Fee pool shrinks by nearly 33% as equity offerings drop in first half

Overall equity issuances during the first half (H1) dropped 40 per cent to $9.1 billion, lowest first-half tally since 2016, according to Refinitiv, a markets data provider

The fee collected by investment bankers for managing equity share sales dropped 33.4 per cent year-on-year (YoY) to $95 million during the first six months of 2022 as a sharp spike in market volatility queered the pitch for deal-making.

Overall equity issuances during the first half (H1) dropped 40 per cent to $9.1 billion — the lowest first-half tally since 2016 — according to Refinitiv, a markets data provider.

A 10 per cent fall in the benchmark indices and a sharper cut in the broader market led to a drop in equity issuances, such as qualified institutional placements, rights issues, and block deals, by listed companies.

The mop-up through initial public offerings (IPOs), however, hit a record.

Maiden share sales raised a cumulative $5.2 billion — the highest-ever for the first six months of any calendar year. This was on the back of the IPO of state-owned Life Insurance Corporation (LIC) of India, which alone raised $2.72 billion — 30 per cent of the total equity capital market (ECM) proceeds during H1.

The number of IPOs was 54 per cent higher than last year.  After LIC, logistics major Delhivery’s $676-million IPO was the second-biggest ECM deal during H1.

“With uncertainties brought by volatile stock markets, geopolitical tensions, and unfavourable macroeconomic factors, global IPOs witnessed dramatic decline this year after a record level of activity seen in 2021. Most major markets experienced YoY declines — both in proceeds and the number of IPOs. India was one of the few that witnessed an increase in IPO activity. However, with high volatility in the secondary markets and measures to tighten liquidity, Indian IPO activity could be subdued in the months to come,” said Elaine Tan, senior analyst, Refinitiv.

Follow-on offerings accounted for 43.4 per cent of the overall ECM proceeds, raising $3.9 billion — down 63 per cent, compared with the same period a year ago. The number of follow-on offerings fell 14 per cent YoY.

In sectoral terms, the financial sector accounted for a bulk of ECM activity, with 34.4 per cent market share. However, the issuance by financial companies was 56 per cent lower, compared to H1 of 2021. Consumer staples was the second-biggest sector in terms of issuance, followed by health care.

Kotak Mahindra Bank topped the league table for ECM issuance, with 18 per cent market share. Citibank saw its rank climb to second place from six during H1 of 2021.