Mumbai: The recent rush of initial public offerings (IPOs) in the Indian market has ensured that investment banks (i-banks) have seen better fee income generation in recent months. Bankers have seen their fee income grow by a sharp 36% to ₹509.2 crore in H1FY24, data analysed by ET showed.
So far this fiscal, 19 companies have raised ₹17,419.7 crore through IPOs, as per data available with the Securities and Exchange Board of India (Sebi).
In H1FY23, investment banks managed to garner IPO fee income of ₹373.6 cror across 13 IPOs, which raised ₹34,758 crore. IPO activity in the year-ago period was dominated by the listing of Life Insurance Corporation of India, which raised ₹20,557 crore but generated a fee of merely ₹11.8 crore.
Top fee earners in H1FY24 include Mankind Pharma, whose IPO saw investment banks take home a total fee of ₹102.2 crore and RR Kabel, which generated a fee income of ₹52.1 crore for the bankers.
With six more IPOs to close before the end of September, including JSW Infrastructure, which is looking to raise ₹2,800 crore, fee income for H1 is only expected to rise further for investment banks.
The rush of IPOs in the first half of the current fiscal comes on the back of buoyant Indian stock markets which are up almost 15% since April 1, and which saw the Nifty scale 20,000 recently.
“The momentum in the broad market is paving the way for two things to happen – premiumisation and commoditisation. That means either the existing stocks are moving up in price or that euphoria is helping newer stocks to get listed. In essence, this signifies a shift in the valuation and accessibility of existing stocks,” said Abhijit Tare, MD & CEO, Motilal Oswal Investment Advisors.
Tare added the prevailing market exuberance has facilitated a surge in IPOs, adding many stakeholders are seizing this opportune moment to divest a portion of their ownership, capitalising on the favourable market conditions. “Notably, this development has proven instrumental in bolstering revenue streams of financial institutions, with bankers seeing a remarkable upswing in fee generation,” said Tare.
The momentum in the primary market is also being helped by the listing day performance of recent IPOs. New listings such as drone maker ideaForge Technologies and private lender Utkarsh Small Finance Bank delivered listing day gains of over 90% to investors.
“One of the key factors driving the current investment cycle is the listing day performance of the last 10-15 IPOs. The returns are proving a good draw for short term value investors,” said Arka Mookerjee, partner at J Sagar Associates.
Going into the second half of the fiscal, even with potential disruptive events such as five state elections in November-December and the likely general polls in April-May, bankers are hopeful that the primary market momentum will continue to remain strong.
“I don’t think the momentum will change going into H2 and, in fact, H2 will probably be more active than the first half…,” said Prashant Rao, director and head-equity capital markets, Anand Rathi Investment Banking.
