Debt pvt placement market collapses

The thriving debt private placement market has come to a virtual standstill after Sebi issued new guidelines in September 2003 on listing of corporate bonds. With tough disclosure norms (on the lines of IPOs) and listing for private placements mandatory, the guidelines took the market by surprise and have since put fresh placements under a limbo at least for the time being. This is borne out by the measly mobilisation of Rs 1700 crore in the October-November period, according to Prithvi Haldea of Prime Database.

According to Prime, there have been only 8 issuers in this 2-month period. The major ones have been Andhra Pradesh Water Resources (Rs 350 crore), Kerala Power Finance (Rs 300 crore) and NTC (Rs 500 crore). In addition, IDBI has placed Rs 340 crore. It may be mentioned here that, as per Prime, the first-half of the current fiscal had witnessed a mobilisation of Rs 23,275 crore. In the previous full years too, there were huge mobilisations: Rs 48,424 crore in 2002-03, Rs 45,427 crore in 2001-02 and Rs 52,456 crore in 2000-01.

While the market is awaiting clarifications on several aspects of the new SEBI guidelines, one thing that is certain is that the days of free-for-all placements without disclosures and/ or listing are now over. This market did require some degree of disclosures/ regulations to at least prevent dubious issuers from tapping resources. Huge concerns had been raised, for example, on the mobilisations of state level undertakings.

In the last three and a half years, state-level bodies had collectively mobilised a massive Rs 33,814 crore, mostly on the strength of questionable state guarantees. The market is hopeful that while addressing such concerns, the new Sebi guidelines would be streamlined to allow good issuers to continue to tap this cost-efficient and speedy source of raising funds.