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Journalism of Courage
MUMBAI, December 9: After the saga of high premium issues and entry of dubious promoters, promoters of companies seem to have taken the self-appraisal route while raising public funds for projects. The number of such self-appraised companies — which vetted the project cost, financing details and implementation by themselves without any help from FIs and banks — has gone up significantly.
In 1996-97, there were 644 self-appraised issues accounting for 72.85 per cent of the total number of issues. These issues raised Rs 11,918.63 crore from the market accounting for 83.44 per cent of the total amount raised. In 1995-96, the corresponding percentages were 47.83 per cent and 56.07 per cent respectively.
This revelation came from none other than SEBI in its annual report for the year 1996-97. “Banks, top merchant bankers and institutions ignored many companies as their projects were not viable. After a series of scams in the capital market in the last five years, these institutions wanted to keep away from more such frauds. Many of the promoters who appraised the projects themselves have now inflated the project cost,” said a merchant banker.
Therefore, it is not surprising the primary market remained subdued during the fiscal 1996-97 as compared to the previous fiscal. The sluggish sentiment continues even in the third quarter of the current fiscal. The self-appraisal of projects just helps promoters to make any projections and later get away with it. After a year, almost 90 per cent of the projections made by the promoters in their self-appraisals have bombed.
