Primary mart failed to sizzle in 2003

15 public issues raised Rs 2,194 crore during the year

Despite the sustained bull run in the secondary market and the feel-good factor sweeping the country, the primary market remained near-comatose in 2003, according to Prithvi Haldea of Prime Databse.

On a calendar basis, there were only 15 public issues in 2003 raising Rs 2,194 crore. Of this, 12 issues hit the market between April and December 2003. But these were relatively small issues, mobilising a meagre Rs. 2,138 crore.

The saving grace is that 2003 was better than 2002, which had seen only 6 issues raising Rs 1,981 crore. In the last 6 years (1998-2003), only Rs 10,202 crore was mobilised from the primary markets, which is 27 per cent less than the Rs 13,887 crore mobilised in just a single year 1995.

But the pipeline of companies is huge, with nearly 600 companies planning to raise over Rs.50,000 crore from the primary markets.

State-run firms such as National Thermal Power Corporation (NTPC) and Power Finance Corporation (PFC) plan to tap the markets to raise fresh capital.

Meanwhile, other firms such as CMC, IBP, IPCL and VSNL are expected to hit the market to off load the government's residual holding. ONGC and GAIL will tap the market for divestment of government's holding.

Also, in the pipleine are number of banks such as Central Bank of India, Punjab and Sind Bank and Bank of Maharashtra.

Other firms such as TCS, UTV, Secure Meteres, NDTV, Bicon, Hyundai and LG are also expected to tap the primary markets this year.

"The sustained bull run in the secondary market and huge returns offered by almost all the IPOs that have hit the market in the recent past, are now making investors relook at equities, Prime Database said in its recent reports.

Nevertheless, bitten by the huge vanishing companies' scam, as also other scams, the risk appetite of investors has diminished.

"As of now, he (investor) will look at investing only in established companies, and only if these offer a reasonable price," the report added.

Adds Haldea, "Unlike the past, the IPO boom this time has not quickly followed the secondary boom, primarily as the pre-float process has become too long. Moreover, the private sector took its time in believing that public market can offer decent valuations. On the other hand, the government offerings have continued to be mired in political/ bureaucratic delays. Frequent changes and lack of clarity in various Sebi guidelines have also held up several IPOs."

"But the primary market is still not being awarded its due place, with our focus staying almost entirely on the secondary market-essentially a traders market. We seem to have forgotten that the main role of the capital market is to provide capital. Lack of capital formation is slowing the economic growth of our country," Haldea added.

The onus for a primary marke revival rests fully on the government. Haldea has recommended that government should hence decide that almost all state-run divestment shall be done only through the public issue route.

Such issues should be earmarked only for the small investors and through the fixed price route, and be made only in the domestic market.

The opposition, according to Haldea, that there is no depth in the domestic market is untenable.