In 99% of cases, no.

But one market where candidates often think otherwise is India.

Banks there try to ‘sell’ you on back and middle-office roles by offering higher base salaries and claiming that these roles lead to solid exit opportunities.

But you should be skeptical.

To get the full story, I recently spoke with a reader who broke into investment banking and now works at one of the top banks in India:

Breaking In: Out of 1.3 Billion People, How Many Want to Be Bankers?

Q: Can you walk us through your story?

A: I attended a top IIT (Indian Institute of Technology), did a few internships, including one in the back office of a bulge bracket bank, and I became interested in corporate finance like that.

But there isn’t that much on-campus recruiting for IB roles, even at the top IITs – banks mostly want candidates from the top IIMs (Indian Institutes of Management) instead.

I recruited at a few banks, consulting firms, and prop trading firms, but the on-campus process is a circus because you only have a few hours to interview with different firms – so if you assess your odds incorrectly, you could easily walk away with nothing.

I didn’t win any offers from on-campus recruiting, so I began a hardcore networking effort and contacted almost every bank in the country.

I went through 8+ interviews with some banks, but I still couldn’t win an offer.

But my LinkedIn networking finally paid off: I won interviews from a message I sent to one banker, and I went through the process and eventually won an offer at a top domestic bank.

Q: Some people say that “networking doesn’t work” or that it’s “impossible” to break into investment banking in India.

A: The first statement is false. Networking works well if you do it properly.

And if you’re not at an IIM, you pretty much have to network to get in.

It’s not “impossible” to win IB offers, but it is extremely difficult because there are few openings: The top banks in the country have only a few dozen people in their IB groups, and each group might hire only a few people each year.

Altogether, there are fewer than 2,000 front-office roles in the entire country, and that’s if you define “front office” quite broadly (i.e., not just IB, but also related roles such as Big 4 Transaction Services, equity research, S&T, etc.).

Banks recruit candidates from:

• The Top IIMs – They want candidates who have completed a Bachelor’s degree and then studied at an IIM, and ideally one of the top two: IIM-A (Ahmedabad) and IIM-C (Calcutta). A few recruiters will also go to IIM-B (Bangalore), which “places second.”

IIM candidates join banks as Analysts and earn solid compensation.

• The Top IITs – Banks try to get undergraduate students at the IITs to accept back-office or “knowledge process outsourcing” (KPO) roles; there aren’t many front-office opportunities at this level.
• CAs (Chartered Accountants) – The CA program is selective and well-regarded by professionals in India. Some banks, such as BAML, have recruiting programs specifically for CAs.
• Non-IIM/IIT Schools – If you’re in this category, you’ll have to network aggressively and target lower-tier banks that work on smaller deals.

Q: Why are there so few positions at Investment Banks in India?

And what options are there if you don’t get into IB?

A: There aren’t many front-office roles because banks focus on back-office and KPO-style work here.

India is in the top 10 economies worldwide, but there isn’t much deal activity compared with similarly-sized economies like the U.K.

If you’re an undergrad, back-office or KPO roles are the most common alternatives to front-office IB jobs.

In those roles, you’ll mostly work on the first drafts of pitch books and send them to IB Analysts in NY and London for corrections and edits.

On my campus, dozens of students won back-office operations roles at various banks.

By contrast, only a handful of students across all the IITs won front-office IB roles.

Banks like to lure students in with higher compensation; these back-office roles at international banks sometimes pay higher base salaries than front-office IB roles at domestic banks.

It’s easier to win consulting jobs if you’re at a top university here: Around 100 to 150 students per year across the IITs win and accept roles at consulting firms.

Since it’s feasible to move from consulting into private equity, many people see it as a better option than banking.

Q: What about nepotism? Does that explain the difficulty of winning these roles?

A: Not really. If you have a relative at a high level, yes, that could help you win an internship.

But full-time roles are a different story: If you go through 10 rounds of interviews and meet everyone multiple times, your C-level uncle won’t be able to overcome a “No” vote from 3 senior bankers.

And since each bank hires few Analysts, it would be obvious if someone unqualified won an offer.

But that same person would be much harder to detect in an Analyst class of 150 in New York.

Q: OK. And what about investment banking interviews in India? What should you expect?

