Not only firms, IPO managers are seeing lots of money come in

An Overview

It’s not just companies that are raising big cash from the primary market now that stock markets are rallying. Investment banks are also making more money as these companies become more publicly traded. According to data provided by Prime Database, investment bank fees have climbed at a higher rate than the number of IPOs – and the amount raised in each calendar year.

Until early September 2021, book running lead managers (BRLMs) had earned a total of Rs 1,390 crore in fees, raising Rs 62,752 crore from 38 IPOs. Underwriting, brokerage, and selling commissions are all included in the fees. The lead managers’ fees accounted for the highest percentage of the issue expenditures in 2021, accounting for 2.2 percent of the total amount raised.

In 2020, 15 IPOs earned Rs 26,613 crore in the midst of the pandemic, with lead managers collecting Rs 369 crore in fees. In the pre-pandemic year of 2019, 16 initial public offerings (IPOs) raised a total of Rs 12,362 crore, with lead managers earning 2% of the total as fees.

Quite a fortune

The highest fees collected in 2021 were Rs 229 crore for Zomato’s IPO in July, while the lowest fees were Rs 3.9 crore for the Indian Rail Finance Corporation (IRFC) IPO at the start of the year. The IPO of Zomato was 38 times oversubscribed, while the IPO of IRFC was just 3.5 times oversubscribed.

In the instance of Ami Organics, which launched its IPO in early September, the lead managers got the biggest proportion of the cash raised, accounting for 7.3 percent of the total amount raised. The IPO was 64.5 times oversubscribed.

Over the following few months, thirty more IPOs are projected to join the primary market, raising roughly Rs 45,000 crore. The investment banking businesses will end the year with an additional income of Rs 900 to Rs 1,125 crore if lead manager fees are in the range of 2-2.5 percent of the amount raised.

Frequently Asked Questions (FAQs)

Q1. What is the role of the lead manager in an initial public offering (IPO)?

Companies engage IPO Lead Managers, who are SEBI-registered independent financial institutions, to assist them in raising capital through initial public offerings (IPOs) and getting listed on stock exchanges. The IPO process is overseen by the lead manager from start to finish. Book Running Lead Managers, or BRLMs, are IPO Lead Managers.

Q2. In IPO terms, who are the registrars?

The company that is going public appoints them. A registrar’s role in an IPO mostly includes processing IPO applications, allocating shares to applicants in accordance with SEBI criteria, processing refunds through ECS or cheque, and transferring allotted shares to investors’ Demat accounts.

Q3. What does an initial public offering (IPO) underwriter do?

Underwriters for initial public offerings (IPOs) are financial experts who work closely with the issuing body to set the securities’ initial offering price, purchase the shares from the issuer, and sell the securities to investors through the underwriter’s distribution network.