For merchant bankers, 2024 is already a record bumper year in terms of IPO fees
Investment bankers are having a banner year, with the primary market's hot streak showing no signs of slowing down.
Data shows that the cumulative fees raked in by investment bankers in the first eight months of the current year have already exceeded what they earned in the whole of last year. In the first eight months of 2024, investment bankers earned Rs 1,377 crore in fees for managing initial public offerings (IPOs), surpassing the Rs 1,308 crore earned during the previous year, data from Prime Database showed.
More importantly, the quantum of fee per issue has also registered a steady rise over the years, clearly showing that bankers now earn more for every issue managed. Incidentally, the percentage of fee differs as per the issue size as well.For instance, the average fee percentage for IPOs above Rs 5,000 crore has increased from 0.98% in 2020 to 2.36%. In contrast, fees for IPOs below Rs 500 crore have decreased slightly from 4.50% in 2021 to 3.93% -- smaller IPOs typically witness a higher percentage of fee relative to the overall issue size.Meanwhile, fees for IPOs in the Rs 500 crore to Rs 1,000 crore range, as well as those between Rs 1,000 crore and Rs 5,000 crore, have remained stable at 3% and around 2-2.5%, respectively.
The cumulative fund raising by IPOs in the first eight months of CY24 at Rs 53,453 crore by 50 companies has also surpassed that of the whole of CY24 when Rs 49,436 crore was raised by a total of 57 entities.
Experts attribute this robust trend to a combination of factors including rising valuations, strong domestic liquidity, and the euphoria surrounding SME returns.
“The primary market is a reflection of the secondary market. We've had an extended rally in the secondary market over the last couple of years. Historically, whenever there is such a rally, companies look to list to take advantage of the positive sentiments,” said Pranav Haldea, Managing Director, Prime Database, a primary market tracking firm.“Liquidity, especially from domestic institutional investors and individual investors, is also fueling the market. On the supply side, many of these companies have private equity and venture capital investors looking for an exit through IPO,” he added.For SME IPOs, 2024 has already become a record year in terms of fund mobilisation. A total of 165 companies have cumulatively raised Rs 5,417 crore, which is the highest-ever in any calendar year even though there are four months to go. The previous high was seen last year when Rs 4,686 crore was raised by 182 SMEs.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.