Global Banks Walk Away From SBI Funds IPO Over Low Fees

Source: Coindoo Original Title: Global Banks Walk Away From SBI Funds IPO Over Low Fees Original Link:

A rare pushback is unfolding in India’s IPO market, where global investment banks are drawing a line on fees.

The planned listing of SBI Funds Management, expected to raise around $1.4 billion, has turned into a clear example of how deal economics are starting to matter more than prestige.

Key Takeaways

• Major global banks declined to advise on the SBI Funds Management IPO due to extremely low fees.
• Citi and JPMorgan stepped aside, while domestic banks filled the advisory roles.
• A packed IPO pipeline is allowing banks to prioritize profitability over prestige.

Global Banks Say No to Ultra-Low Fees

Several large Wall Street firms quietly stepped away after reviewing the compensation structure. Advisory fees were pitched at roughly 0.01% of the deal size – a level bankers privately described as symbolic rather than commercial. For international banks with high fixed costs, the economics were difficult to justify.

Among those opting out were Citigroup, which was initially included but later withdrew, and JPMorgan Chase, which chose not to pursue the mandate after pitching. SBI Funds Management subsequently brought in Jefferies Financial Group as a replacement adviser, while other foreign banks also declined to proceed.

The sellers in the IPO are State Bank of India and Amundi, which plan to divest a combined 10% stake. At an expected valuation of about $14 billion, the deal would rank among India’s larger listings this year, despite the unusually thin fee pool.

Domestic Banks Step In as IPO Pipeline Grows

With global banks pulling back, domestic institutions have taken the lead. Firms such as Kotak Mahindra Capital, Axis Bank, SBI Capital Markets, ICICI Securities, and others have agreed to work on the transaction.

Accepting minimal or token fees is not unusual in government-linked deals in India, where long-term relationships and league-table credit can outweigh short-term revenue.

What sets this episode apart is timing. India’s IPO calendar is crowded, with regulators expecting more than 200 private-sector listings this year. That abundance is giving banks leverage to be selective. Rather than chasing high-profile but loss-making mandates, many international firms are prioritizing deals that generate sustainable fees.

The SBI Funds IPO highlights a subtle shift in global dealmaking. Even in one of the world’s hottest listing markets, reputation alone is no longer enough to secure bank participation when the numbers fail to add up.