Ibanks get just 0.06% to handle largest float
The government had to pay just 0.06 per cent of the proceeds to investment bankers for handling the mega share sale of Life Insurance Corporation (LIC) of India.
According to the final offer document filed by LIC, the company shelled out just ~11.8 crore as payment to book-running lead managers (BRLMS). This was 9.9 per cent of the total issue expense of nearly ~120 crore and 0.06 per cent of the total initial public offering (IPO) proceeds of ~20,557 crore.
The IPO was entirely a secondary share sale by the government, which diluted 3.5 per cent of its holding in LIC.
All the 10 BRLMS had agreed to work on the LIC mandate for a base fee of ~1 crore each set by the government.
“Investment bankers will get a total of ~10 crore for handling the LIC share sale. The additional ~1.8 crore shown in the offer document is on account of the goods and services tax,” said an investment banker.
The investment banks that handled the share sale were Kotak Mahindra Bank, Axis Capital, Bofa Securities, Citibank, Nomura, Goldman Sachs, ICICI Securities, JM Financial, Jpmorgan, and SBI Capital Markets.
LIC’S IPO will boost the league table standing for all the 10 banks for 2022, which could prove beneficial while bidding for future mandates.
The other two IPOS by state-owned companies to hit the market in 2021, Railtel Corporation and Indian Railway Finance Corporation had paid ~16.5 crore and ~4 crore, respectively, to investment bankers.
The fees paid on public-sector undertaking mandates is only a fraction of that paid for private-sector IPOS.
Last year, Paytm coughed up ~324 crore, 1.8 per cent of its IPO proceeds of ~18,300 crore, while Zomato paid ~229 crore.
The recently-concluded Delhivery IPO paid ~105 crore — 2 per cent of its issue size.
LIC had to spend ~40 crore on broker commissions. Industry players said the issuer had to pay a commission between 15 basis points (bps) and 35 bps to brokers for garnering subscriptions from individual investors. The commission is paid only on applications that get allotment. In LIC’S IPO, over 6 million small investors got allotment for shares.