There are some important messages from the recently released data on primary markets. Last year (2010-11) a sum of Rs.46,267 crore was raised through public equity issues. The mobilisation was roughly the same as that of the previous year. According to Prime Database, one of India's oldest and most reliable purveyors of capital market data, the mobilisation last year — incidentally the third highest ever — could have been even more but for the fact that some public sector undertakings (PSUs) deferred their planned large public offerings. One of the reasons for the postponement was the volatility in the secondary markets that had set in during the last quarter of 2010-11. Indeed, continuing volatility poses daunting challenges to primary market issuers, especially in timing the issue and price discovery. When iconic PSUs are involved, the issue price can never remain outside the pale of controversy, no matter what method is used to discover the price.

In 2010-11, a total of 57 public issues entered the market, compared to 44 the previous year. Of these, 52 were initial offerings and the remaining five follow-on offers. The average deal size was Rs.811 crore. Ten issues were for Rs.1,000 crore and above. At the other end, there were six issues of less than Rs.50 crore and none below Rs.10 crore. The important message here is that India's primary market remains tilted towards large companies. The ongoing efforts of the government and the regulator, SEBI, to encourage small and medium enterprises to seek funds from the capital market instead of depending solely on bank finance have not been successful. Dedicated exchanges for small share offerings have not taken off. The OTC exchange, which goes back to the early 1990s, was well conceptualised but it found few takers. Public issue of shares continues to be an expensive affair. The system, derived from regulatory rules as well as deeply ingrained market practices, favours the larger issuers over the small. Irrespective of the issue size, there are certain fixed costs such as advertising and publicity that the issuer has to incur. That, in many cases, raises the bar for the smaller issues. While there is absolutely no doubt that a public listing of shares confers many advantages to a corporate, the small and medium enterprises (SMEs) will have to weigh the costs involved against the advantages. Many SMEs therefore depend on outside equity support from venture capital, private equity and many categories of institutional investors.

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