Bankers still chase Indian IPOs, gain less fee
By siliconindia   |   Thursday, 05 August 2010, 15:44 IST   |    5 Comments
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Bankers still chase Indian IPOs, gain less fee
Mumbai: Bankers, managing public issues in India, have little to cheer, even though underwriting fees touched a new high in a global basis this year. According to data by Thomson Reuters/Freeman Consulting, India's estimated average underwriting fee ranges from 1-2.5 percent, reports Deeptha Rajkumar of the Economic Times. The higher percentile of India's estimated average underwriting fee was earned in big-ticket private sector deals. In the other hand, the average underwriting fees in the U.S. is between 5 percent and 7 percent, and it is 2.5 to 4 percent in Western Europe. For the first seven months of 2010, IPO fees reached $3.7 billion globally, from $706 million for the same period last year. According to bankers, fees in emerging markets such as India tend to be lower than mature markets such as the U.S. and Western Europe because investment banks are focused more on gaining a foothold here, and are willing to settle for a lower fee. According to a senior investment banker, India is a growth market, but the number of banks have grown at a faster rate than the market itself. If the government pays banks near zero fees, it automatically drags down underwriting fees for the private sector. According to Thomson Reuters, IPO fees rose for the third straight month despite a decrease in the number of issues - bolstered by fees from the recent AgBank of China IPO which accounted for 46 percent of the monthly total. July saw an increase of 38 percent in total fees over June despite a 3 percent decline in the number of IPOs. July 2009 saw the highest monthly value for total IPOs proceeds since November 2007. Year-to-date IPO offerings are up five times from the same period last year and every region has seen a significant increase over 2009 levels.

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