Behind frosted glass in rooms off-limits to anyone not cleared for access, analysts at research firm Copal Partners calculate company valuations, compile industry data and write case studies of past mergers.
Their specialty is pitch books, the reports that investment banks use to win M&A deals. The Copal team is working in an office building in the New Delhi suburb of Gurgaon; its clients are Wall Street banks halfway across the globe.
"Copal does some of the things that we would do ourselves, but frankly we don't have all the time in the world," says Stephen Green, chairman of NoonMark Advisors, a privately owned New York investment bank that uses Copal's merger, company and industry analysis. "You have a need to constantly keep your cost structure down."
Wall Street, which got hooked on shipping its back-office work to India this decade, is taking the next step: outsourcing investment research.
Citigroup Inc., Deutsche Bank, Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley and UBS are among the firms staffing units in Bangalore, Hyderabad, Mumbai and New Delhi.
They're tapping analysts who in the U.S. and Europe would cost firms 200,000 to 400,000 euros ($290,000 to $580,000) a year and instead are paying a quarter to a third of those sums.
The banks are also relying on firms such as Copal, which set up a unit in Gurgaon in 2003. Its MBA graduates with three years of experience cost the company about 1.7 million rupees ($43,282) a year in pay, benefits and perks, co-founder Joel Perlman says.
The recent turmoil on Wall Street is likely to accelerate the desire of investment banks to outsource research, predicts Christopher Gentle, the London-based head of financial services research at Deloitte & Touche.
"There will be a greater and greater focus on cost and on making sure that you have the best people doing the best activity," he says. "This will be a catalyst for a greater move offshore."
The research challenge at investment banks started long before the sub-prime meltdown and departures of chief executives Charles Prince at Citigroup and Stan O'Neal at Merrill Lynch & Co.
On May 1, 1975, trading commissions that had been 75 cents a share were deregulated -- and have since fallen to less than a penny a share, according to Integrity Research Associates. In the 1990s, electronic trading kicked in.
A 2003 deal with former New York Atty. Gen. Eliot Spitzer and other regulators delivered another blow. Firms agreed to separate their banking and research arms and shelled out $1.4 billion to settle charges that bankers were swaying analyst coverage to reap lucrative underwriting fees.
Before 2000, investment banking funded as much as 40% of research budgets, according to Integrity. Now, it no longer pays costs of research departments.
Wall Street's plight is India's opportunity, just as software companies, computer service providers and generic drug makers have discovered.
"It's almost a no-brainer these days," says Marc Vollenweider, 42, chief executive of Evalueserve. The Bermuda-based research firm employs 2,100 people; 650 do financial analysis, and most of those are in India.
Amba Research, Irevna, Pipal Research Corp., Copal and Evalueserve say they can do what Wall Street's junior analysts do. Amba, which is based in New York and has about half of its 550 employees in Bangalore, says it's even testing strategies and models for quantitative hedge funds.
For other hedge fund clients, Amba does everything except give advice on the size and timing of an investment, co-founder Anand Aithal says.