Fund raising via rights issue sinks to 4-year low in 2013

A total of Rs 4,101 crore were garnered in 2013 as against Rs 7,295 crore raised in the preceding year, indicating a 44% slump: Prime Database report

Marking the lowest level in four years, Indian companies raised Rs 4,101 crore through issuance of 'rights' shares to their existing shareholders in 2013 amid volatile markets, according to a report by Prime Database.

The report said that 2014 is also likely to see little action on the rights front.

In a rights issue, shares are issued by the companies to their existing investors as per their holding at a pre- determined price and ratio.

According to the report, a total of Rs 4,101 crore were garnered in 2013 as against Rs 7,295 crore raised in the preceding year, indicating a 44% slump.

This was also the lowest level of funds raised through rights issue since 2009, when companies had raked in Rs 3,774 crore.

By way of numbers, 2013 witnessed 12 companies using the rights route as compared to 17 firms in the preceding year.

"...Volatile market conditions through the year, delays in the rights issues process and an overall lack of confidence in companies to raise and deploy fresh capital were the main reasons for the poor utilisation of the rights route," Prime Database MD Pranav Haldea.

The largest rights issue in 2013 was from Bajaj Finance (Rs 744 crore), followed by Godrej Properties (Rs 700 crore) and Reliance Mediaworks (Rs 600 crore).

Besides, the rights issue route was used by two companies (Peirce Leslie and Dalal Street) to dilute promoters' shareholding to comply with Sebi's requirement of 25% minimum public shareholding.

Dalal Street's issue (Rs 9 lakh) was successful, Pierce Leslie had to refund the amount collected from the investors as it was not able to obtain the minimum subscription.

Sectorally, 18% of the mobilisation was done by the financial services segment, followed by media and real estate at 17% each.

At present, there are only nine companies planning to mop up Rs 881 crore. They have Sebi's approval.

There are another six firms considering to rake in Rs 396 crore which have applied for market regulator's nod.