It?s not just the merchant banking fee that the public sector initial public offerings (IPOs) pay that is minuscule, their advertising and marketing expense too is tiny compared with private companies.

Advertising and marketing (A&M) expense as a percentage of the issue size is as high as 2% for some of the private sector IPOs, while the same for government IPOs could be as low as 0.06%.

In absolute terms also the A&M expense is low. For instance, Jaypee Infratech, which came out with an IPO in May, spent about Rs 42 crore on A&M, that?s 2% of Rs 2,262 crore it raised. Meanwhile, PSU major NTPC, which did a follow-on public offering (FPO) in February this year, spent less than Rs 5 crore, or 0.06% of Rs 8,479 crore that it raised on A&M, according to figures in their respective Red Herring Prospectus (RHP).

According to sources, India?s largest ever IPO Coal India?s A&M budget is just Rs5 crore, not even 0.03% of Rs 15,000 crore it plans to raise. ?Public sector companies generally don?t spend much on advertising. They have a very balanced approach and do not want to create over hype,? said Jagannadham Thunuguntla, strategist & head of research, SMC Global Securities.

It could be recalled that Reliance Power, which came out with India?s biggest ever IPO till date in January 2008, had launched a pre-IPO advertising blitzkrieg. The company launched a slogan ?Power On, India On? and went all out across media platforms to promote it. According to its RHP, it spent Rs 30 crore towards adverting and marketing. It got a bang for its buck, as the Rs 11,563 crore-issue got subscribed a whopping 72 times.

?There is no direct correlation between IPO ad spends and subscription garnered as there are a lot of other variables like valuations, secondary market conditions, etc that matter,? said Vivek Suchanti, MD, Concept PR, which also has an advertising wing which handles IPO-related ads.

According to advertising expert Manish Bhatt, founder director, Scarecrow Communications, the government get things cheaper and hence more visibility per penny spent. ?The government gets four times the visibility compared to a private company.?

The process that the government has put in place for selecting an ad agency also helps it keep costs low. Similar to its selection process of merchant bankers, ad agencies also have to bid low to bag a contract. The ad agency is selected through a competitive bidding process, where the agency has to first technically qualify and then bid lowest for getting selected.

Coal India?s marketing campaign may pale in comparison to Reliance Power, but it being billed as India?s largest ever IPO, has helped garner enough buzz among investors. The IPO has received overwhelming response its road shows, say merchant bankers.