Investment bankers are set to raise Rs 100-150 crore from a follow-on public offering (FPO) of Adani Enterprises. Adani’s Rs 20,000 crore FPO will be the largest in the country and may be done in two or three tranches. The initial payment will be Rs 10,000 crore.

Fees are calculated as a percentage of 0.5-0.75% and will include a variable portion which may vary from banker to banker. Fees will be lower than private sector players typically pay for such products (0.75-1.25%).

In absolute terms, however, this is a sizeable figure, accounting for 9.4% of the fees bankers receive from equity capital market activity in the calendar year 2022. Banks earned Rs 1,600 crore last year from a total ECM issuance of Rs 1.55 trillion, resulting in a payout of 1% in percentage terms.

Yes Bank is likely to disburse more than Rs 93 crore for its Rs 15,000 crore FPO in 2020, the largest FPO to date, according to the Prime database. In percentage terms, this equates to 0.6% of the problem size.

“It’s a big deal with a total fee of Rs 100 crore to Rs 150 crore in line with market rates. It’s also a good chance for the bankers to rank higher in the leaderboard,” said one banker.

Food delivery firm Zomato’s Rs 9,375 crore IPO has netted i-bankers a record Rs 229 crore fee, a hefty sum for a massive offering in 2021. The IPO size of Paytm, Zomato, Nykaa, PB Fintech and CarTrade was Rs 41,736 crore – resulting in a total fee of Rs 940 crore for investment banks. This averages out to 2.25%.

It should be noted that these figures are not strictly comparable. Bankers typically charge 2-3% of the IPO offering size. For FPOs, this drops to 0.5-1.5%. IPOs are costly due to the time and effort involved in market and price discovery.

Issuers typically have two or three structures for allocating fees. All bankers who handle FPO assignments are assigned a flat fee. Variable fees depend on parameters such as bank purchases on the institutional and retail/HNI side and the type of work put in.

The actual fees paid to Adani FPO bankers will be disclosed after the close of the offering on January 31.

ICICI Securities, Jefferies and SBI Capital were initially designated as FPOs. Axis Capital, Elara Capital, BoB Capital Markets, IDBI Capital, JM Financial, Monarch Networth Capital and IIFL Securities were subsequently appointed.

According to two people familiar with the matter, FPO has been listed in the United States, the United Kingdom, West Asia and Singapore, and foreign institutional investors have shown strong interest in it.

“This stock has performed exceptionally well. Investors who missed the bus may be keen to invest, given the IPO price is Rs 400-500 below recent prices. Investors can expect 3-5% returns within a month. Key risks It is unfavourable for the market to move post-budget as the stock is part of the key benchmark index,” said an analyst.

The stock was quoted at Rs 3,700 in September.

The floor price for FPOs has been fixed at a minimum of Rs 3,112 per share with a ceiling of Rs 3,276 for all classes of investors. The company has announced a discount of Rs 64 per FPO share for retail investors.

Shares of Adani Enterprises closed at Rs 3,439.5 per share on Monday, down 0.5% from the previous session. The stock has fallen 7.4% over the past month.