A: There was a heavy focus on technical questions – more so than in places like London.

Many investment banks in India assume that if you can answer the technical questions effectively, you’ll be able to do the job effectively, so they sometimes pay less attention to “fit.”

They also ask about macroeconomic indicators, such as the CPI of India, the expected GDP growth rate, and the rate of inflation.

Finally, banks expect you to know about recent deals in the market and the domestic and international banks that have advised on them.

I did not receive case studies or modeling tests because I was applying with no full-time work experience.

But consulting roles require case studies, and almost all private equity funds give you modeling tests.

On the Job in India: How the Domestic Banks Won

Q: Thanks for that description.

What is the investment banking industry there like?

A: A long time ago, many of the international bulge bracket banks here had joint ventures with domestic banks.

But that changed over time, and most domestic banks ended these JVs and began operating independently (e.g., Kotak with GS and JM Financial with MS).

Deal activity is driven by ECM rather than M&A, and many IPOs are quite small by the standards of Western markets ($80-$100 million USD).

Of the top investment banks, most of the international bulge bracket banks and the “In-Between-a-Banks” have a presence here.

If there’s a large M&A deal, the companies involved sometimes hire one international bank to gain better access to worldwide relationships and capital.

Of the elite boutiques, Rothschild, Lazard, Evercore, and Moelis also operate here.

A few of the top domestic banks include Kotak and JM Financial.

Q: Are there any differences in the deal process, valuation, and analysis?

A: Not really. As with other emerging markets, sometimes you’ll use higher discount rates because of geopolitical and country-specific risks, but accounting and valuation are similar.

One trend is that companies here have been trading at higher and higher multiples – you’ll see multi-billion-dollar companies trading at 70x P / E multiples sometimes.

Those figures imply extremely high future growth, which many view with skepticism.

Q: Yeah, those numbers sound like “private tech startup multiples” to me.

How do investment banking salaries in India differ between domestic and international banks?

A: At the bulge bracket banks, you’ll make around $100K USD total as an Analyst, and maybe a bit more than that (with a 50/50 split between base salary and bonus).

That’s a discount to pay in NY and London, but $100K also goes much further in India.

Domestic banks pay more like $40K – $50K to Analysts, but there’s a wide variance among different firms.

Many people are tempted to accept KPO or back-office roles at the international banks because they often pay higher base salaries than domestic banks do, at least at the undergraduate level.

Some large banks don’t have Analyst programs for undergraduates: They only hire IIM grads for these positions.

Meanwhile, other banks have “long-term internships,” where you might work for 6+ months to prove yourself before winning a full-time offer.

(NOTE: Compensation figures as of 2017.)

Q: Thanks for explaining all that.

What are your long-term plans, and what do most Indian investment bankers do long-term?

A: Almost every banker in India wants to get into private equity, which has been booming here.

There are no real hedge funds, and mutual funds are highly regulated, so PE is the most attractive option.

But there are not that many buy-side roles, and they’re even more difficult to win than IB roles. So, in practice, many bankers continue in banking or move overseas.

Just like everyone else, I also want to get into private equity in a few years.

My plan is to work in PE for a few years, complete an MBA in the U.S., and then return home to continue in private equity.

Q: Great. Thanks for your time, and good luck!

A: Thank you. My pleasure!

Want More?

You might be interested in reading about Investment Banking In Dubai.

The post Investment Banking in India appeared first on Mergers & Inquisitions.

If you want to work with tech startups in the finance industry, you might assume that you have to be in venture capital.

After all, technology investment banking groups work with larger, more established companies… right?

That might be true in developed markets, but in some emerging markets, such as India, investment banks dedicated to tech startups have been popping up left and right.

To get the full story on this trend, I recently spoke with a reader who’s working at one of the leading startup-focused investment banks in India:

Why Are Investment Banks Advising Startups?!

Q: Normally, I start with your story and background information, but I think we need to address the big question first:

Why, exactly, are startups paying for investment banks to advise them on fundraising deals?

A: The startup ecosystem in India has been booming – it’s the #3 country for startups behind the U.S. and U.K.

So many new companies are being formed that fundraising has become difficult.

