DCM desks, which earn 1%-3% of the total deal value on dollar bond issuances, are staring at competition following the central bank’s proposed norms.
M&A financing has so far been driven by non-bank lenders such as NBFCs, private credit funds, mutual funds, and family offices. While onshore acquisitions are typically financed through NCDs or loans raised from NBFCs, mutual funds, private credit funds, or family offices, companies tap external commercial borrowings (ECBs) for offshore deals.
Markets experts say the 1-3% of the total deal value DCM desks earn on dollar bond issuances compares with only 10-25 basis points on external commercial borrowings (ECBs).
Indian companies raised $61 billion through ECBs last year compared to just $15 billion via dollar bonds, per RBI data.
“In addition, global investment banks typically earn 1-2% in underwriting fees from prospective acquirers in return for providing letters of assurance or funds-availability commitments, which helps in the acquirer’s bid credibility in competitive M&A processes,” said a banker. “Subsequently, these same banks also generate meaningful revenue by arranging the eventual financing through the debt capital markets mobilising capital from mutual funds, insurance companies, NBFCs, family offices, and private credit funds.”However, as domestic commercial banks increasingly participate in such transactions, global investment banks risk losing not only the lucrative underwriting fee associated with providing assurance of funds availability but also the downstream DCM syndication and placement revenues associated with fundraisings.”This change takes away a high margin niche,” said a senior banker. “Banks’ balance-sheet strength will compress spreads and force arrangers to compete more on speed and relationships.”
Alternative investment funds, NBFCs, mutual funds, and offshore lenders collectively financed about $9 billion worth of share transfers in the first half of 2025, including marquee deals such as Jubilant Group-Coca-Cola and JSW-Akzo Nobel.
Private credit funds, offering yields of 8-9%, dominated mid-market and distressed M&A financing but now face pressure as banks can lend at 7-7.5%. EY data shows private credit deployment jumped 53% year-on-year to $9 billion across 79 deals in H1 2025, a nearly threefold rise from H2 2024 levels.
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