With recent initial public offerings (IPOs) delivering big listing gains and investor interest in them growing, the primary markets have seen a lot of action in the first nine months of 2014. The number of IPOs and rights offers hitting the markets has also shot up to the highest level in four years. But that hasn’t translated into big gains for investment bankers, who take these companies to the markets.

Investment bankers have, in fact, seen their fees from managing public offers fall sharply this year, despite heightened primary market action. Their total fees of ₹33.7 crore earned so far is less than a tenth of the ₹375 crore they raked in during the previous IPO boom, in 2010. These are the findings of data analysis pertaining to equity offerings, from the Bloomberg League tables, over the last five years.

It is the small size of the equity offers that has had an impact on the earnings of the dealmakers. The number of rights offers and IPOs in the first nine months, at 38, saw a 72 per cent jump over the same period last year. But with the average offer size falling, they together raised only ₹1,000 crore. Though investment bankers charged more — their average fee in percentage terms was the highest in the past five years, at 3.37 per cent — they netted just ₹33.7 crore. In comparison, between January and September 2013, when just 22 deals worth ₹1,500 crore were struck, investment bankers pocketed ₹44.9 crore in fees. In fact, merchant banking fees have tumbled steadily from their high in 2010, when bankers made a whopping ₹374.9 crore from 42 IPOs.

Churn in top managers’ list

As smaller offers have dominated the market, there has also been a churn in the lead managers for the offers. In 2014, so far, Indian firms have overtaken their foreign counterparts to top the league tables for the first time since 2011. In both 2012 and 2013, Citibank was the top manager for Indian IPOs, but it wasn’t among the leaders in 2014. Instead, Edelweiss Financial Services has emerged as the top manager, with a 27.5 per cent market share through two deals valued at ₹300 crore. The fact that Edelweiss’ disclosed fees stood at just 2.70 per cent in comparison to 3.31-3.41 per cent in the case of Citi could have something to do with this.

Edelweiss is followed by HDFC Bank and IDFC Capital in the list of the top IPO managers, with the three firms collectively handling about two-thirds of the deals by value. However, in terms of the number of deals, they only handled a tenth of the IPOs that were conducted in the first three quarters of 2014.