The Hindu : Business : Record mobilisation through public offerings

Online edition of India's National Newspaper
Wednesday, Dec 29, 2004

Business

Business

Record mobilisation through public offerings

By Our Corporate Reporter

MUMBAI, DEC. 28. The calendar 2004 has seen the emergence of a new Indian primary market, lesser issues but large quality issues, raising huge sums of money. According to Prithvi Haldea of PRIME, the premier database on the primary capital market, all myths about the shallowness of the market were dispelled with the year ending with an impressive upsurge in public offerings, with a total mobilisation of Rs. 30,511 crores, which is 14 times higher than the meagre Rs.. 2,194 crores mobilised in the preceding year.

According to PRIME, the year's equity mobilisation of Rs. 30,511 crores, in fact, is the highest-ever in the history of the Indian capital market, more than twice than the previous best of Rs. 13, 887 crores raised in 1995 by a record 1,444 companies and significantly almost equal to the collective raising of Rs. 32,025 crores in the last nine years, 1995 to 2003.

The huge increase came primarily due to offers for sale, which went up to Rs. 19,808 crores this year from Rs. 1,282 crores in the previous year. According to PRIME, a total of 13 companies compared to five in the preceding year, made offers for sale. Significantly, a high 85 per cent or Rs. 16,819 crores of this was accounted for by seven government divestments. On the other hand, six offers were made by the private sector aggregating Rs. 2,989 crores, such offers coming in from promoters, funds and other investors, with TCS leading the pack with divestment of Rs. 2,778 crores.

In terms of raising fresh capital too, the amount increased to an impressive Rs. 10,703 crores, higher by 11 times than Rs. 911 crores in the previous year, according to PRIME.

Significantly, the year, according to Mr. Haldea, saw a near-demise of small issues; there were only five issues of below Rs. 10 crores. The Rs. 10-20 crore public issues appear a thing of the past; India is now in the big league. In this calendar year, there were three issues of over Rs. 5,000 crores each.

The first half of the year saw a mobilisation of Rs. 19,190 crores, while the second half witnessed raisings of Rs. 11,321 crores.

According to PRIME, of the 34 equity issues, while only 21 were made through the book-building route, these collectively mobilised over 99 per cent of the year's amount. Little wonder, this helped allocation to qualified institutional buyers (QIBs) rise to a huge Rs.15,544 crores.

In another development, public offerings by listed companies emerged strongly. Compared to three in the previous year raising Rs. 494 crores, nine listed companies went public raising Rs. 17,389 crores in 2004. Of this, while seven listed companies made divestments for Rs. 14,136 crores, two companies raised Rs. 3,253 crores in fresh capital. The remaining 25 cases were initial public offerings, which collectively mobilised Rs. 13,122 crores.

By number, the performance of the year was much better, according to PRIME. Compared to 15 public issues in the previous year, 2004 recorded 34 public issues, registering a 126 per cent increase.

Safety factor

Mr. Haldea stated that `safety' continued to be the hallmark of the year's offerings. It may be recalled that courtesy the bad experiences of the mid `90s, further compounded by the misadventure' with several recent IPOs, investors have shown marked preference for safety.

The year was characterised by good quality issuers; one or combination of well-established companies or promoters, divestments either by the Government or by venture capitalist and follow-on offerings, all auguring well for the investors, the capital market and the economy.

PSE divestment

The 'safety' factor was evident by a 66 per cent share of the mobilisation taken up by government undertakings (PSU divestments: Rs. 16,819 crores, PSU banks: Rs. 230 crores and other PSUs: Rs. 3,169 crores) and Rs. 10,234 crores by established private sector companies, according to PRIME. Only one new company entered the market to raise a meagre Rs. 59 crores and that too by the promoters of a well-established company. Clearly, there was no market for greenfield projects or for new promoters.

Courtesy high quality, the response from the public to the issues of the year was excellent with huge oversubscriptions reported for almost all the issues. Several issues attracted a huge number of applications, with NTPC leading at 14.40 lakhs, followed by TCS at 12.42 lakhs and Bank of Maharashtra 10.21 lakhs. Supporting this response was the buoyant secondary market almost through the year.

The economic resurgence and the stable political climate only further improved the scenario.

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