Debt issues dominate primary market

NEW DELHI, MAY 7. The primary market could not take off as expected in 1999-2000 despite the boom in the secondary market as mobilisation of Rs. 7,673 crores was below the Rs. 7,911 crores in 1998-99.

According to Prime database, an independent primary market monitoring agency, debt continued to dominate the issuance with Rs. 4,698 crores or 61 per cent.``Continuing dominance of debt clearly shows investors' preference for safety, because of the bad experience of the mid-Nineties," Mr. Prithvi Haldea of Prime database said.

The amount raised through equity issues was only Rs. 2,975 crores. This represented a phenomenal increase of nearly 500 per cent from 1998-99 (from Rs. 504 crores to Rs. 2,975 crores), which was incidentally the worst year for the public equity issue market, Prime said in its study.

The buoyancy in the primary market was dominated by the knowledge sector with as high as Rs. 1,492 crores or 50 per cent accounted for by the information technology sector through 36 issues. Of the balance, Rs. 541 crores or 18 per cent was taken up by five pharma issues and Rs. 125 crores or four per cent by two media companies. Thus knowledge sector accounted for 72 per cent of the total equity mobilisation.

However, Prime said the manufacturing sector continued with its pathetic performance with only three issues aggregating Rs. 191 crores (excluding pharma sector).

For primary market to witness long term revival, Mr. Haldea said there was urgent need to take several measures. He said exemplary punishment to the vanished and fraudulent companies of the mid- Nineties is now long overdue.

``This will send the desired comfort signals to investors about non-recurrence of such frauds in future." He stressed that the quality, quantity, format and delivery of information disclosure has to improve substantially and be more relevant to the retail investor if one insists on continuing with his direct participation in IPOs. There is also need for entry barriers and several other issues-related guidelines which are preventing companies from raising capital on the one hand and are facilitating bad-to-medium quality issues on the other.