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Zomato IPO Delivers Record Fees For Bankers

Investment bankers dealing with Zomato Ltds Earned 9,375 crore initial public offering (IPO) 229 crore in fees, the grocery delivery unicorn’s latest bid documents showed, making it one of the highest payouts for any Indian IPO.

Zomato was advised by Kotak Mahindra Capital, Morgan Stanley, Credit Suisse, Bank of America and Citi. According to data from primary market tracker Prime Database, the fees Zomato paid to the five bankers far exceeded all others IPO at over $ 5,000 billion.

By comparison, investment banks earned 97.34 crore from Gland Pharma’s 6,479.5 crore IPO in November, 90.85 crore from ICICI Prudential Life Insurance’s 6,056.79 crore IPO in 2016 and 85.25 crore from Blackstone-backed Sona BLW Precision Forging Ltd’s 5,550 crore IPO in June.

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Lot of money

Other larger issues like SBI Cards and Payment Services Ltd’s 10,340.79 crore IPO saw banks just earn 48.34 crore, while HDFC Life Insurance Co Ltd She only got 8,695 crore IPO 35.61 million euros.

“While the fee may seem high, keep in mind that this was the first IPO of its kind in the Indian market for a leading tech company. It took considerable efforts on the part of the consultants in the preparation of the prospectus and the cooperation with the supervisory authority in order to obtain approval for the transaction, as well as extensive marketing in the foreign markets in order to attract fixed investors, as is clearly shown in the anchor book of the IPO “, such a person, aware of the fundraiser, said with a request for anonymity.

Zomato’s shares will begin trading on Friday. The IPO ended on July 16 with 40 subscriptions.

However, the IPO fee is not evenly distributed among the five bankers, as IPOs with multiple bankers have a two-tier payout model. The so-called ‘Lead-Left Merchant Bank’ and Global Coordinators receive more salaries than others in the consortium listed as Book-Running Lead Managers.

“As a percentage of the issue size, the fee is in the range of 2-3% that you would normally see in an IPO below the 5,000 crore in size. In the case of larger IPOs, it tends to drop below 2%. But Zomato’s initial public offering is unlikely to be comparable to any other transaction as the banking consortium was appointed with the option to consider an IPO overseas as well, and extensive work has been done on that front as well. and so the fee would have been structured like an IPO abroad would have paid the banks, “said an investment banker who sought anonymity.

For commercial banks, the big money at Zomato comes at a time when an IPO frenzy has increased their revenues with overall fee income falling.

According to the financial market tracker Refinitiv, investment banking activities in India generated $ 437.9 million in the first half of 2021, a decrease of 10% from the first half of the previous year, the lowest first half-year since 2016 (263.6 million US -Dollar).

According to Refinitiv, stock capital market subscription fees were at $ 126.0 million, their highest level in more than a decade, up 25.2% over the same period in 2020.

Indian companies raised $ 3.9 billion through initial public offerings in the first half of 2021, more than three times the amount raised in the same period last year.

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