Record IPO run has I-bankers laughing their way to bank with highest fee of $1.1 bn in 2021

Driven by a historic IPO boom that saw 63 issuers, led by new-age tech companies, garnering a whopping Rs 1.2 lakh crore (USD 16.6 billion) from the primary market, investment bankers laughed their way to the bank collecting USD 1.1 billion in fees in the year just gone by, making it the highest-ever advisory fees collected, says an industry report.

At USD 16.6 billion, the initial public offers (IPO) set a lifetime record in 2021, bettering the previous record of USD 10.8 billion in 2017 by a wider margin.

While the number of IPOs more than doubled from a year ago to 63, the proceeds were more than four-times the amount raised from the same period previous year and the momentum is likely to continue as more IPOs are anticipated next year, with mother of all issues, LIC issue, expected to boost proceeds next year much higher, it said.

The report is prepared by Refinitiv, an LSEG (London Stock Exchange Group) Business, and one of the world’s largest providers of financial markets data.

Investment banking activities generated a record USD1.1 billion in 2021, which is 8.5 per cent higher compared to 2020, making it the highest-ever annual period since records began in 2000, the report said.

Of the total, equity capital markets underwriting fees touched USD 433.8 million, up 49.7 per cent over 2020 and the debt capital market underwriting fees totalled USD 164.8 million, down 24.4 per cent year-on-year, and this was the lowest since 2018.

Overall the equity capital markets raised USD 35.6 billion in 2021, down 4.3 per cent in proceeds from 2020, despite a 73.6 per cent growth in volume as deals were done in smaller values.

Follow-on offerings, which accounted for 52 per cent of overall ECM proceeds, raised USD 18.6 billion, again down 42.8 per cent, but in volume it was up 21.4 per cent.

Equity capital market issuances by financial sector accounted for majority of the activity with 30.9 per cent market share worth USD11 billion, down 20.3 per cent year-on-year.

Telecom saw a 46.5 per cent increase in proceeds and captured 17.4 per cent market share, followed by materials with 11.9 per cent market share.

Among the I-bankers, SBI Caps took the overall top spot in investment banking fee league tables with 7.8 per cent wallet share and USD 86.9 million in related fees, according to the report.

From a category point of view, ICICI Bank led the ECM underwriting fee chart with USD 3.9 million in related proceeds and 10.8 per cent market share, followed by JP Morgan and Axis Bank capturing 10.5 per cent and 8.6 per cent market share, respectively; and Axis Bank topped the ranking in the bonds underwriting 108 issues worth USD9.7 billion and accounted for 16.6 per cent of the market share.

Completed M&A advisory fees grew 6.7 per cent to USD327.6 million, while syndicated lending fees declined 11.1 per cent to USD192.1 million.

On the other hand, deal making hit a three-year high, despite challenges posed by the pandemic. The report expects the deal momentum to continue on the back of growing investor demand and ample liquidity as companies reshape their businesses through M&As.

M&As reached a three-year high at USD125.7 billion, up 53.7 per cent over 2020. While average deal value was USD95 million, up 15.5 per cent, there were 21 deals of over USD1 billion, with a cumulative total of USD50 billion, up from 16 deals worth USD34.6 billion in 2020.

Domestic M&As amounted to USD44.9 billion, up 22.6 per cent, led by Piramal Finance acquiring DHFL for USD4.7 billion, making it the largest deal of the year.

Inbound M&As nearly doubled (up 93.1 per cent) to reach USD69.8 billion, the highest annual period since records began in 1980.

The US was the most active foreign acquirer with USD33.3 billion worth of deals.

Outbound M&As hit a three-year high at USD6.9 billion, up 57 per cent from a year ago and Britain was the most targeted nation in terms of value by domestic companies with 22 deals worth USD2.3 billion which is 33 per cent of the total, while the US saw the highest number of acquisitions with 58 deals worth USD1.9 billion and 27.4 per cent market share.

Majority of the deal making was in the financials sector at USD29.8 billion, up 171.3 per cent from 2020, which was 23.7 per cent of all deals.

Primary bond offerings saw issuers raising USD58.6 billion in 2021, down 20.2 per cent in proceeds from 2020, making it the lowest period since 2018 when it was USD46.2 billion. HDFC’s USD1.3 billion 10-year bond offering was the largest issuance in the year.