The Indian share market is witnessing a unique scenario with a flurry of companies going public. This has put the investment banks in charge of running these public issues in a position of profit. These financial institutions have pocketed record income as fees for running these IPOs.
As per the documents filed by different consumer technology companies with SEBI (Securities and Exchange Board of India), these banks have pocketed about Rs. 940 crores or $126 million in fees. This list of companies included Nykaa, PolicyBazaar, CarTrade, Zomato, and Paytm.
The transaction of Paytm itself generated Rs. 323.9 crores in fees. This initial public offering of Paytm is worth Rs. 18,300, which is the biggest in this country so far. The public issue of Zomato generated Rs. 229.1 crores, Nykaa paid Rs. 148.3 crores, and PolicyBazaar and CarTrade paid Rs. 168.4 crores and Rs. 70.7 crores respectively.
Apart from these top companies, the fees earned from other notable IPOs include –
A point to note here is that technology companies have outweighed non-tech firms in terms of fee generation.
The income generated from the tech IPOs is higher than that of non-tech ones, as mentioned above. According to a senior official from an investment bank, this is due to the fact that these are the first batch of tech IPOs in India. Resultantly, the efforts and preparation go into various areas. This includes working with SEBI to receive approval, focusing on marketing, and finding marquee investors.
He further mentioned that, in bigger public issues, this fee is below 2%, but in these tech-IPOs, this has remained 2% to 3%. Among the public offering from this technology space, only Paytm’s fees are 1.8%, i.e. below the 2% threshold.
Apart from these data, a point to keep in mind here is that the fees from these IPOs are not equally distributed among investment banks. Global coordinators and so-called ‘lead-left merchant banks’ receive a higher earning than that of just BRLMs.
A buoyant primary market of India has strongly affected the fortunes of investment banks in this fiscal year. Fee income in the first nine months of 2021 has witnessed an increase of 7.4% to $241.4 million.
What are the duties of a lead manager in an IPO?
Besides developing marketing strategies for an IPO, the merchant bankers also play a part in price determination and compliance associated with a public issue. They work as an information centre of a public issue.
Are the registrars and BRLMs performing similar duties in managing an IPO?
No, they have a separate set of responsibilities when managing a public issue.
Who are some of the leading book running lead managers of India?
Kotak Mahindra Capital, ICICI Securities Limited, SBI Capital Markets Limited, J.P. Morgan India Private Limited are some of the popular lead managers among several others.
We're Live on WhatsApp! Join our channel for market insights & updates