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India’s record share sales bring banks little cheer in fees
Context
Funds raised in India through share sales reached the most in a decade this year thanks to booming stock markets
News
Funds raised in India through share sales reached the most in a decade this year thanks to booming stock markets, but the rush to raise capital while investor sentiment remained bullish pushed dealmakers’ fee ratio to multi-year lows
Surge in stock index
India’s main stock indexes surged almost 30% in 2017 as investors bet on economic reform and corporate earnings recovery. That spurred almost $30 billion worth of share sales including a record $11.5 billion in initial public offerings (IPO)
Low fees for banks
But for banks which arrange the sales, fees earned as a percentage of funds raised hit the lowest in four years, Thomson Reuters data showed. That made arranging work in Asia’s third-largest economy the worst paid out of 11 Asian markets
- This year was particularly low because a high proportion of deals involved state-run firms which typically pay paltry fees
- An increasing number of banks involved in each deal also means fees are being split between more dealmakers, said the ECM head at a multinational bank, who was not authorised to publicly comment on fees and so declined to be identified. There is also a “new cycle of people willing to go down the fee curve,” the banker
What does a low fees signify?
Low fees mean regardless of higher deal volumes, many banks — especially foreign banks with high cost structures — are not aggressively expanding ECM teams
