Merchant bankers have earned ten times more from primary market issuances from the private sector than from state enterprises, in the form of management fees in 2010 so far. Of the total amount of Rs 22,300 crore mobilised by four PSUs — NTPC, REC, NMDC and Union Bank of India — the lead managers earned just Rs 10.25 crore as management fees, which is 0.05% of the issue size.

Compared to this, merchant bankers, who have handled a total of 14 issuances worth over Rs 4,280 crore from the private sector earned Rs 123 crore, which is 2.88% of issue size, according to data compiled by Delhi based SMC Capitals.

While merchant bankers earned Rs 5.93 crore and Rs 2.35 crore respectively as fees for the follow-on public offer (FPO) of Rs 8,478 crore NTPC and Rs 3,529 crore REC, the Rs 9,967 crore NMDC issue fetched just about Rs 10 lakh.

Though aggressive pricing and adverse market conditions were attributed for the poor response to PSUs, experts also point to unattractive fees as one of the reasons behind poor marketing. For PSU share issuances, merchant bankers are appointed in a two-way competitive bidding process.

Those technically qualified in the initial stage will be shortlisted on the basis of price quoted by them through a competitive bidding process. ?Any primary market issuances from PSUs are large transactions and bankers are keen to be part of it, since it gives them a visibility and brand image,? said a lead manager who was part of an FPO from a PSU.