The Hindu Business Line : `Funds from primary market issues down 25 pc in 2005'

DESPITE an extremely bullish secondary market this year, funds raised in the primary equity market through public issues were lower by 25 per cent at Rs 22,754 crore from the previous year.

In 2004, Rs 30,511 crore was raised in the primary market, the highest ever in history.

The mobilisation in 2005 would have been much larger but for the PSU divestments that continued to be in the pipeline but never materialised, according to a release from Prime Database, an independent primary market monitor.

The firm said that last year, Rs 16,819 crore was accounted for by PSU divestments, which went down to nil in 2005.

"In the light of this, the performance of 2005 can be considered impressive," said Mr Prithivi Haldea, Managing Director of Prime Database.

By number of issues, the performance of the year was much better. Compared to 34 public issues in the previous year, 2005 recorded 72, a 47 per cent growth.

Mr Haldea said that book-building issues continued to dominate, with 50 of the 72 equity issues made through that route. Book-built issues mobilised over 97 per cent of the year's amount.

In 2005, follow-on public offerings (FPOs) by listed companies continued to dominate.

Compared to nine such issues in the previous year, which raised Rs 17,389 crore, 19 listed companies made FPOs in 2005, raising Rs 12,764 crore.

The remaining 53 issues were IPOs, which collectively mobilised Rs 9,990 crore.

There was a very sharp rise in the raising of fresh capital (which typically goes into productive assets), with the amount increasing to Rs 20,380 crore in 2005 - twice that of the previous year's Rs 10,703 crore.

The year was characterised by good quality issuers as no new company entered the market, indicating that there was no appetite for green field projects or for new promoters.

The response from the public to the issues was also good, with huge over-subscriptions reported for almost all the issues. Several issues attracted a large number of applications, with PNB leading at 8.48 lakh, followed by IDFC at 6.20 lakh and Suzlon at 5.14 lakh.

In terms of public debt issues, the amount mobilised increased by 72 per cent to Rs 4,095 crore from Rs 2,383 crore in 2004. There was no debt mobilisation by the corporate sector similar to last year, Prime Database said.