ECM fees in H1CY21 jump 25% to hit 10-year high of $126 mn amid IPO boom

IPOs by Indian companies totalled $3.9 billion in the first half of 2021, more than thrice the amount raised from the same period last year

The fees collected by investment bankers for handling initial public offerings (IPOs) and other equity share sales has hit a decade high during the first half of 2021. According to data compiled by Refinitiv, a financial data provider, the so-called equity capital market (ECM) fees for the January-June 2021 period stood at $126 million, a jump of 25.2 per cent over the same period of last year.

The jump in fees comes amid a surge in primary market activity. IPOs by Indian companies totalled $3.9 billion in the first half of 2021, more than thrice the amount raised during the same period last year. This was also the highest first half period since 2008, when $4.3 billion was raised by way of IPOs. Number of deals during the first half grew 131.3 per cent over the same period last year, when activity was hit by the covid-19 outbreak.

However, overall ECM activity was down compared to last year, which was underscored by large share sales by listed companies. Domestic equity capital markets raised $13.4 billion during the first half of 2021, 36.1 per cent less compared to the first half of 2020. This drop in proceeds was even as total ECM deals were almost double that of last year at 92.

“Driven by ample liquidity, robust demand and investor appetite, as well as relatively low interest rates, deal making activity involving India sustained its momentum,” Refinitiv has said.

Follow-on offerings accounted for 68.7 per cent of India’s overall ECM proceeds and raised $9.2 billion in the first half of 2021, down 51 per cent from a year ago.

The recently-concluded IPO of auto ancillary maker Sona BLW Precision Forgings was the largest issue of the first half. While HDFC Life Insurance’s block deal was the biggest equity deal at $912 million.

The outlook for the second half also looks equally promising, say experts.

“An exuberant stock market continues to drive confidence and bolstered a flurry of activities in India’s IPO market. A healthy pipeline of IPOs is expected to retain buoyancy in India’s primary markets for the rest of the year, including the upcoming IPO from Zomato which is anticipated to raise more than $1 billion,” said Elaine Tan, Senior Analyst, Deals Intelligence at Refinitiv.

The financial sector dominated ECM activity in the first half with nearly 50 per cent market share. Surprisingly, the real estate sector occupied the second place with nearly 11 per cent market share.

According to Refinitiv, JP Morgan currently leads the ranking for India’s ECM league tables with $1.4 billion in related proceeds and 10.6 per cent market share. BofA Securities and ICICI Bank take second and third place, capturing 10.4% and 9.4 per cent market share, respectively, it said in a report.