As the US investment banking empire falls, recruitment analysts say, the future of the possibly scathed Indian employees may not be daunting after all.

The top four investment banks employ approximately 6,500 people in India. Of which Lehman Brothers reportedly has 2,200 to 2,500 employees, including those in the BPO unit, Merrill Lynch has 600, Morgan Stanley has 500, and Goldman Sachs have about 3,000 employees in Bangalore, of which 100 are working on investment research. While Lehman Brothers has about 200 employees in investment banking, it has no retail business in India. Earlier this year, the firm had shutdown its mortgage capital division employing around 150.

Both Morgan Stanley and Merrill Lynch on the other hand have a Mutual Fund joint venture in India, and Goldman Sachs is into asset management, commodities, financial derivatives, mergers and acquisitions, private equity businesses. The company also has a big technology operation, which has back office support here.

The four banks are overlevered, Lehman Brothers and Merrill Lynch more than Goldman Sachs and Morgan Stanley, says Korn Ferrys office managing director, Deepak Gupta.

On the other avenues available for these employees, Gupta told FE, private equity funds, hedge funds, and strategy consultancies would be interested in the investment banking profile. However a slump in salary levels and a huge drop in demand in pure investment banking jobs can be expected. Gupta further adds,

Some of the European banks which have not been impacted by the US sub prime crisis and are possibly in expansion mode would be strong contenders for these candidates.

Even as employees hustle and recruiters speculate, the final word is not out on the fate of the approximately 2,200 Lehman Brothers back office employees in India. For the back office, the chances are that it will get picked up lock stock and barrel and would be a very good buy for any contender because of the quality of the talent pool and their infrastructure, says E Balaji, CEO Ma Foi Management Consultants Limited, however, these talks are happening at a US or UK level within the firm.

Gupta of Korn Ferry says, Even if the bank goes to Barclays, the back office would still be needed. Responding to the current frenzy, E Balaji, who has been in recruitment business for over 15 years said, I remember at least twice before when the markets were in a worse condition. During 1997-1998 when the Asian economies went for a toss there was an impact felt in India too, especially within Indian companies who had operations in Thailand or Singapore. During 2001-2001, dotcom bust the job situation here was far more turbulent than it is today. The stock markets fell by 50% and companies froze salaries and senior level executives were taking 10% to 15% salary cuts. So far we have seen no such indication although the stock market has fallen by about 38%.

The next two quarters will be challenging from a recruitment perspective, as companies will be cautious about spending and hiring. Increments will at best be inflation hedged and the investment banks, which are usually big recruiters on campus, will go slow on campus hiring. According to Balaji, finding alternate jobs will not be an issue for employees, but matching investment bank salaries will.

Gupta of Korn Ferry adds, Definitely there is worry amongst investment bankers about what is going to happen to them tomorrow.

Some are waiting for word on the Morgan Stanley-Wachovia deal; others feel apprehensive about the future of Goldman Sachs. Lehman guys have been approaching recruiters asking them to place 5 or 6 of them together as they would like to move as a team. Although we have seen unprecedented in pour of resumes over the last week, cutting a deal for a team is a whole different ball game. No one has a deal on the table as far as I know.

Namrita Jhangiani, Financial Practice Partner at search firm Egon Zehnder International echos a similar sentiment, The business for investment bankers is bound to decline, and therefore a number of investment banks will lay off some of their team, to keep costs in control. Salaries and bonuses will go down.

Some of the Indian investment banks view this as a good time to strengthen their investment banking franchises and are in discussion with bankers from the international banks at both the senior and mid levels.

It is an exceptional situation right now as it is not like any outside bank is mandating recruiters to find a certain kind of individual or team. According to Gupta, Investment bankers would not be the ideal candidates for mutual funds companies such as Franklin Templeton and Fidelity as these companies, need asset managers, retail sales skills and investment manager type people. People in the capital markets group and trading group of Lehman may be contenders for Mutual Fund companies.