Mumbai: On the back of a strong run in the initial public offering (IPO) market, investment bankers handling IPOs took home a total fee of Rs404 crore this year.
Investment bankers generated the fees from 24 IPOs in the nine months ended 30 September in which companies raised Rs30,850.8 crore in total, according to data from the final prospectuses filed by companies with Securities and Exchange Board of India (Sebi).
The total fee generated by bankers in the nine months increased only marginally from the year earlier despite more companies hitting the market with their initial share sales and larger IPO sizes.
Bankers generated Rs394.7 crore in fees in the first nine months of 2016 from 15 companies that raised Rs19,378.7 crore through IPOs. The flattish growth in fee for bankers in 2017 can be attributed to lower fees generated from larger sized IPOs.
In 2016, when ICICI Prudential Life Insurance Co. Ltd became the first insurer in the country to launch an IPO, the bankers managing the share sale took home Rs90.9 crore in fees (1.5% of the issue size).
ICICI Prudential raised Rs6,056.7 crore through its IPO.
Similar IPOs in 2017 generated lower fees.
ICICI Lombard General Insurance Co. Ltd, which raised Rs5,700 crore in September, similar in size to ICICI Prudential, saw bankers make a fee of Rs54.16 crore (0.95% of issue size).
SBI Life Insurance Co. Ltd, which at Rs8,386.4 crore is the largest IPO so far this year, resulted in even lower fee generation.
Bankers to the SBI Life issue took home Rs18 crore in fees (0.21% of the issue size).
Overall fee generation in 2017, both value and percentage wise, was also dragged down by other issuances such as D-Mart parent Avenue Supermart Ltd and those of state-owned companies Cochin Shipyard Ltd and Housing and Urban Development Corp. Ltd, all of which generated less than 0.5% in fees for the bankers.
As a result, average fee percentage in 2017 fell to 1.31% per issue, lower than the 2% average in 2016, data shows.
To be sure, the final quarter of 2017 is expected to witness intense fund-raising action in the IPO market, with several large issuances such as General Insurance Corp. of India Ltd, New India Assurance Ltd and HDFC Standard Life Insurance Ltd looking to launch their respective share sales before the end of the year.
On 5 October, consulting firm EY said in a report that IPO activity in the country is headed for a record year in 2017, as an increased number of issuers aim to take advantage of a stock market rally and investor demand.
The report noted that the IPO outlook remains buoyant despite the volatility resulting from the introduction of the goods and services tax.
This activity is bound to ensure that bankers will take home a larger sum of fee by the time the year comes to a close.