Record public equity mobilisation by Indian firms


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New Delhi : Indian companies mobilised a record amount from public equity issues in fiscal 2006-07, raising Rs.249.93 billion (some $6 billion) in the process, which was 5 percent higher than in the previous year.

"In fact, the year's equity mobilization was the highest-ever in the history of Indian capital market," said Prithvi Haldea, managing director of equity market think tank PRIME Database that releases an annual study on the primary market.

Indian firms had mobilised Rs.236.76 billion in 2005-06 and Rs.214.32 billion in 2004-05, the think tank said. Prior to this, the highest amount raised by way of public issues in a year was Rs.134.43 billion in 1994-95.

"The mobilization in the year could have been higher but for the two secondary market crashes during the year that forced temporary shelving of initial public offerings (IPOs) as also lack of divestments of state-run enterprises."

According to PRIME, follow-on public offers by listed companies witnessed a huge decline and accounted for only 5 percent of total mobilization, even as the year saw the largest-ever equity IPO in India – Rs.57.89 billion by Cairn India.

Significantly, the number of issues hitting the market recorded a decline during 2006-07 with 85 public issues, compared with 102 in the previous fiscal – a drop of over 17 percent.

In terms of the method of offering, 71 out of 85 issues were book-building, and cornered 99 percent of the total mobilization, leaving only 1 percent share for fixed-price issues.

"The response from the public to equity issues of the year was excellent," said Haldea, attributing it to a buoyant secondary market almost throughout the year, the economic resurgence and a stable political climate.

"But courtesy secondary market crashes, as many as eight IPOs – all small – were caught in its midst, and failed to evoke the requisite response and had to be refunded," he added.