It’s tough for many startups to stand out and tell their stories effectively; one company often comes up with an original idea, and then dozens of others try to copy it.

Many entrepreneurs here also try to raise funding too early, i.e. right after they have the idea but nothing else – and no evidence of traction.

As a result, they start reaching out to banks early on, assuming that bankers can help them in this situation (nope!).

Also, new founders don’t know the right set of investors to reach out to, so they go to banks to gain access to VCs.

Finally, venture capital firms have struggling portfolio companies and have hired investment banks to help them raise funds or sell the companies.

Most participating banks are boutique or middle-market firms, but bulge-bracket banks may also advise growth-stage startups.

Domestic banks, such as Kotak, Motilal Oswal, Avendus, and Dexter Capital are involved, but some international banks, such as GS, MS, and Citi, have also been getting into the market.

One example is Paytm’s $575 million round, where GS and Citi both advised.

Q: Thanks for explaining that.

How did you win your current role at one of these banks?

A: I did a degree at a top-ranked commerce college in India.

I networked my way into an IB internship in my second year in college and then used that experience to win an offer at my current boutique bank.

Q: And what did they ask you about in interviews?

A: Many of the standard questions on accounting, equity value and enterprise value, and valuation came up, but they also asked about the fundraising process, the startup ecosystem, and why startups succeed or fail.

For example, they asked me why fewer startups were filing for IPOs and what that meant about their business plans and market conditions.

I was also judged on my basic modeling and PowerPoint skills, but I did not receive case studies or modeling tests. It’s rare to get those in India unless you have full-time work experience or you’re interviewing for buy-side roles.

If you want a case study example, check out our Uber valuation.

Your academic background and grades matter a lot if you interview at banks via the on-campus recruiting process, but if you win interviews via networking, they care more about your knowledge and how well you can do the job.

On the Job in Venture-Capital-Meets-Investment Banking

Q: OK, I see.

What is your average day on the job like?

A: The overall deal process consists of doing an intro call with a startup, analyzing its business model and industry, and then preparing marketing materials such as a financial model and investor presentation.

Then, we reach out to VC funds, see who’s interested, execute NDAs with the interested parties, and start negotiating the deal.

As the process moves along, we share more and more information with the VC fund.

That process means that my average day consists of two tasks:

1. Calls and Preparing for Calls – If I do 4-5 of these in a day, that’s my entire day right there; I’ll usually do at least 1-2 per day.
2. Financial Modeling and Presentation Work – I spend time tweaking existing presentations and creating new presentations and models.

The financial models are mostly revenue and expense projections. We work with startups, so there is no “historical data,” and all the future numbers are projected.

Two banks preparing financial models for the same startup might come up with different numbers.

The biggest difference is that our models tend to be monthly – VC firms always want to see month-on-month growth rates.

We also build in cases for different amounts of capital raised and different timing, and we adjust the growth rates and break-even points accordingly.

Q: Which types of VCs do you pitch these startups to?

A: We focus on domestic VC firms, such as Helion, Blume, Kalaari, Ventureast, Artha, and Kae, but we also reach out to the foreign VC firms.

Of the domestic investment banks, Avendus, Dexter, Spark, CreedCap, and Unitus Capital have all been active in the space (in addition to the international banks I mentioned in the beginning).

Q: OK. This role seems like a mix between venture capital and investment banking, but what’s the culture like?

A: Overall, it’s more like venture capital because teams are small – often fewer than ten people – and Analysts often speak directly with MDs, senior team members, and clients.

There isn’t necessarily a clear hierarchy as there is in the traditional investment banking career path, and junior-level team members can easily source deals.

The work hours depend on the number of active deals, but the average day is about 10-15 hours, and weekend work is common as well, particular when last-minute Monday morning meetings come up.

The Long-Term Outlook: Robust Growth Expectations?

Q: Thanks for that comparison, but I want to push back on a few of your comments in the beginning.

Specifically, how much can bankers really help startups? Aren’t VCs mostly looking for traction in users and revenue?

A: You’re right that if the founder knows what he/she is doing and already has product traction and VC relationships, we can’t do much.

But there are several common mistakes that we help founders avoid:

• Story and Pitch – Many startups are horrible at presenting themselves. We help companies spin what they’re doing into sounding like they’re solving billion-dollar problems in a scalable way.

