Primary Securities Markets

 

The market remained subdued during 1996-97 compared to the previous year. Not only did the number of issues decline sharply but so did the amount of capital raised from the primary market. This may be attributed in part to the conditions prevailing in the secondary market and in the overall stance of monetary policy as it impacted the economy. The decline in issuance may also be attributed to stricter eligibility criteria that were implemented in 1995-96. While they may have contributed to the decline in issuance, the stricter eligibility criteria have resulted in an improvement in the quality of issuance. This is borne out by several trends that became evident in 1996-97. There was an increase in funds raised through large issues and a relative decline in the number of small issues and in funds raised through them. There was also a reduction in the number of Initial Public Offers (IPOs), and a decline in the number of issues made by finance companies and the funds raised by them. An important trend that emerged, and which is expected to continue into 1997-98 is the growing significance of banks and financial institutions as issuers. This trend is important from the point of view of investors in the primary market, as issuers without track records are more likely to seek funding from banks and financial institutions, which are better able to evaluate and monitor the performance of such issuers, and not directly from investors.

During the year 1996-97, 884 issues opened for raising Rs.14,284.31 crore while in 1995-96, 1,725 issues opened for raising Rs.20,803.63 crore. This represents a decline of 48.75% in the number of issues and 31.34% in the amount raised. In 1996-97, Rs.11,565.11 crore were raised through public issues and Rs.2,719.20 crore were raised through rights issues. Table 2 gives details of public and rights issues in 1995-96 and 1996-97. Figure 1 summarises primary market issuance in 1995-96 and 1996-97.

Table 2 : Primary Market Issues


  Public Right Total

Year No Amount No Amount No Amount

1996-97 753 11,565.11 131 2,719.20 884 14,284.31
1995-96 1,426 14,239.50 299 6,564.13 1,725 20,803.63

Trends in the Primary Market