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The capital raised from the primary market though public and rights issues has fallen by 56.82 per cent in 2011-12 ending October as compared to the corresponding period last year, reveals data from SEBI.
The amount raised was Rs 16,342 crore as compared to Rs 37,851 crore as on the last trading day of October 2010. The total includes the addition of equity (listed and IPO) along with debt.
The finance industry raised Rs 7,699 crore, the highest amount through public and rights issues as on October this year. SEBI data in the November 2010 bulletin shows that industries under the category of ‘others' raised Rs 22,402 crore through public and rights issues. This was followed by banking and financial institutions which raised Rs 5,070 crore
Although the amount raised this year was almost half, the total number of issues slipped only marginally to 41 from 56 last year.
SEBI data also shows that initial public offerings (IPOs) have taken a big hit. The amount raised through IPOs has reduced by almost 84.14 per cent. The amount raised through IPOs (up to calendar year October 2011) has dropped to Rs 4,981 crore from Rs 31,415 crore in the same period last year.
Many IPOs called off
“The IPOs which were launched this year had a very small ticket sizes. Due to the pressure in the secondary market, the primary market was under pressure and almost 27 IPOs which aimed to raise Rs 35,000 crore were called off this year,” said Mr Jagannadham Thunuguntla, Strategist and Head of Research, SMC Global Securities.
The number of issues hitting the market as of October 2011 reduced to 29 from 36 issues in the same period last year. “Going forward, I feel that the primary market will continue to be under pressure until the secondary market stabilises,” said Mr Thunuguntla.
The capital raised from listed (equity) has increased to Rs 6,666 crore this year from Rs 4,500 crore last year, according to SEBI data.
Affected rights issue too
The worsening sentiments in the secondary markets have led to loss of interest in rights issues as well, say analysts. Companies come out with rights issues for many reasons. The capital raised through rights issues can help improve the debt-equity ratio of companies. Also, rights issues are good routes for promoters to raise their stake in the company.
“One reason for the drop in the amount raised through the primary market is because no major public issues have come out this year. Even the ONGC issue which had harboured a lot of expectations was called off this year,” said Mr Mr Sundar Rangan, Head — Merchant Banking, Arihant Capital Markets.
The ONGC Follow-on Public Offer (FPO) was expected to mop-up nearly Rs 12,000 crore this year. Last year, Coal India raised nearly Rs 15,000 crore through its IPO.
However, the amount raised through debt (instrument-wise) increased to Rs 4,695 crore in the calendar year ending October 2011 from Rs 1,936 crore as on October 2010.
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