The fees earned by investment banks on equity-related capital raising transactions have shrunk this year, despite a boom in the initial public offering (IPO) market.
From the data, domestic equity capital market (ECM) activity has generated combined fees of $71.8 million (Rs 475 crore) in the first nine months of 2016. This is nearly 40 per cent less than what investment banks made during the same period last year.
Overall ECM activity has declined 60 per cent. In the first nine months, ECM deals other than IPOs, such as Offer for Sale (OFS), block trades and rights issues, have totalled $4 billion, about 75 per cent down from nearly $16 bn last year.
Last year saw the Rs 22,500-crore Coal India OFS and the Rs 9,400-crore Indian Oil OFS by the government. Also, a Rs 20,000-crore block deal in Sun Pharmaceutical by Japan’s Daiichi Sankyo. In comparison, the biggest ECM transaction in 2016 has been the Rs 6,000-crore ICICI Prudential Life Insurance IPO, followed by the Rs 5,000-crore OFS by the government in NTPC.
Market experts say big disinvestments have been missing, though likely during the March 2017 quarter. Also, Qualified Institutional Placement activity is set to pick up gradually, as listed companies prepare expansion plans to benefit from the uptick in the economy.
IPOs have been the highlight for this year. Transactions there have seen a near three-fold jump. Notably, barring a few, most such deals this year have been less than Rs 1,000 crore in size.
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