Banker fees for equity offerings halve in 2022 Fees collected by investment bankers in 2022 from activities related to the equity capital market has more than halved from the previous year amid a decline in public share sales. Fees for ECM underwriting stood at $203.1 million, down 54% from a year ago, data from Refinitiv, a financial markets data tracker, showed. Forty companies raised Rs 59,412 crore through main board IPOs in CY22, 50% lower than the Rs 1,18,723 crore mobilised by 63 IPOs in 2021. Overall public equity fundraising slid 55% to Rs 90,995 crore in CY22 from the year ago. Of the mainboard issuances, Rs 20,557 crore or 35% of the amount raised, was by state insurer Life Insurance Corporation of India. Despite being the largest IPO ever, it earned the bankers miniscule fees. This is because the investment bankers involved in the deal had quoted a flat fee of `1 crore, the minimum set by the government, to bag the state insurer LIC’s IPO mandate. LIC was followed by Delhivery (Rs 5,235 crore) and Adani Wilmar (Rs 3,600 crore). The average deal size was a high Rs 1,485 crore. As many as 17 out of the 40 IPOs came in the last two months of the year alone, which shows the volatile conditions prevalent through most of the year which are not conducive for IPO activity. “Unlike in 2021, only one IPO (Delhivery) was from a new-age technology company (NATC). This may have had a bearing on the overall fee pool considering several of these companies had paid higher fees to bankers,” said Pranav Haldea, managing director, PRIME Database. In 2021, seven NATC IPOs raised a total of Rs 42,826 crore. IPOs of Paytm, Zomato, Nykaa, PB Fintech and CarTrade generated total fees of Rs 940 crore for investment banks. Food delivery firm Zomato’s Rs 9,375-crore IPO fetched record fees of Rs 229 crore for i-bankers, a sizeable amount for a large-sized offering. Fees charged by bankers for IPOs typically range from 2-3% of an issue’s size. This drops to 0.5-1.5% for follow-on offerings.Issuers typically have two or three structures for distributing fees. A fixed fee is distributed among all bankers handling the IPO mandate. Variable fees depend on parameters such as the procurement done by the banks on the institutional and retail/HNI side. Some issuers also keep a discretionary fee, which they pay if they are satisfied by the work put in by bankers. Issuances from the financials sector accounted for majority of the ECM activity with a 28.1% market share worth $5.5 billion in proceeds, a 50.4% decline from a year ago, according to Refinitiv. Healthcare captured a 16.2% market share as proceeds grew 11.1% from a year ago to $3.1 billion, while industrials saw a 31.1% increase in proceeds and captured a 12.5% market share. Follow-on offerings, which accounted for 60.8% of India’s overall ECM proceeds, raised $11.8 billion, down 33.8% from a year ago. DCM underwriting fees totaled $172 million, a 1% increase from the year-ago period. Syndicated lending fees declined 14% from the comparable period last year and generated $187.6 million in 2022. Completed M&A advisory fees increased 21% year-on-year and totaled $426.7 million, according to Refinitiv.
The Japanese pharma major is also filing a plea before the Delhi HC seeking appointment of forensic auditors to analyse transactions involving IHH, Fortis Healthcare and RHT, Singapore, as directed by the HC on October 18.
The development is likely to create legal hurdles and delay the proposed open offer as IHH had recently told FE that it could only go ahead if Sebi agreed with its legal interpretation that the SC’s September 22 order has lifted all such restraints.
IHH managing director and CEO Kelvin Loh told FE on November 9 that the company would like to go ahead with the open offer “as soon as possible” as there has already been a delay of four years. Ravi Rajagopal, chairman of Fortis Healthcare, had added that their legal counsel has advised that the company can go ahead with the open offer as the SC order has disposed of various appeals, including the suo motu contempt. “We have represented to the Sebi and the matter is with them,” Rajagopal had said.
However, legal observers told FE that the matter is not that straightforward and simple as the Delhi HC has to take the final call on the matter of open offer as well as whether a forensic audit has to be done in the share sale which was executed in 2018.
Also Read: IHH to float open offer for Fortis if Sebi concurs with our legal view: MD & CEO
Loh and Rajagopal had said the possibility that the matter may take a different turn when it comes up in Delhi HC cannot be ruled out.
IHH had in July 2018 acquired a 31% stake in Fortis Healthcare for Rs 4,000 crore through the bidding route. It had also earmarked Rs 3,000 crore to make an open offer for an additional 26% to the public shareholders as required under the law.
Daiichi has written to Sebi that the SC in its September 22 order had asked the HC to consider ordering a forensic audit into the dilution of FHL shareholding, repeated violation of undertakings and assurance by former FHL promoters — Malvinder and Shivinder Singh — and the transaction between FHL, IHH and the clandestine transfer of Rs 4,666 crore to RHT Singapore.
Daiichi is “severely prejudiced” with IHH’s clandestine attempt to subvert the status quo order directed by the SC on December 14, 2018, and September 22 with respect to the conduct of forensic audit and the pending proceedings before the HC by purportedly consulting regulatory authorities, including Sebi, on the proposed FHL-IHH transaction. It has reiterated that the FHL-IHH transaction was currently sub-judice before the HC where FHL is also a party, its solicitors, P&A Law Offices, have said in the letter.
“We further state that any such attempt by FHL and/or IHH to proceed with the FHH-IHH transaction would be in direct contravention of the HC and SC orders,” the letter sent by the law firm has stated. Daiichi Sankyo is pursuing the enforcement of Rs 3,500-crore arbitration award against the Singh brothers pronounced by a Singapore tribunal for concealing information when they sold Ranbaxy Laboratories to it for $4.6 billion in 2008. The apex court had in 2018 put on hold the sale of Fortis Healthcare to IHH on a contempt plea filed by the Japanese drugmaker against the Singh brothers.