Public sector dominates primary capital market

NEW DELHI, NOV 8: In the face of a dearth of initial public offerings from the private sector, the public sector is gradually establishing ...

NEW DELHI, NOV 8: In the face of a dearth of initial public offerings from the private sector, the public sector is gradually establishing its hold on the primary market.

The share of the public sector in the total mobilisation from issues has grown from a miniscule nine per cent in 1994-95 to 65 per cent in 1996-97 and 79 per cent so far in the current fiscal (April-October), a study conducted by Prime Data, a leading database on primary market, says.

Even in October, only two noticeable issues hit the primary market, both from the public sector – Corporation Bank’s Rs 304-crore issue and Gujarat Mineral Development Corporation’s Rs 88-crore issue.

Within the public sector also, the public issues market is dominated by financial institutions and banks, which together cornered 61 per cent of the 79 per cent mobilised in the first seven months of the current fiscal year, the study says.

Though the amount raised by FIs and banks during Apr-Oct this year has been only Rs 448 crore, compared to Rs 4,589 crore and Rs 7,039 crore for the whole of 1995-96 and 1996-97, due to subdued market conditions, their share in total mobilisation has gone up from 39 per cent in 1995-96 to 60 per cent in 1996-97 and 61 per cent in the current year.

On the other hand, the total mobilisation by private sector companies has nosedived from Rs 12,061 crore in 1994-95 to Rs 2,919 crore in 1995-96 and Rs 155 crore in the current fiscal.

The manufacturing sector has been badly hit by the fall in public issue mobilisation, the study says, adding that the financing of industrial products through public issues have been steadily coming down.

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So far in the current financial year, only 46 public issues have tapped the market, raising Rs 734 crore compared with 618 issues that hit the market in the corresponding period last year, raising Rs 6,515 crore.

This represents an alarming 89 per cent fall in amount mobilised and a 93 per cent decline in the number of issues that hit the market in current finanacial year.

The study says though the public issues of ICICI Bank, Corporation Bank and Gujarat Mineral Development Corporation have been oversubscribed, it cannot be seen as the revival of the primary market because their success hinged on the fact they were from the public sector.

"The primary market can be considered to have revived only when more issues start hitting the market and evoke a favourable response from the investors. But this does not appear to be happening, especially from the private sector," the study says.