Only two issues in August

Haldea said the revival of the primary market appears remote. Major offerings lined up in the near future are still very few and are all from the public sector: VSNL (Rs 80 crore equity), Corporation Bank (Rs 304 crore equity), and ICICI (Rs 300 crore bonds).

Other bank issues may follow by the year-end and will lead to total monopolisation of the primary market by the government and the banking sector.

“The present state of the market portends only disaster,” he said. In the first five months of the current fiscal, it has seen only 41 public issues raising a meagre Rs 347 crore as compared to 490 issues aggregating Rs 4,801 crore in the corresponding period of the previous fiscal.

This represents an alarming 93 per cent decline in amount mobilisation and a 92 per cent fall in number of issues. "Among various factors, the over-stringent entry barrier and other guidelines of SEBI seem to have totally retarded the growth of the market.

An indication of this is the alarming decline in the number of public issue documents filed with SEBI for clearance," Haldea says.

From an average of 149 documents per month filed with SEBI in the January-June 1996, the figure fell to only 24 per month in July-December 1996. It is now further down to seven per month in the January-July 1997.

When the secondary market started looking up in December 1996, the number of aspirants to tap the primary market should, in fact, have gone up. If such few documents are being filed, it can mean only four things, viz, the corporate sector is not interested in tapping the market, there are no quality offerings, the corporates fear poor investors’ response and finally, that they cannot meet the SEBI guidelines.

While the first two reasons are obviously not valid, the third does not merit attention as all good issues in the recent past have evoked overwhelming response. “It, therefore, appears the entry barrier and other guidelines of Sebi are stalling the market or may be the hidden intention is to allow only the government organisations to tap the market,” Haldea said.

Questioning the rationale behind a Sebi norm based on dividend payment record, Haldea said equity is essentially an investment in the future earning potential.

Ultimately, investors are looking for capital appreciation and not for dividends. In several developed countries, companies in fact make IPOs with a specific declaration that they will not pay out dividends.

Moreover, as participation from banks is tedious, time-consuming and not forthcoming, selected Category I merchant bankers should also be allowed to appraise and have equity participation in manufacturing projects. The only requisites should be, necessary safeguards on information disclosure and suitable accountability of merchant bankers.