The recent follow-on public offer (FPO) of Vodafone Idea Limited (VIL) has brought not only relief to the struggling telecom operator but also lucrative fees for the three investment banks that managed the Rs 18,000 crore share sale. According to the final prospectus filed by VIL, they paid Rs 287 crore, amounting to 1.6% of the issue size, as book running lead manager (BRLM) fees. This payment represents the second-highest BRLM fee for a domestic FPO or IPO, as reported by PRIME Database, with Paytm holding the record for the highest fee paid following its IPO in November 2021.
The VIL deal stands out as a profitable venture for the BRLMs involved – Axis Capital, Jefferies, and SBI Capital Markets – as the fee pool will be divided among only three investment banks, a smaller number than typically seen in deals of this magnitude. Conversely, large deals involving government-owned entities have yielded lower fees for investment banks, such as LIC paying a fee of Rs 11.8 crore split among 16 banks and YES Bank disbursing a relatively low fee of Rs 93 crore to eight bankers for its FPO, which was part of a government rescue package.
Despite the challenges presented by Vodafone Idea Limited's high debt levels and uncertain business outlook, the successful execution of this deal has paved the way for a positive outlook. The substantial equity infusion by the Birla group, priced 35% above the FPO price, has set a tone for the deal, further indicating potential for a turnaround. The aftermath of this FPO has seen a positive shift in rankings for Jefferies and Axis on the 2024 equity capital market league table, according to data from Dealogic, reflecting the impact of the deal on the investment banking landscape.