istless Primary Market Impeding Industrial Growth

The mobilisation through public issues continued to remain extremely low for the second successive month. According to a study conducted by the Delhi-based Prime Database, the primary market witnessed mobilisation through public issues aggregating to a meagre Rs 72 crore.

This mobilisation was similar to Rs 73 crore in April but represented a substantial fall from Rs 1,132 crore in March, Rs 826 crore in February and Rs 1,651 crore in January, most of which in any case was raised by financial institutions.

The number of issues too reached an extremely low level, declining to only 9 in May compared with 15 in April, 16 in March, 24 in February and 34 in January. Interestingly, May 1996 had seen 73 issues while May 1995 had 122 issues. Compared with even the corresponding period of the previous year, the decline in amount mobilisation is 91 per cent and by number of issues it is 87 per cent.

 

According to Prime, poor resource mobilisation is increasingly affecting the countrys industrial growth, specially new projects. Public issues of 1992-93 had helped finance industrial projects worth Rs 15,923 crore. This had more than doubled to Rs 33,229 crore in 1993-94 and had risen further to Rs 38,182 crore in 1994-95.

However, the continuing depression in the capital market since early 1995 resulted in a poor response from the investors. It also led to promoters shelving their issue-raising plans and consequently their projects.

Projects implemented via public issues in 1995-96, as compared with 1994-95, fell by over 63 per cent to only Rs 14,040 crore and have further fallen by another 51 per cent to a meagre Rs 6,925 crore in 1996-97.

Significantly, not only has the total mobilisation been declining, but even most of the money raised from the primary market in the past two years has been by the financial sector and not the manufacturing sector.

While 83 per cent of the total funds raised in 1994-95 were by the manufacturing sector, this fell to 47 per cent in 1995-96 and to a low of 32 per cent in 1996-97.

The resources raised by the finance sector may ultimately find their way to the manufacturing sector through long/short term debt or through leased assets.

Of the total mobilisation of Rs 11,648 crore in fiscal 1996-97 through public issues, over 60 per cent was debt. quity mobilisation has been taking a consistent beating, down from Rs 13,312 crore in 1994-95 to Rs 8,882 crore in 1995-96 to only Rs 4,671 crore in 1996-97 (of which the private sectors share hit a rock bottom at Rs 2,919 crore)

In 1994-95, the private sector had raised Rs 12,521 crore in equity which had declined to Rs 6,663 crore in 1995-96. The decline in 1996-97 as such is an alarming 57 per cent over the last year and 77 per cent over 1994-95.