayed sacred though, and having a supportive husband helps.

Much of the anxiety has to do with the fact that i-banking is ultimately a short-term profession. No one comes here thinking that they are going to do it till they are 60. Most want to do it for 15 years, 20 at the most. “Think of a country at wartime, burning millions of units of energy to ensure that it wins the war and can then savour the fruits of victory,” says Lahiri.

Indusion’s Vaishnav characterises it as living in the constant shadow of being sacked or burning out. According to estimates off the street, nearly 40 to 50 bankers (those with 15 plus years of experience) were laid off between 2009 and 2010 in India alone.

In a business where mistakes aren’t tolerated (“Never make the same mistake twice,” says Pradhan), the burnouts are all too frequent. A Mumbai-based psychiatrist says that the work-related stress inevitably spills into their family lives. “I have seen close friends losing their loved ones. That’s one fear I have, of losing my family,” says HSBC’s Singh.

Others complain that promoters often treat them shabbily. Though nobody wanted to go on record for fear of upsetting a client, many expressed the opinion that their time was forever taken for granted—meetings on Sundays, being asked to come at odd hours to meet the CEO and so on. Many have to work in strange, even ridiculous, situations. Like negotiating a complex deal at a chairman’s mountain home in Taiwan, sitting next to his huge, temperamental dog, or negotiating a deal in Thailand from a lock-up after a visa-related misunderstanding. Chatterji says he was once asked to arrange an elephant for a company’s listing ceremony.

But, what is perhaps most demeaning for all i-bankers is when promoters haggle over their fees. “On banker’s fees of 2.5% of deal size, they’ll try and argue for 50 basis points,” says one. “It’s almost as if there’s no value in what we have done.”

AND AT THE HEART OF ANY INVESTMENT BANKER’S life is money. Money makes them objects of envy, and sometimes, like after the last meltdown, objects of scorn. These are the guys who lead breathless lives—fly business if not first class, never cattle, drive Bimmers and Audis, buy million-dollar homes at Mumbai’s Cuffe Parade, Malabar Hills or Pali Hill, get their suits tailored on London’s Jermyn Street or, closer home, in Singapore’s Marina Square, and buy Chateau Petrus 2002 for Rs 1.75 lakh a bottle at Aer, Four Seasons, arguably Mumbai’s toniest watering hole, and expense it, and so on.

The stories they trade smack of the gilded high life. One banker speaks of a colleague who paid Rs 1.25 crore for a Mercedes CL. Another speaks of his vacation in a $1,500 a night castle in Scotland. Chawla takes four vacations abroad each year: “Two short ones, and two very short ones,” he says. Pradhan hires expensive SUVs on every vacation overseas, while Dhir often shops abroad. A Mumbai real estate broker says, after businessmen and film stars, i-bankers are the most indifferent towards cost of housing. Almost every banker that Fortune India spoke with owns at least three houses—one in Mumbai and others elsewhere. Indeed, along with fixed income assets, real estate is their favourite investment option, while most stay away from equities. The other emerging choice: Privately investing in startups by family or friends.

Yet, for all such exhibitions of almost obscene affluence, the relationship between India’s i-bankers and money has never been more complex. Unlike their peers abroad, all of them are forever trying to downplay their wealth, as if they are embarrassed by it. In conversations, they talk about everyday stuff—mortgages to pay off, the rising cost of health care for ageing parents or how expensive schools are today.

Many feel they will embarrass their clients if their wealth is too obvious: Most CEOs don’t make as much. “It is possible that i-bankers make more money than CEOs of some companies. But we provide a service,” says Singh.

Others point to where many of them come from—small-town India—and say they carry the middle-class sensibilities over, despite their present overt affluence. Lahiri is from Kulti, West Bengal, where his father was with the steel industry; Chawla was born in Bokaro, Jharkhand, the son of a businessman, while Singh grew up travelling all over India—his father was in the navy.

Some of them also carry memories of a different India, of closed markets and little growth. Both Pradhan and Singh remember the protests surrounding the implementation of the Mandal Commission report while they were in college in Delhi. (In 1990, then prime- minister Vishwanath Pratap Singh decided that India needed reservations for backward classes, which sparked riots among students from the upper classes, who thought their careers would be usurped.) While Singh didn’t take part in the agitation, the memories of those days are still fresh and temper their attitudes towards their erstwhile peers. Pradhan watched as one student set himself on fire. “I can still recall his face,” he says.

IT’S NEARING EVENING as I meet Wagle at the Mumbai Cricket Association, a new club in Bandra. It’s all glass and steel, nothing remotely old world about it. It’s the CCI’s upstart competitor. Wagle is talking about Nanhi Kali, a non-profit trust he is associated with, that looks after underprivileged girls.

He finds the charity work a good way to unwind, away from the everyday madness of doing deals, keeping clients happy and, above all, being an i-banker. “Ultimately, you need to give back to society, right?” he asks somewhat rhetorically. After all, in the land of mystics, even greed ultimately has to serve a noble purpose.