Poor run of rights issues in H1

By Our Corporate Reporter

CHENNAI, NOV. 16. While the public issue market reached a nadir in the first half of the current fiscal recording 2 IPOs for a meagre Rs. 6 crores, mobilisation of resources through rights issues too presented a dismal picture with only four companies entering the market.

In the corresponding period of the previous year which itself was a bad year, 12 companies had made rights issues. This has been reported by Mr. Prithvi Haldea of Prime, country's premier data base on the primary market.

Courtesy the Rs. 672 crore issue from Telco, the amount raised in the 6-month period, however, reached Rs. 737 crores, far higher than Rs. 350 crores that had been raised in the corresponding period of the previous fiscal and almost similar to Rs. 729 crores raised in the entire previous year.

Though over the corresponding period of the previous year, the increase by amount was a significant 110 per cent, in perspective, the mobilisation was still so meagre according to Mr. Haldea that it works out to only six per cent of the Rs. 12,630 crores which was raised in the boom year of 1992-93 by a record 488 companies.The decline, both by number and amount, has been almost consistent over the last 8 years:

While Telco led the pack of issuers with a Rs. 672 crore offer, it may be recalled that the company had earlier announced an issue of Rs. 1,307 crores which it had to scale down by nearly 50 per cent due to bad market conditions as well as the poor corporate performance. The other issuers in the period were Alok Industries (Rs. 51 crores), Dalmia Cement (Rs. 8 crores) and Dharamsi Morarji Chemical (Rs. 7 crores).

The poor run of rights issues, according to Mr. Haldea, is primarily because of the dull conditions which have hit the market through almost the entire last two years. In fact, the continuing fall in the number of companies tapping the rights route down the years can be ascribed mainly to the generally depressed secondary market prices of a vast majority of companies, many due to poor fundamentals.

On the other hand, scores of companies with good performance have preferred to meet their fund requirements through preferential allotments or by way of private placement to mutual funds, private equity investors and venture capital funds. Several corporates have also opted for debt through the private placement route.

According to Mr. Haldea, the overall investors' apathy towards the primary capital market consequent to the 1993-1996 fiasco also continues to be a major factor for the current state of the rights market.

In that period, most companies had made issues at a very high premium and as these subsequently led to significant losses, the investors have just turned away.

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