• Investor Bias – In India, investors tend to prefer consumer (B2C) businesses over B2B businesses because they believe that B2C companies are easier to scale. We help B2B businesses present themselves as a bit more consumer-oriented.

• Relationships – We’ve worked with dozens of venture capital firms, and we have key relationships everywhere. Even if a founder gets a warm introduction, it will be tough to win the attention of these firms, especially as a first-time entrepreneur.

• Traction and Key Metrics – Many startups attempt to prove their traction, but they use the wrong metrics to do so; we help them highlight the right ones. For example, many consumer Internet companies focus too much on user growth and not enough on customer acquisition costs (CAC), which all investors scrutinize.

• Process and Valuation – Many first-time founders aim for too high a valuation, which could result in an over-funded company or a failed fundraising; we help them temper expectations regarding funds and valuation and speed the process along.

Q: OK, fair enough. So, who would be a good fit for this role, and who would be a poor fit?

A: In India, it is tough to win investment banking roles unless you’ve attended one of the top IITs, IIMs, or some of the selected commerce colleges (or you’re coming from a Chartered Accountant (CA) background, and you’re applying to a bank that values it).

If you’re a career changer or you’re otherwise “off the beaten path,” you have a better shot at these startup-focused investment banks.

To do well on the job, you need to be comfortable with little structure, responsibility for sourcing and client interaction, and a different type of modeling work.

It’s feasible to get into venture capital or other banks from here, but it would be tough to win private equity roles.

So, if you have the stats to get into a larger bank, that’s probably a better initial option for exit opportunities.

But if you don’t, or you’re set on technology or venture capital, one of these firms could be a good option.

Q: Is that your plan as well?

A: Maybe! I plan to stay here for 2-3 years, as I still have a lot to learn in terms of pitching, presentations, and financial modeling.

In the long term, I want to go into venture capital or private equity, but I might switch firms and go to a larger bank first.

Q: OK, great, thanks for your time and for telling us about this sector.

A: My pleasure. Any time!

The post What to Expect at a Startup-Focused Investment Bank in India appeared first on Mergers & Inquisitions.

Do emerging markets ever change?

The answer seems to be “yes” – after all, how can a country stay in “emerging” mode indefinitely?

It turns into a developed market with an advanced economy (Japan), or it slides back into third-world status due to economic and political failures (Argentina).

But one potential exception to that rule is India, where the finance industry, at least, hasn’t changed much since we first started covering it.

Back in 2009, for example, there were 2,000 – 3,000 front-office IB jobs in the entire country, a lot of people were “tricked” into working for KPOs rather than real banks, and most firms recruited students from the top IITs and IIMs…

…and six or seven years later, most of that is still happening.

Since the market hasn’t changed much, I figured it would be more useful to cover a different industry instead – we’ve featured investment banking (twice) and private equity, so this time around it’s Big 4 Transaction Services (TS) in India.

And our industry expert is a reader who currently works at one of the Big 4 firms in India, advising on transactions there:

Industry Overview and How India is Different from the U.S. and U.K.

Q: So, what can you tell us about Big 4 TS in India?

How big is it, how many people work at the different firms, and what types of deals do you advise on?

A: It’s relatively small – and given the size of the economy here, it is a “niche practice.”

Altogether, the Big 4 firms here employ around 400 professionals in the Transaction Advisory/Services space (as of the end of 2015 / early 2016).

Ernst & Young is the biggest of the Big 4 firms, but the others are expanding rapidly.

Deal activity has been on the upswing in India due to the amount of capital flowing into startups, private equity funds, and other investment firms; most of our work relates to advising private equity funds on minority stake deals.

(For more about this topic, please see our tutorial on the equity method of accounting.)

Strategic mergers also take place, but they’re less frequent than financial-sponsor-related deals.

We get a lot of repeat business because deals take substantial time to close, and sometimes the PE firm wants us to follow up and do another round of due diligence if a significant amount of time has passed between the first round of DD and the planned close date.

Q: OK, so you’re saying that most of your engagements are buy-side advisory and due diligence assignments for financial sponsors acquiring minority stakes in companies.

