Funds via preferential shares at Rs 15,997 cr; lowest in 4 yrs

Fund raising by listed companies through preferential allotments to investors plunged to a four year low of Rs 15,997 crore in April-August period, latest data available with the market regulator showed.

Firms had raised twice as much funds (Rs 30,560 crore) through issuance of shares on preferential basis to their respective promoters and shareholders, during the April-August period in 2013-14.

A total of Rs 15,997 crore was mobilised through 223 preferential issues in the first five months, which is the lowest amount raised in this period since fiscal 2011-12.

Funds raised in the previous years were Rs 30,560 crore (2013-14), Rs 36,384 (2012-13) and Rs 19,377 crore (2011-12).

"The reason why preferential allotments has been subdued is because there has been change in the new companies law," CNI Research CMD Kishor Ostwal said.

"The law has been made stringent and lot of firms are still looking into and understanding various compliances required under the new Act," he added.

Under the new Companies Act, entities have to comply with various norms related to preferential issue of shares.

Among others, in case preferential shares are to be redeemed out of the company's profit, a sum equal to the amount of shares has to be transferred to a reserve called the Capital Redemption Reserve Account.

For August, companies garnered an amount of Rs 2,265 crore, an increase of 5% from Rs 2,159 crore in the preceding month. The data with market regulator was available only till August.

In other months of the current fiscal, firms had raised Rs 3,160 crore in April, Rs 5,142 crore in May and Rs 3,271 crore in June.

During April-August, the maximum number (100) were listed on the National Stock Exchange (NSE). These issues on the exchange were worth Rs 2,650 crore.

Besides, 35 issues amounting to Rs 1,756 crore were listed on the BSE, while 88 issues totalling Rs 11,591 crore were listed both on the BSE as well as NSE.