• MARCH 1, 2000

The changing colors of primary market

There was a 46% increase in the amount raised from primary market through rights and public issue during the first nine months of the fiscal 1999-2000. A sum of Rs 57.2 bn was raised during this period from the primary market with equity constituting 61% against a much lower share of 18% in the corresponding period of the previous year.

The following measures seems to have helped in this revival of fortunes in the primary market:

  • Tax sops offered in the previous budget for the increased flow of funds into mutual funds.
  • Reduction in the long-term capital gains tax.
  • Abolition of fixed par value concept by SEBI.
  • Rationalization of listing requirement norms for securities in IT sectors.
  • A bullish secondary market.
  • Better risk surveillance systems in the secondary market.

    During this period the proportion of resources raised through public issues declined to 75.8% from 89.6% in the corresponding period of the previous year. The average size of the issue however remained unchanged at Rs 950 m. In terms of sector performance, banks and financial institutions raised the maximum followed by information and technology sector and cement and construction sector. Though banks and financial institutions raised the largest amount from primary market their share in total resource mobilization declined from 84.4% during April-December 1998 to 53.1% during April- December 1999.

    (Rs bn)April to December  
    Type of issue19981999% change
    Public 35.2 43.4 23%
    as % of total90%76% 
    Rights 4.1 13.8 237%
    as % of total10%24% 
    Total 39.3 57.2 46%
    Public (nos) 23.0 39.0 70%
    Rights (nos) 18.0 22.0 22%
    Total number of issues 41.0 61.0 49%
    Avg size of public issue 1.5 1.1 -27%
    Average size of rights 0.2 0.6 176%
    Average size of issue 1.0 0.9 -2%

    Debt issues accounted for 38.8% and equity issues accounted for 61.2% during April- December 1999 against 82.1% debt issues and 17.9% equity issues in the previous year.

    (Rs bn)April to December  
    Type of issue19981999% change
    Debt 32.24 22.21 -31%
    as % of total82.1%38.8% 
    Equity 7.05 35.02 397%
    as % of total54.2%61.2% 
    Total 39.29 57.23  
    No. of debt issues 13 7 -46%
    No. of equity issues 28 53 89%
    Avg size of debt issue 2.48 3.17 28%
    Avg size of equity issue 0.25 0.66 162%

    As for investor preference equities seem to be favorites as reflected by the 397% increase in the amount raised through equities during April to December 1999 against the corresponding period of the previous year. Also the lower interest rates offered on debt has resulted in lower mobilization through debt. There is a 31% decline in the amount mobilized thorough debt during the above period as compared to the previous year. The other interesting fact to note is that the average size of equity issues has gone up by 162% from Rs 250 m to Rs 660 m. The increase in the average size of equity issues could probably due to higher number of issues with a premium.

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited (Research Analyst)
    103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407