Leading brokerage pays highest sign-on amount

Brokerage India Infoline scoops CLSA top guns by paying megabucks

MUMBAI: In an coup of its kind not witnessed in India, India Infoline Ltd, a Goregaon, Mumbai-based stock brokerage, has poached four top officials of CLSA Asia Pacific Markets, the Singapore-based brokerage, by offering what is the largest sign-on bonus ever in India – Rs 44 crore.

That is, hold your breath, the quartet gets paid Rs 44 crore upfront to join. That’s about Rs 29.5 crore post tax, divided between the four -- Bharat Parajia, director of sales at CLSA in Singapore, H Nemkumar, CLSA’s country head for India, Aniruddha Dange, CLSA’s head of research in India, and Vasudev Jagannath, CLSA’s head of sales in India.

Till now, sign-on bonuses in India have been in the Rs 1-5 crore range. While Parajia will join as head of institutional sales at India Infoline, Dange will be head of research and Nemkumar head of investment banking.

Parajia and Nemkumar are chartered accountancy batchmates of Nirmal Jain, the promoter of India Infoline. So what does India Infoline gain from such blowout payouts?

Till now, the company has not exactly been renowned for research.

To become a force in investment banking (India Infoline doesn’t operate in this phenomenally profitable businesses) and and institutional sales, broking houses need to generate cutting-edge, world-class and compelling research and analytics on a daily basis to make the winning bets on bourses.

Now, in a flash, as it were, India Infoline has gained the ability.

Every morning, many brokerages in India keenly await CLSA’s “Morning Pack” reports on the markets and companies before deciding on their course of action.

As head of research at CLSA, these reports mainly came through Aniruddha Dange.

The induction thus metamorphoses a retail investor-led broking house (with its 5paise.com trading platform), into a force that can go shoulder to shoulder with the likes of Salomon Smith Barney, Morgan Stanley and Merrill Lynch.

Also, with such an A-team in place (promoter Jain has done management from IIM Ahmedabad and is also a cost accountant to boot), expect more reputed names from Finance St to join the India Infoline ranks soon.

It is also very likely that some institutional clients of CLSA that were catered to by Parajia, Nemkumar and Jagannath may come to India Infoline.

Parijia has the reputation of being one of the best sales heads on Finance St, while Nemkumar, who once worked with Bharat Petroleum Corporation, is a top-draw oil & gas analyst.

“Each one of them is bringing in more than 10 years of experience with a top institutional brokerage in Asia. They have had tremendous exposure in institutional broking, investment banking and asset management. We already have a presence in institutional broking. We see a huge potential there but this induction will help expand our line of business in a big way,” said Harshad Apte, vice president, planning, India Infoline.

Still, are such gargantuan sign-on cheques justified?

“All the four are in a league of their own. There was a time when if the markets got a wind that Parajia is in town, it used to react in anticipation of some big deal,” said a source close to the development.

Recently, a Mumbai brokerage paid Rs 1 crore as joining bonus to an analyst who came in at a far lower level.

“The figures, therefore, are not surprising,” said the source.

Will pay Rs 360 cr for shares later!

The CLSA foursome will also pick up stakes in India Infoline through the preferential allotment route. Sources said their collective stake would add up to around 15%.

Parajia already holds a 2.88% stake in India Infoline. He will subscribe to 25 lakh equity warrants at Rs 440 each.

Nemkumar will pick up another 25 lakh, while Jagannath and Aniruddha Dange will subscribe to 20 lakh warrants each. The preferential allotment includes the four men buying 90 lakh equity warrants at a price of Rs 440 each, of which 10% will be paid up front as their sign-on bonus.

The remaining will be payable at the end of eighteen months when the warrants will be convertible into shares.

That is, all these guys will have to cough up about Rs 360 crore to convert their warrants into shares.

But that’s another story