Heard the latest joke doing the corporate rounds these days? If your boss asks you out for lunch, clear out your cabin and all that sentimental memorabilia. You may not be returning to get your stuff.
The joke, however, is not about being funny. It's about false bravado. The kind people use to mask feelings of despair, anger and insecurity whenever there is bad news. And it's bad news right now in the high-paying glamorous world of foreign institutional investors (FIIs). Call it "mayhem in Mumbai". Or coin a new saying: "The higher they get paid, the harder they fall."
These are some of the ways The End has come:
Meanwhile Peregrine's drawn up a list of 43 people who'll face the axe in case a buyer isn't willing to absorb the 80-odd people still working for the India operations. Banque Nationale de Paris is completing the 'due diligence' for takeover of the bankrupt operations in Hong Kong. The fate of the India office, though a profitable one, hangs in balance.
NatWest Markets has shut shop. BZW has closed down its India operations and all 15 employees have been given three months' salaries. Executive Access has been hired as the outplacement agency that would help people find jobs elsewhere. "People are busy cranking out their bio-datas and e-mailing them to headhunters. That is, when they aren't staring out of the window at the Mumbai skyline," says an insider.
"It's bloodbath in the financial sector. Earlier, firms were executing strategies, now they're executing staff," says Atul Sud, MD, Strategic Capital.
Many see in this a correction of the excesses of two years ago. The stockmarket was booming. Some 1,343 issues hit the primary market in 1994-95 garnering over Rs 13,000 crore. Business was brisk on the secondary market. Equity researchers, economists and analysts were superstars commanding unheard-of salaries, lived in Malabar Hill, Peddar Road and Napean Sea Road. Opel Astras and Cielos were there for the asking. Times were so good that everyone forgot that the financial business by nature is cyclical and volatile. "Starting salaries in the industry had touched Rs 12 lakh and a director-level guy would cost anywhere between Rs 60-80 lakh. Highly unsustainable levels in a downturn," says Vikram Chhachhi of headhunting firm Amrop International. This year, eight of the 11 FII brokerages reported losses.
"The high-risk, high-reward, high-uncertainty principle is as irrefutable as the law of gravity," says Ravi Virmani, head, Noble & Hewitt. What went up had to come down. Only the severity caught even the cynics unaware. First came the cuts. Credit Lyonnaise pared salaries by 30 per cent. At Crosby Securities, the bite was 40 per cent. Then came the horror stories of people being sent home. But behind all these were plain business statistics.
In the first nine months of the current financial year, just 56 new issues hit the market raising a puny Rs 1,424 crore, points out Prithvi Haldea of Prime Database. About 75 per cent of this business was cornered by top lead managers like DSP Merill Lynch, Kotak Mahindra, JM Financial, SBI Caps and Emam Financials. Thus a steady income stream dried up for hundreds of merchant bankers. The other source of revenue for them—underwriting commission—also dried up as only nine of the 56 issues came up for underwriting. The casualty list is lengthening. According to the latest figures released by SEBI, some 40 merchant bankers did not come forward to renew their licences this December.
The scenario in the secondary market was no better. Daily trading volumes have been down. According to a SEBI release, the number of actively traded scrips has come down from 1,000 to 300. "If the daily turnover is around Rs 50 crore, at 0.5 per cent commission, the earnings for brokerage houses aren't enough to pay for half the cost incurred on staff," says Sud. "There are just too many intermediaries and too few deals."
The Asian tumble has added to the woes. "We might not be in as bad a shape as Indonesia or Korea, but when a man sitting at Lehman Brothers or Salomon Brothers in London or New York is chalking out his Asian strategy, the flu in Indonesia is bound to chill investments in India," says a director at Peregrine. People are taking salary cuts across the board. One senior manager Outlook met, in fact, switched jobs at half his previous salary because "I didn't want to go home and tell my son one evening I'd been sacked."
Besides, worldwide the financial industry is consolidating. Several businesses have merged or were taken over. The reverberations are bound to be felt in India. Take the UBS (Union Bank of Switzerland)-SBC (Swiss Banking Corporation) merger. The new entity has announced it'll trim 13,000 employees over a three to four-year period from the present 56,000. Staffers at UBS Securities in India are already looking for jobs. "In the globalising world, if there's a storm anywhere, the ripples will be felt everywhere. More so when we're talking of financial trading where there are no assets or production happening," says Noni Chawla, MD, Korn\Ferry International.
But this storm's unlikely to blow over soon. "The human resource implication of people losing jobs is immense. The issue here isn't about just taking away jobs from people, it's about taking away their sense of self, peace of mind and standing at home. That's why we advise our clients to refrain from sacking as a knee-jerk reaction," says Virmani. So, many companies are concentrating on cutting salaries and costs, helping employees get jobs elsewhere and even paying consultants to outplace them.Like Virmani says: "You've to soften the blow to enable people to cope with the hard reality that sacking's become a part of professional life today."
