India I-banking fees dip 25% in H1CY2022 amid record M&A, IPO proceeds: Refinitiv

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India’s deal landscape during the first half of 2022 saw a 25 percent fall in investment banking fees when compared to the same period last year, according to a report titled ‘India Investment Banking Review First Half 2022’ by Refinitiv, an LSEG (London Stock Exchange Group) business.

This despite the phase witnessing an all-time high in M&A activity (driven by the mega $60.4 billion HDFC Bank-HDFC merger) in terms of value and announced deals as well as IPO proceeds. Domestic investment banking activities generated total fees of $377 million, making it the lowest first-half period since 2016, the Refinitiv report said.

DEAL FEES: H1CY2022 REPORTCARD

Here’s the segment-wise breakdown. ECM (equity capital market) underwriting fees reached $94.9 million, down 33.4 percent from a year ago. DCM underwriting fees totalled $81.4 million, down 8.5 percent from a year ago. Completed M&A advisory fees grew 1.5 percent from a year ago and hit $145.9 million. Syndicated lending fees declined 57.4 percent from the comparable period last year and generated $54.7 million in the first half of 2022.

THE M&A REPORT CARD

India-involvement announced M&A activity saw an all-time high with $130.3 billion in the first half of 2022, more than double the value compared to the first half of 2021, making it the highest semi-annual period since records began in 1980, the Refinitiv report said.  The number of announced deals grew 30.3 percent year-on-year and saw the busiest-ever period. Target India M&A totalled $122.6 billion, up 123.8 percent from the same period last year. Domestic M&A activity reached record levels amounting to $101.1 billion, up 241.7 percent in value compared to the same period last year.

HDFC Bank Ltd agreed to merge with Housing Development Finance Corp Ltd (HDFC) in a deal valued at $60.4 billion, making it the largest Indian-involvement deal on record. Adani Group’s buyout of Holcim’s domestic cement assets and the L&T Infotech-Mindtree merger were two of the other big-bang deals announced in the first half of the year.

The majority of the deal-making activity involving India targeted the Financials sector which totalled $69.0 billion, a five-fold increase in value from a year ago with a market share of 53 per cent. The High Technology sector, which saw the most number of deals, totalled $16.5 billion, up 78.3 percent from a year ago with a 12.7 percent market share.

INBOUND VS OUTBOUND

India’s Inbound M&A activity fell 14.6 percent from a year ago and reached $21.5 billion. The United States was the most active foreign acquirer in India with $11.3 billion worth of deals, down 7.9 percent from a year ago and accounted for 52.3 percent market share of India’s inbound M&A.  Outbound M&A transactions totalled $6.0 billion, a 73.6 percent increase in value compared to a year ago, making it the highest first-half period since 2010. Yet again, the United States was the most targeted nation in terms of value from Indian companies with 31 deals worth $4.1 billion, or 67.7 percent market share.  This was driven by the $3.3 billion pending acquisition of the Biosimilars Business of Viatris Inc by Biocon Biologics Ltd, making it the largest-ever Indian outbound acquisition in US healthcare. Citi topped the overall m&a league tables, according to Refinitiv.

THE INDIAN ECM SHOW 

Indian equity capital markets (ECM) raised $9.1 billion in the first half of 2022, a 39.9 percent decline in proceeds compared to the first half of last year and the lowest first-half period since 2016. However, the number of ECM offerings grew 11.1 per cent year-on-year.  Initial public offerings (IPO) from Indian issuers raised $5.2 billion during the first half of this year, a 26.1 percent growth from a year ago, making it the highest-ever first-half period in terms of proceeds. The number of IPOs also grew 53.8 percent year on year. Life Insurance Corp priced India’s largest IPO so far this year, raising $2.7 billion.

Follow-on offerings, which accounted for 43.4 percent of India’s overall ECM proceeds, raised US$3.9 billion, down 63.0 percent from a year ago, while the number of follow-on offerings fell 13.8 percent year on year. ECM Issuance from India’s Financials sector accounted for a majority of the ECM activity with 34.4 percent market share worth US$3.1 billion in proceeds, a 56.3 percent decline year on year. Consumer Staples saw a significant increase in proceeds and captured 15 percent market share, while Healthcare followed with 14.6 percent market share. According to the Refinitiv report, Kotak Mahindra Bank currently leads the ranking for India’s ECM underwriting with 1.6 billion in related proceeds and a 17.8 percent market share.

THE REFINITIV VIEW ON INDIAN DEAL CLIMATE

“The investment banking fee has a slightly different lens and criteria than the volume trends featured in the report. For instance, the M&A fee is based on complete deals and wouldn’t account for the pending top deals announced this year like the HDFC-HDFC Bank merger. While IPOs have increased, follow-on offerings witness year–on-year declines. Bonds and loans also saw a YoY drop,” explained Elaine Tan, Senior Analyst at Refinitiv.

Commenting on the various aspects of the report, she said, “A notable theme this year was the growing M&A activity involving renewable energy and sustainable sectors which totalled US$11.5 billion so far this year, up 41.7 percent from a year ago.  High Technology continues to witness significant number of transactions as India’s strong innovative start-up economy, and value creation from digital transformation will continue to drive activity."

She added further, “With uncertainties brought by volatile stock markets, geopolitical tensions and unfavourable macroeconomic factors, global IPO witnessed a dramatic decline this year after a record level of activity seen in 2021. Most major markets experienced year-on-year declines both in proceeds and number of IPOs. India was one of the few that witnessed an increase in IPO activity with proceeds up 26.1 percent and number of IPOs grew 53.8 percent from a year ago which included listing from Life Insurance Corp (LIC) that raised $2.7 billion  - the largest ever Indian IPO and the third-largest IPO globally so far this year. However, with high volatility in the secondary markets and measures to tighten liquidity, Indian IPO activity could be subdued in the coming months."