The Hindu Business Line : Waning primary markets

Resources mobilised in the primary market grew by about 57.5 per cent in 2007-08 with companies raking in over Rs 2.08 lakh crore through local and overseas offerings. While both the domestic (IPOs, rights offers, private placements) and the overseas (GDR, ECBs, FCCBs) markets were tapped with equal fervor, overseas flotations were favoured, with money raised abroad trebling to Rs 31600 crore this year.

Statistics from CMIE show that the lion’s share of these funds were raised in the months of June and July 2007. June 2007, in particular was a frenetic month, with Rs 20,000 crore raised through IPOs of realty majors DLF and HDIL and the follow-on offer from ICICI bank, amongst others. By September, aided by the bull run in the stock markets, companies had already raised close to Rs 30,000 through IPOs, beating the mop-ups for the whole of 2006-07 (Rs 29,000 crore).

Private placements more popular?

While public offers bolstered the June numbers, private placements — at Rs 15200 crore — added to the July mop-up. The momentum in private placements continued, with October, December and January 2008 witnessing a Rs 41,300-crore addition to corporate India’s kitty through the private placement route. In fact, at the end of the year, private placements had overtaken IPOs as the key domestic source of funds for companies.

The bear hug

The momentum witnessed in the first nine months failed to carry through to the fag end, courtesy, the stock market crash that began on January 21-22.

Although companies like Reliance Power, Future Capital and IRB Infrastructure did garner about Rs 10500 crore through public offers during this time, companies like Emaar –MGF and Wochardt Hospitals were forced to withdraw their IPOs due to under subscription.

With the potent cocktail of weak global economic cues and poor market sentiment, total mobilisation (domestic and overseas, equity and debt) averaged only Rs 6,000-8,000 crore per month in the months following January, from an average of Rs 15000-20000 crore in the preceding months. The trend seems to continue this year too, with April seeing a mop up of just over Rs 7000 crore.

PARVATHA VARDHINI C

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