Investment banks in India reap gains of bumper primary market this year

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Investment banks are reaping the gains of a bumper primary market this year. They have pocketed record fee incomes, managing a slew of public issues, especially those of consumer technology firms.

Papers filed by the consumer technology companies with the Securities and Exchange Board of India (Sebi) showed that IPOs of five of these companies—Paytm, Zomato, Nykaa, Policybazaar and CarTrade—generated collective fee incomes of 940 crore (about $126 million) for banks.

The Paytm transaction alone achieved a record high fee income of 323.9 crore for banks. Paytm’s 18,300 crore IPO was the biggest so far in the country.

Zomato’s IPO brought in 229.1 crore, while Policybazaar paid 168.4 crore and Nykaa and CarTrade paid 148.3 crore and 70.7 crore, respectively.

Collectively, these companies have raised 41,732 crore from share sales.

Technology companies far outweighed the much larger non-tech firms in fee generation.

Investment banks earned 97.34 crore from Gland Pharma’s 6,479.5 crore IPO, 90.85 crore from ICICI Prudential Life Insurance’s 6,056.79 crore IPO in 2016, and 85.25 crore from Blackstone-backed Sona BLW Precision Forging Ltd’s 5,550 crore IPO.

Other larger issuances such as SBI Cards and Payment Services Ltd’s 10,340.79 crore IPO saw banks earn only 48.34 crore, while HDFC Life Insurance Co. Ltd’s 8,695 crore IPO got them only 35.61 crore.

“The fee income from tech IPO deals is definitely higher than non-tech IPOs, and that is because this is the very first batch of tech IPOs. Hence, the effort that goes into these IPOs is a lot different and more in areas such as preparation of prospectuses and working with the regulator to get approval for the deal as well as extensive marketing in overseas markets to get marquee investors,” an investment banker said on condition of anonymity.

“Generally, in larger IPOs, the fee tends to be below 2%, but in most of these tech IPOs, we have seen fees in the 2-3% range,” the banker said.

Among the five deals in the consumer technology space, only Paytm’s fee is below 2% (1.8%), but the share sale size far exceeded the other four deals, resulting in comparatively higher fee incomes.

To be sure, the fee from the initial public offering is not equally distributed among all the banks working on a deal as such transactions comprising several bankers have a two-tiered payout model.

The so-called ‘lead-left merchant bank’ and global coordinators earn more than the others listed as book-running lead managers in the syndicate.

A buoyant Indian primary market has lifted the fortunes of investment banks this year.

Fee incomes from initial public offerings grew 7.4% to $241.4 million in the first nine months of 2021 even as overall investment banking fees fell 5.4% to $761.5 million during the period, showed data from financial markets tracker Refinitiv.

This article was first published on livemint.com.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.