SBICAP and IPOs

Banking Frontiers - - Highlights - Me­hul@bank­ingfron­tiers.com

SBICAP ex­pects some 40 IPOs in 2017-18:

SBI Cap­i­tal Mar­kets (SBICAP) is In­dia’s largest do­mes­tic in­vest­ment bank, of­fer­ing the en­tire gamut of in­vest­ment bank­ing and cor­po­rate ad­vi­sory ser­vices, en­com­pass­ing project ad­vi­sory and loan syn­di­ca­tion, struc­tured debt place­ment, cap­i­tal mar­kets, merg­ers and ac­qui­si­tions, pri­vate eq­uity and stressed as­sets res­o­lu­tion. Founded in 1986, it is a wholly owned sub­sidiary and the in­vest­ment bank­ing arm of the State Bank of In­dia.

CAP­I­TAL RAIS­ING

SBICAP had raised close to `200 bil­lion through IPOs in 2016-17 against `18.16 bil­lion in FY2015-16. IPOs have crossed `100 bil­lion in the first 6 months of 2017. June 2017 has seen IPOs worth more than `53 bil­lion. In the fast-paced stock mar­ket con­di­tions, the IPO of GTPL Hath­way, which of­fers ca­ble TV and broad­band ser­vices, was over­sub­scribed 1.53 times, against an IPO tar­get of `485 crore. An­other IPO for `1912 crore of AU Small Fi­nance Bank got 53.50 times sub­scribed on the fi­nal day.

Ac­cord­ing to Narayanan Sadanan­dan, ex­ec­u­tive vice pres­i­dent, SBICAP has al­ready raised close to `20 bil­lion till date this year. “The ma­jor busi­ness of the com­pany is project ad­vi­sory, struc­tured fi­nance and syn­di­ca­tion. Hence, around 10% of the com­pany’s in­come is con­trib­uted by cap­i­tal mar­ket ac­tiv­i­ties,” he adds.

Sim­i­larly, the `525 crore IPO of Cen­tral De­pos­i­tory Ser­vices (CDSL) has been over­sub­scribed 170 times and state-owned Hudco saw nearly 80 times sub­scrip­tion in the first quar­ter of the cur­rent FY.

Says Narayanan Sadanan­dan: “We have com­pleted IPOs of CDSL and HUDCO this year. We launched 7 IPOs last year though we had filed 13 DRHPs.”

For 2016-17, SBICAP was as­so­ci­ated with the IPOs of RBL Bank, ICICI Pru­den­tial Life In­sur­ance, L&T Tech­nol­ogy Ser­vices, HPL Elec­tric & Power, BSE, GVR In­fra Projects etc. In 2015-16 it was as­so­ci­ated with the IPOs of Navkar Cor­po­ra­tion, Prab­hat Dairy, In­fibeam In­cor­po­ra­tion, and Pre­ci­sion Camshafts.

SBICAP has been in­stru­men­tal in help­ing the Pune Mu­nic­i­pal Cor­po­ra­tion (PMC) re­cently to cre­ate his­tory by be­com­ing the first civic body in 14 years to raise money through mu­nic­i­pal bonds. The is­sue was sub­scribed 6 times.

PMC has raised `200 crore as the first tranche of a `2300-crore fund rais­ing pro­gram to fund a 24x7 wa­ter sup­ply project for Pune city.The bond is­sue was a part of a bor­row­ing plan of PMC that will be spread over 5 years. SBICAP was the lead ar­ranger for the is­sue.

ROLES AS THE BA­SIS

In the case of cer­tain IPOs, some fi­nan­cial in­sti­tu­tions are re­garded as global co­or­di­na­tors and oth­ers as Book Run­ning Lead Man­agers for the same of­fer­ing. Narayanan Sadanan­dan opines: “If the client wants to tier the BRLMs based on the roles, you may find GCBRLMs and BRLMs in few is­sues.”

STAFF PRO­FILE

The SBICAP work­force is a bal­anced blend of ex­pe­ri­ence and ex­per­tise. It has a com­bi­na­tion of pro­fes­sion­als, in­clud­ing MBAs and CAs, and ex­pe­ri­enced lat­eral re­cruits from the mar­ket. Out of the to­tal of 285 em­ploy­ees, 31 are ex­ec­u­tives on dep­u­ta­tion from the SBI and 208 are di­rectly re­cruited man­age­rial staff. As much as 80% of the di­rect re­cruits are MBAs from In­dia’s lead­ing busi­ness schools and 20% are char­tered ac­coun­tants.

SBICAP has 2 for­eign sub­sidiaries, one in Sin­ga­pore and the other in Lon­don, which looks af­ter distri­bu­tion. The in­sti­tu­tional sales and re­search and re­tail sales are housed in its do­mes­tic sub­sidiary i.e. SBI Caps Se­cu­ri­ties.

TAR­GETS IN CUR­RENT FY

The mar­ket to­day is ripe with fac­tors like good macro- eco­nomic con­di­tions, re­form ori­ented sta­ble gov­ern­ment, good mon­soon and more than ad­e­quate liq­uid­ity. Stock mar­ket is less volatile and there is ad­e­quate fund flow from FIIs. Narayanan Sadanan­dan es­ti­mates that nearly 40 IPOs will hit the mar­ket in the cur­rent fi­nan­cial year.

SBI Cap­i­tal Mar­kets has been al­ready man­dated for 20 IPOs this year. “Given the con­ducive mar­ket, we are hope­ful of churn­ing out the best per­for­mance this year,” says Narayanan Sadanan­dan.

Narayanan Sadanan­dan is hope­ful of churn­ing out the best per­for­mance this year in the given con­ducive mar­ket

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