 "Investment banks")
Investment banks (i-banks) raked in a record $123.4 million (Rs 1,000 crore) for handling equity share sales in the Indian markets during the three months ended March 2024.
The fees were 2.34x higher than those during the first quarter (Q1) of the calendar year 2023 and also marked the highest Q1 total since records began in 2000, according to a report by LSEG Data & Analytics.
According to the report, India's equity capital market (ECM) witnessed a recordstart and raised $14.6 billion in Q1 of 2024, up 2.7x compared to a year ago, making it the highest-ever Q1 total by proceeds.
A number of ECM offerings also saw a 46.5 per cent increase year-on-year (Y-o-Y).
Follow-on offerings accounted for 84 per cent of overall ECM proceeds, raising $12.3 billion, up 2.3x from a year ago. The number of follow-on issues was up 33.3 per cent Y-o-Y.
Initial public offerings (IPOs) from Indian issuers raised $2.3 billion, a thirteenfold increase compared to Q1 of 2023, as the number of IPOs saw 61 per cent Y-o-Y growth.
“The ECM fee pool has risen as the number of IPOs and block deals has gone up. In the first three months, we had 22 IPOs raising Rs 13,120 crore compared to three last year. Many deals are from the small-cap segment, where the spread is reasonable,” said Ajay Garg, founder of Equirus Capital.
Industry players said the robust deal activity means i-bankers will receive substantial bonuses this year. Typically, for domestic banks, the bonuses are paid on a financial year basis, while foreign banks mostly follow the calendar year cycle.
“The payouts can range between 50 per cent and 75 per cent of annual salaries. For top performers, it could even be 1x or 1.2x their annual pay,” said an i-banker.
The banker, however, disputed the Rs 1,000 crore fee pool, stating that banks usually handle large block deals for only a few basis points of the total deal size, and fees are rarely disclosed publicly.
"I bankers don't make much money from block deals because there is no price discovery in blocks because the stock is already listed,' said Garg.
The largest ECM issuances so far this year are British American Tobacco Plc's $2.1 billion equity divestment in ITC, Tata Sons' $1.14 billion share sale in Tata Consultancy Services, and co-founder Rakesh Gangwal's $820 million worth of stake sale in InterGlobe Aviation.
Other significant deals during the quarter included a $750 million infrastructure investment trust issuance by Highways Infrastructure Trust, a $480 million rights issue by Birla Group firm Grasim, and a $480 million stake sale by Kohlberg Kravis Roberts (popularly known as KKR) and the Canada Pension Plan Investment Board in Indus Towers.
Bankers said the ECM pipeline is likely to be robust.
"The IPO pipeline is strong, and there could be blocks from firms that were listed a few years back," said Garg.
According to LSEG data, the overall fee from i-banking activities stood at $247.2 million (Rs 2,000 crores) during Q1 of 2024, a 27 per cent decline from last year.
According to the market data tracker, Jefferies secured the top position for overall i-banking fee ranking in India, totalling $20.3 million, accounting for 8.2 per cent of the total fee pool.