A: Yes, but that’s not everything we do.

For example, some companies that are looking to sell a stake or raise funding will hire us to complete vendor due diligence (VDD).

In these assignments, we have much better access to data and the management team, since the goal is to give a “stamp of approval” to the company and say that everything is in order.

Sometimes we also get hired to point out red flags in VDDs that have already been carried out because each investor focuses on different criteria, and existing VDDs don’t necessarily have everything they’re looking for.

Each fund here has its preferred adviser and tends to work with that person exclusively; each Partner at my firm is connected to at least one fund and serves as the “relationship manager” for it.

Q: So what are the other differences between Big 4 TS in India and similar groups/firms in Western countries like the U.S. and U.K.?

A: Besides the heavy focus on buy-side assignments from financial sponsors here, another difference is that firms in the U.S. tend to have dedicated industry teams for pharmaceuticals, technology, manufacturing, etc.

But here, we work across industries at the junior levels and specialize in a vertical only after advancing to the managerial level.

However, this might be changing because several of the Big 4 firms here are moving toward a more industry-specific model.

The work itself is very similar throughout the world because you always use the same types of analysis to determine what’s driving a company’s revenue and expenses, what a company’s cash conversion cycle is, and so on.

One difference is that companies here report results using different accounting systems: some use Indian GAAP, some use U.S. GAAP, and some use IFRS, and so you have to know the key differences.

Finally, Transaction Advisory teams here are so small that many people don’t even know we exist, whereas these groups receive much wider recognition in other countries.

Breaking into Big 4 Transaction Services

Q: And how do most people get into Big 4 firms there?

Do these companies recruit only at the top universities and business schools, or are they seeking mostly experienced candidates for TS roles?

A: The recruitment process varies a bit based on the applicant’s level, but most of the people working in TS in India are Chartered Accountants (CAs), similar CPAs in the U.S.

We mostly recruit Associates who have completed the CA, and we greatly prefer those who have finished their “articleship” (the 3-year internship period for becoming a CA) in audit.

So if you want to work in Transaction Services here, I strongly recommend following that path.

The interview process usually goes like this:

1. 1. Resume Screen – The HR person will review your resume and ask you generic questions like “Why TS?” and “Why us and not another Big 4 Firm?”
   2. Technical Round with MD or Director – They’ll ask about your work experience and will throw in questions about valuation, revenue/expense modeling, accounting principles, etc.
   3. Technical Case Study – They’ll give you an Offering Memorandum (AKA Confidential Information Memorandum or CIM), and ask you to read it and recommend for or against acquiring a stake in the company.

You’ve already covered how to read and interpret CIMs, so I won’t repeat everything here; one additional point is that you should beware of regulatory problems in a market like India.

Sometimes they also turn this exercise into a stress test, where they give you the memo and then take it away and ask you rapid-fire questions about the company – so be prepared!

1. 1. Excel and PowerPoint Test – You must have a high proficiency level with both programs to work in TS. If you still use the mouse in Excel, you won’t make it past these tests.

You should have a solid understanding of pivot tables, lookup functions, INDEX/MATCH, and formatting without using the mouse.

1. Partner Round – They ask you fit-based questions that you must nail. They will still ask you to walk through your resume/CV, and they may still ask technical questions, but at this stage it’s mostly “the airport test” – no one wants to work long hours next to boring or un-fun people.

As I said, the process differs a bit depending on your level. For example, we sometimes do hire very junior staff just out of university who aren’t yet CAs, but it’s random and not at all a structured process.

Also, if you recruit at the Manager level or above, the process is different, and they don’t care as much about technical questions or the Excel and PowerPoint tests since your responsibilities change at that level.

Since it’s such a small industry with so few qualified professionals, poaching of staff members is quite common here. People frequently jump around and join other Big 4 firms, which means going through the whole process all over again.

From the Big 4 into Investment Banking: Mission Impossible?

Q: Many readers join Big 4 firms because they see it as a stepping stone into investment banking or private equity.

We’ll get to those transitions in a bit, but one big problem in India is determining whether or not you’ll even be doing “real” front-office investment banking.

It seems like there are a lot of “knowledge process outsourcing” (KPO) firms that “trick” students into joining.

