Citigroup expects fee squeeze next year
Fee for underwriting stock sales in India may remain near all-time lows as investment banks battle for market share, according to an executive at Citigroup Inc., the top-ranked adviser on equity offerings in the country.
Indian companies paid bankers 0.92 per cent of the record $24 billion they raised locally this year in initial public offerings and additional sales as fees, the lowest ratio since Bloomberg began compiling the data in 1999. That compares with 3.5 per cent in the US and 2.17 per cent in Hong Kong, the largest markets for stock offerings in 2010, the data show.
“On the top end of the deal pyramid, there is serious competition,” Ravi Kapoor, head of Citigroup’s global banking operations in India, said in a December 22 interview in Mumbai. “We will still see sub-optimal fees being charged just to gain market share.”
State-run enterprises that paid near-zero fees in 2010 will continue to dominate India’s equity capital market next year along with infrastructure, manufacturing and services companies, Kapoor said. Citigroup, ranked fifth in the world for share sales, and five rivals accepted fees of less than $6 each to arrange government-controlled Coal India Ltd’s record IPO. India was the world’s eighth-largest market for IPOs and secondary offerings this year, Bloomberg data show.
Government-led sales accounted for about half the total amount raised in domestic share offers in 2010. New York-based Citigroup maintained its share of local equity sales at almost 16 per cent for a second year.