Banks forgo bumper fees for managing LIC IPO to get league table rankings

Investment banks advising on the initial public offering of Life Insurance Corp. of India are forgoing large fees expected from the country’s biggest ever listing, and settling instead for glory in the league table rankings.

The 10 advisers managing the IPO will receive around 10 million rupees ($129,000) each for their role in the offering, a fraction of what they’d typically pocket for a deal of this size. Earnings are further trimmed because India’s government, which owns LIC, won’t compensate the banks for expenses such as printing forms for the issue.

What bankers stand to gain is outsized credit in rankings that compare rivals by the volume of deals they handle, which can be influential in winning them future work. The fee estimates are from people familiar with the developments, who asked not to be identified because the information is still private.

A company would typically pay banker fees from 1.25% to 1.5% of the issue size for a comparable listing, one of the people said. For LIC’s IPO, which at the top end of the price band would raise $2.7 billion, a fee of that size would be as much as $40.5 million, according to Bloomberg calculations.

The fee for LIC was agreed with the government in advance of the filing of the prospectus, the people said. The arrangers also agreed to bear some additional costs including travel for the investor presentations and arranging press conferences, the people said. Banks spent less than expected on travel, given that the roadshow meetings were held virtually, one of the people said.

Investors had submitted 2.5 times as many orders as there are available shares ahead of the offering’s closing Monday.

A finance ministry spokesperson declined to comment. Representatives for Bank of America Corp., Goldman Sachs Group Inc., ICICI Securities Ltd., JM Financial Ltd., JPMorgan Chase & Co., Citigroup Inc. and Nomura Holdings Inc. also declined to comment, while Axis Capital Ltd., Kotak Mahindra Capital Co. and SBI Capital Markets Ltd. didn’t immediately respond to requests for comment.