Spurt in rights issues by firms

Fund mobilisation of resources through rights issues has suddenly spurted in August. According to Prime Database, as many as 5 issues aggreg...

Fund mobilisation of resources through rights issues has suddenly spurted in August. According to Prime Database, as many as 5 issues aggregating Rs 2,275 crore are tapping the rights route this month. These includes Sterlite Industries (Rs 1972 crore), Bharat Forge (Rs 105 crore), Centurion Bank (Rs 91 crore), Balrampur Chini Mills (Rs 59 crore) and South Indian Bank (Rs 48 crore).

Significantly, this month’s mobilisation alone is more than twice the amount (Rs 1,006 crore) that was raised in the entire previous financial year, according to Prime.

With 2 rights issues having hit the market in May (Texmaco Rs 15 crore and Moschip Rs 12 crore), the total resources raised through rights issues this year, according to Prime have reached Rs 2,303 crore. In the previous fiscal, the amount raised till August was a meagre Rs 27 crore.

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Incidentally, the amount already raised in the current year is higher than each of the preceding 7 full years. However, in perspective, the present mobilisation is still a meagre 18 per cent of the Rs 12,630 crore which was raised in the boom year of 1992-93 through 488 companies.

The turnaround in the fortunes of rights issues both by numbers and by amount, according to Prithvi Haldea of Prime, has come about primarily because of the steady conditions in the secondary market and drying up of the ECB market. Companies are offering shares on rights basis either to expand, diversify or simply to restructure their balance sheets.

However, scores of companies with good performance are continuing to prefer to meet their fund requirements through preferential allotments of equity or by way of private placement of debt. As per PRIME, as many as 15 companies have applied for or have obtained SEBI approval to collectively raise Rs 546 crore.

These include CESC (Rs 50 crore), Coonoor Tea Estates (1), Core Projects (5), GIC Housing Finance (16), J.M.A. Industries (6), Mawana Sugars (9), Neemtek (1), Parry Agro (9), Polyolefins Rubber (30), Schenectady Herdillia (51), Spanco (7), TV18 (23), United Breweries (214), Varun Shipping (76) and Vijay Industries (48).

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In addition, there are at least 20 companies which have in the past 6 months announced their plans to tap the rights market and may firm up their plans in the near future. These include Andhra Pradesh Tanneries, Bajaj Hindustan, Bal Pharma, Bata, Beeyu Overseas, Compudyne, Devaki Hospitals, Gujarat Ambuja Exports, Gujarat NRE Coke, J&K Bank, Maharashtra Industrial, Mascon Global, Noida Toll Bridge, Shiva Cement, SIEL Sugar and Welspun.