Primary market hits rock-bottom

MUMBAI, OCT 1: The amount mobilised through public issues has again fallen steeply in the last six months, indicating the worsening situati...

MUMBAI, OCT 1: The amount mobilised through public issues has again fallen steeply in the last six months, indicating the worsening situation in the primary capital market. There have been only 42 public issues raising a meagre Rs 348 crore in the April-September 1997 period as compared to 577 issues aggregating Rs 6,199 crore in the same period, the previous year. This represents an alarming 93 per cent decline in amount mobilisation and a 94 per cent fall in number of issues.

The primary capital market continues to be in a pathetic state and has hit rockbottom in September, according to Prime Database. While July and August had two and three public issues respectively, September witnessed only one issue, and that too for a meagre amount of Rs 1 crore from a small finance company. The only other month in the last decade with a single public issue was June 1991.

It is now for the sixth month in succession that the primary market has witnessed an extremely low level of mobilisation through public issues. The Rs 1 crore mobilisation in September represents a substantial fall from even earlier months’ figures: Rs 147 crore in August (courtesy ICICI Bank issue), Rs 3 crore in July, Rs 53 crore in June, Rs 72 crore in May and Rs 73 crore in April. The number of issues is low compared to three in August, two in July, 13 in June, nine in May and 15 in April.

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Significantly, the first six months have been marked by a total absence of public debt issues, which had dominated the entire previous year. Also missing, according to Prime, were mega equity issues both from the public and private sector. Premium issues too remained in the hiding with no such issue in September. In fact, in the previous 11 months, there have been only 11 premium issues, 4 of which have been from the public sector.

“The success of the ICICI Bank issue in August was heralded as the revival of the primary market. This is far from true. The primary market should be considered to have revived only when more number of issues start hitting the market, with favourable response from the investors,” Prime said in a study.It said revival of the primary market appeared remote, especially for the private sector, despite the buoyancy of over eight months in the secondary market. Major offerings on the horizon are still very few and almost all are from the public sector or from banks, making for a near-monopolisation of the primary market by the Government.

While the issues of Corporation Bank and GMDC are opening in October, the other equity public issues lined up are from VSNL (Rs 62 crore), IBP (Rs 40 crore, State Bank of Bikaner & Jaipur (Rs 68 crore), State Bank of Hyderabad (Rs 58 crore), State Bank of Travancore (Rs 83 crore) and PNB (Rs 500 crore).