What can you say about this issue?

A: Yeah, it’s always tempting because many of these “operations”/ KPO roles pay more than real front-office IB ones do, at least at first.

For example, you might earn 50-100% of your base salary as a bonus at these firms, so it seems like real investment banking at first.

One friend took a bulge-bracket operations role because it paid more than a real front-office DCM position at a domestic investment bank; he regrets that decision now.

There are front-office positions in India, but team sizes are small and the entire industry, including boutiques, is 2,500 people at most.

Q: So how can you tell whether you’ll be doing KPO work or joining a real bank?

A: There are a few things you can check:

• Look at the job description and position name. If it is not something like Analyst, IBD or Associate, IBD, you should avoid it.

• Look up your colleagues’ profiles on LinkedIn – do they mention the deals they’ve worked on? Do these deals include real, well-known companies or are they tiny, obscure firms in other countries?

• Do you have a stellar academic record, and have you networked extensively? If not, you’re probably not applying to a real IBD role.

• What’s the nature of the work? Do they mention only “valuations” and “pitch books,” or can they point to closed deals that they have advised on from beginning to end?

Q: Thanks for those tips. So do you think Big 4 TS is a good stepping stone into investment banking in India?

A: Yes and no. “Yes” in that it is possible to move from TS into IBD, but “no” in that it’s not the easiest thing in the world, and it’s better to go into investment banking directly if you can do so.

Most of the recruitment for investment banking in India happens at the IIMs (Indian Institutes of Management) and IITs (Indian Institutes of Technology), which are the Indian equivalent of the Ivy League schools.

However, just like recruitment at Ivy League schools is uneven (e.g., Brown is sometimes not even viewed as a “target school”), it’s also uneven at the IITs and IIMs here.

Each of the top 3 IIMs graduates ~400 students per year, so there are at least 1,200 students that may want to get into investment banking each year against a total industry size of 2,500 at all levels.

And that doesn’t even count students from schools outside the top 3 and professionals in other industries who also want to move in.

So banks can afford to be picky, and your chances are not good unless you’re at one of the top 3 schools.

Sometimes banks do hire CAs with work experience, and sometimes they hire TS employees as well.

But to make the transition, you’ll need to network extensively, hone your financial modeling skills (you don’t spend much time on IB-style modeling in TS), and also make time to develop hobbies so you’re more “interesting.”

Transaction Services in India: To Stay, or To Go?

Q: So considering everything we discussed, do you think professionals interested in investment banking and deal advisory should stay in TS in India for the long term?

Or should they move to a major financial center in a developed market instead?

A: It depends on your chances of moving up the ladder.

If you think you have a reasonable chance of making Partner here, you should stay – there are so few qualified people, and the industry is growing so quickly that you can do very, very well if you make it to that level.

My Partner, for example, is always traveling to remote/exotic locations and staying at 5-star hotels since he has done so well.

You need to take an honest look at yourself and assess your “business development” skills and how good you might be at client relationship management.

If you don’t think you’re the best person in these areas, you’re better off moving elsewhere.

I frequently work longer hours than my colleagues in the corporate finance team here; we’re often short-staffed because we don’t like to make unnecessary hires, and the pay is weak for the amount you work.

So unless you’re reasonably confident that you’ll make Partner, you’d likely be better off moving to the UAE (investment banking in Dubai or Abu Dhabi) and earning 3x what we do for the same type of work and reduced hours.

Q: And what if you decide to leave Transaction Services altogether? What are the exit opportunities?

A: People frequently leave for IB, PE, internal M&A / corporate development, or even management consulting at the Big 4 firms.

Those are all doable, but you should aim to stay for 1-2 years at the most and then leave because you’ll get pigeonholed into Big 4 TS work if you stay beyond that.

TS is also great for business school applications.

If you get to the managerial level here, your most likely exit will be an FP&A role at a major corporation.

Q: Great. And what are your plans?

A: I’m planning to stay here for a year and then move to corporate strategy or management consulting.

Call me crazy, but I like some of the more qualitative work you do in those fields.

Q: Well, on a positive note, you won’t be drilling for gold in Saskatchewan if you stay in India or move to the UAE…

Thanks for your time!

A: My pleasure.

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