Wall Street banks have had enough of heavy work for puny paychecks on Indian government share sales - at least when it comes to smaller or difficult deals.
That choosiness comes at a bad time for India, which may struggle to hit its goal of raising nearly $6 billion from share sales in state companies by the end of March with investor demand for new shares expected to remain modest.
Just three banks, all local, bid to run a roughly $300 million stake sale in National Aluminium Co Ltd, said bankers with direct knowledge of the matter.
Two years ago, by comparison, 10 banks - four of them global heavyweights - bid to manage a $275 million initial public offering by state manganese ore producer MOIL Ltd.
That was despite a payday of $3 split among three winning banks with no reimbursement for expenses. That is a standard setup for state deals in India, where investment banks can lose $1 million or more on costs but have played along for league table credit and the hope of future business.
Now, global banks, weakened after rounds of job cuts, are shying away from state deals that are too small or difficult to do purely for credit in industry rankings.
A couple of years ago, we would bid aggressively for all the government deals, hoping to win some of them. Today, we spend a lot of time in deciding the ones we would like to bid for the mandate, said the equity market head at a leading U.S. bank.
The reason is simple - why take on additional costs when the business itself is bad? said the executive, who like several other bankers declined to be identified for fear of losing future government business.
Banks lose money on even the biggest Indian state deals.
Coal India Ltd, which raised $3.5 billion two years ago in India's largest IPO, paid fees to its six banks that were not enough to cover a night's stay in a hotel during the investor roadshow to places like Singapore and Hong Kong.
By comparison, fees for private sector IPOs in India are between 2 per cent and 4 per cent of the money raised, while for secondary share deals they range from 1.5 to 3 per cent, banking sources said. In China, state companies pay about 2.5 per cent for IPOs in Hong Kong, and 1 to 1.5 per cent for follow-on sales.
It's tough to build a