i-bankers for Rs 10k-cr NMDC issue refuse to accept Rs 16,550 fees

Investment bankers who handled the Rs 10,000-crore disinvestment of mining major National Mineral Development Corporation (NMDC) are learned to have told the government that they can do without the small change when they were repeatedly asked to submit bills for the i-banking fees.

While the follow-on-public offer in NMDC raised Rs 9,304.45 crore, the six investment bankers that handled the issue?UBS securities, Citigroup, Edelweiss, Kotak Mahindra, Morgan Stanley and RBS equities?will be paid a pittance of Rs 16,550 each. This amount is much lower than the cost of paperwork needed to prepare the bills.

?We have not released the fees as the i-bankers have not submitted the bills so far,? a disinvestment department official told FE on Tuesday, on the condition of anonymity. The official, however, was quick to add that ?the legal consultants are already paid.? Domestic and international legal counsels Crawford Bayley & Co and Gide Loyrette Nouel LP, respectively, were quick to submit the bill since their fees amounted to close to Rs 1 crore.

In a tough battle to manage the country?s biggest follow-on-public offer in recent years, 17 investment bankers had tried to outbid each other by taking the investment banking fees to record lows. The six bankers who won the issue had bid to manage the issue at 0.0001% of the disinvestment proceeds, a record low across the world for managing such transactions, according to Bloomberg data. ?We underwrote the issue to retain our position in the league table and shelled out crores from our own kitties to file the prospectus, print the application forms and conduct the road shows. After all this, do you expect us to run around officials for Rs 10,000?? asked one of the i-bankers.

Meanwhile, the government has put in place new norms for selecting investment bankers. The new norms have brought down the importance for financial parameters and say that the government will have to pay brokers 0.35% of the value of the shares they sell to retail investors, and 0.15% of stock sold to high net-worth individuals.