Amid sluggish market conditions, fund-raising by Indian companies through rights issue plunged by 68 per cent to Rs 2,166 crore in the first half of the current fiscal.

According to a report by Prime Database, a leading database on primary capital market, companies mopped up Rs 2,166 crore during April-September 2013-14 against Rs 6,749 crore raised in the corresponding period of the preceding fiscal year.

Rights issue

In a rights issue, shares are issued to existing investors at a pre-determined price, normally at a discount, in proportion to their holdings.

During the six-month period ended September 30, 2013, nine companies used the rights route to raise funds compared with 10 firms in the year-ago period.

“Dismal and volatile market conditions through the year as well as overall lack of confidence in companies to raise and deploy fresh capital were the main reasons for the poor utilisation of the rights route,” Prime Database Managing Director Pranav Haldea said.

He further said: “The balance part of the year is also likely to see little action on the rights front.”

Currently, only 13 companies have obtained or have applied for SEBI approval for collectively raising Rs 652 crore, he added.

The largest rights issue during this period was from Godrej Properties (Rs 700 crore), followed by Reliance Mediaworks (Rs 600 crore) and Kesoram Industries (Rs 416 crore).

Besides, two companies (Pierce Leslie and Dalal Street) used the rights issue route to dilute promoters’ shareholding to comply with SEBI requirement of 25 per cent minimum public shareholding.

The report said that 32 per cent of the mobilisation, at Rs 700 crore, was done by real estate sector (one issue of Godrej Properties) followed by media 28 per cent (Rs 600 crore issue of Reliance Mediaworks).

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