Record Mop-Up Via Pvt Debt In May
Funds raised from the markets through private placement of debt issues touched a record high of Rs 3,050 crore in May 1997, a study by the Centre for Monitoring Indian Economy (CMIE) reveals. It also shows that the conventional public and equity issue route to raise funds has virtually dried up.
According to an official statement from CMIE, during the last month, there were 13 private placements, which together raised over Rs 3,000 crore. The privately placed debt offered very low interest rates from 13.5 per cent to 15.75 per cent. This was the highest amount mopped up through this route in a single month. The issuers included financial institutions, public and private sector companies.
The latest Securities and Exchange Board of India (Sebi) figures on offer documents received and cleared by the regulator from June 2-6, 1997, shows that an application for a rights issue was filed for raising a total capital of Rs 75.04 crore. During the same week, Sebi issued two acknowledgement cards to raise a sum of Rs 3.2 crore.
The three companies which sought to raise funds through public issues were Supreme Impex (Rs 22 lakh), Light Roofing Capital (Rs 302 lakh) and Pragati Fincap (Rs 399.4 lakh).
The CMIE data states that the largest issuers of debt included IDBI (Rs 1,000 crore), Indian Railway Finance Corporation (Rs 500 crore) and Krishna Jala Bhagya (Rs 500 crore).
In the private sector, Reliance Industries raised Rs 100 crore through 15.5 per cent five-year bonds with bullet maturity. Kotak Mahindra Primus sought to raise Rs 50 crore with 14.75 per cent debentures with a short maturity of two years.
According to CMIE, the glut in privately placed debt will continue in the coming months. "More and more private sector companies which have deferred their public issue plans owing to the fatigue in the secondary markets are expected to privately place debt,'' a source said.
The sharp increase signifies a structural change in the primary capital markets, with the public/equity offerings virtually absent. The dominance of debt over equity had begun in 1996-97. Thus, the heavy mobilisation of funds through this route is a continuation of past trends. But, the drop in interest rates shows a clear shift in regime. During 1996-97, the coupon rates offered on bonds and debentures varied between 16 and 18 per cent.