Hyundai Motor India Limited’s (HMIL’s) record Rs 27,870 crore initial public offering (IPO) may not have set the primary market alight with sky-high subscription levels, but it has spelled a windfall for the five investment banks steering the share sale.
The Indian arm of the South Korean carmaker paid Rs 493 crore — 1.77 per cent of the issue size — in fees and commissions to the book running lead managers (BRLMs), marking the largest-ever payout for an IPO in the country.
This eclipses the previous record of Rs 324 crore, also 1.77 per cent of the total issue size, paid by digital payments major One97 Communications (Paytm) for its Rs 18,300 crore IPO in November 2021.
Buoyed by HMIL’s record payout, fees from handling equity share sales have soared past Rs 3,000 crore this calendar year to an all-time high, according to industry estimates.
This sets the stage for significant bonuses for investment banking executives.
Notably, the three most lucrative deals have all occurred in 2024.
Alongside Hyundai’s offering, Voda–fone India’s Rs 18,000 crore follow-on public offering (FPO) generated Rs 287 crore in fees, while Ola Electric Mobility’s Rs 6,146 crore IPO pumped Rs 145 crore into the pockets of investment bankers.
The five banks handling HMIL’s IPO will divide the fees.
The sheer scale of the deal — over four times the size of the year’s second-largest IPO, Bajaj Housing Finance’s Rs 6,560 crore offering — has also propelled these banks up the league table of leading investment banks in the country.
In contrast, Life Insurance Corporation of India’s (LIC’s) Rs 20,557 crore IPO in 2022 – which held the record before HMIL’s offering -- paid only Rs 11.8 crore in fees, spread thinly across 16 banks.
IPOs of government companies typically offer much lower fees, but banks often bid for these mandates to elevate their league table rankings, which can help win more prestigious private-sector mandates in the future.
For large private-sector deals, BRLMs typically charge between 1 per cent and 3 per cent of the total issue size.
“For a deal of Hyundai’s size, a fee of nearly 1.8 per cent is highly lucrative.
"If there is enough pull for the stock, companies can drive a hard bargain. If the issue is price attractively, the efforts required during roadshows is less,” said an investment banker, citing the case of Bajaj Housing Finance.
The mortgage lender paid just Rs 36 crore, or 0.6 per cent of the total issue size, for its Rs 6,560 crore offering.
Shares of Bajaj Housing Finance surged 137 per cent on debut.
So far in 2024, 66 companies have collectively raised over Rs 93,000 crore through IPOs.
The previous record for IPO fundraising, set in 2021 when Rs 1.19 trillion was raised, is within striking distance, with several more major offerings -- such as Shapoorji Pallonji group’s Afcons Infrastructure's Rs 7,000 crore IPO, solar panel maker Waaree Energies’ Rs 4,321 crore issue, food delivery major Swiggy’s Rs 11,600 crore offer, and NTPC Green Energy’s Rs 10,000 crore share sale -- on the horizon.
