Equity capital markets have a record year for underwriting fees, reaching $471 million

Thanks to a flurry of initial public offerings, block deals and private placements, equity capital markets (ECM) underwriting fees rose 110% year-on-year to $471 million, London Stock Exchange Group (LSEG) data showed, the biggest nine-month turnover on record in 2000. Jefferies led the league in handling $5 billion in ECM activities and captured 11% of the market.

“Both issuers and investors are taking advantage of favorable market conditions and strong secondary markets and raising capital through additional share sales and new listings in the Indian stock markets,” Elaine Tan, senior manager at LSEG Deals Intelligence, said in a report.

Indian companies raised around $9 billion through IPOs in January-September, almost double the amount raised in the same period in 2023. The wave of IPOs is expected to continue, with prominent names like Swiggy, Ofbusiness, Infra .Market and Hyundai Motor India and Afcons Infrastructure Ltd in IPO queue. LSEG’s Tan also pointed to the growing list as multinational companies such as LG Electronics plan to list their Indian units.

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India ECM – which includes initial public offerings, block deals followed by share sales and private placements – raised a record $49 billion in the first nine months, up about 115% year-on-year, and also surpassed that set in 2020 Annual revenue record. The number of ECM offerings was 61% higher than in 2023. Follow-on offerings, which generated 81% of total ECM proceeds, amounted to $40 billion, up 119% year-on-year, while the number of such offerings increased in Year-on-year increased by 59% – compared to the previous year.

The optimism is largely fueled by strong inflows from domestic investors, which are boosting demand, said Bhavesh Shah, managing director and head of investment banking at Equirus. “On the supply side, we are seeing the emergence of promising business models that are IPO-worthy. The short-term development of the secondary market, capital market sentiment and therefore also the IPO market is difficult to predict.” Structurally, however, the trend appears to be very strong, as IPOs appear to be a win-win situation for companies to raise funds , and investors to deploy funds lucratively,” Shah said.

High market valuations have also paved the way for block deals, the proceeds of which are used for a variety of purposes, including debt repayment. This has been particularly the case with many multinational companies, many of which have sold part of their shares to their Indian counterparts. Examples include Conagra Brands’ sale of its majority stake in India’s Agro Tech Foods (ATFL); Sale of a partial stake in ITC by British American Tobacco (BAT); and Japan’s Sumitomo Wiring Systems sold a 4.4% stake to Samvardhana Motherson International.

Indian markets have generally remained resilient despite macroeconomic and geopolitical shocks, said Gaurav Sood, managing director and head of equity capital markets at Avendus Capital. “Indian markets stand out because they are not dependent on foreign inflows and have a strong domestic investor ecosystem hungry for ideas,” Sood said, adding that in times of increased volatility, several large deals have successfully closed on primary – and secondary markets were carried out to determine the depth of the markets.

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The current year has been a blockbuster for the capital markets as it surpassed the last two years in terms of volume and value, Sood said. “The rest of the year will be no different. We are seeing a resurgence of new-age IPOs and believe that the upcoming IPOs of multinational companies mark the beginning of a multi-decadal trend,” he said. With over $1 billion worth of transactions on the horizon in the primary and secondary markets, Sood expects strong aftermarket performance even as valuations are tempered by overall volatility.

Despite rising geopolitical risks and fluctuating commodity prices, Indian markets have been among the best performing emerging markets, largely due to pro-business policies and macroeconomic stability, said Neha Agarwal, managing director and head of equity markets, JM Financial Institutional Securities Ltd. “This strong performance in comparison to the rest of the world is primarily due to India’s resilience to global geopolitical and economic disruptions, its stable domestic macroeconomic outlook and a robust domestic investor base,” Agarwal said.

Additionally, upcoming major IPOs such as Hyundai, NTPC Green Energy, Hexaware, Swiggy and Vishal Megamart signal strong momentum. Agarwal expects this wave of strong activity to continue, potentially raising $8 billion to $10 billion in the coming months, underscoring investor appetite and market confidence.

The industrial sector accounted for the majority of ECM activity, with a market share of 23.0% and revenue of $11 billion, an increase of 137% year-over-year. Financials followed with a 15% market share as revenues rose 79% compared to the first nine months of 2023. Telecommunications came in third with 11.5% market share and brought in $6 billion, a significant increase compared to the same period last year.

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Meanwhile, underwriting fees in debt capital markets (DCM), where companies issue bonds and notes, fell 4% to about $183 million in the period.

Total investment banking fees – including ECM and DCM – fell 15% to around $842 million in the nine months. Here, Kotak Mahindra Bank had the largest share with 7.3%, followed by Axis Bank with 6.8%.

“Given the very dynamic geopolitical situation in the Middle East, it will be difficult to predict how markets will perform,” said Prashant Rao, director and head of equity markets at Anand Rathi Investment Banking. “While the recent conflict could result in Despite the temporary volatility in the markets, Indian markets have proven resilient this calendar year. Furthermore, FIIs are net sellers with a total outflow of more than 10% ₹With a volume of 1.26 trillion, Indian markets not only held up but also delivered robust returns with Nifty and Sensex returning 18.71% and 16.64% respectively,” Rao added.

The data shows that syndicated loan fees also fell 58% compared to the same period last year, generating $76 million in the first nine months of 2024. At the same time, closed M&A advisory fees fell 72% year-over-year, totaling $111 million.

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This is the lowest total in the first nine months since 2017. Mergers and acquisitions involving Indians totaled $57 billion, down 20% year-on-year. Notably, the US was the most active country doing cross-border deals with India.

Tan highlighted the decline in business deals but remained optimistic as some sectors, including infrastructure, renewable energy, healthcare and fast-moving consumer goods, will have high growth potential. This is expected to be driven by India’s growing middle class with higher disposable incomes.