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Funds mobilised by companies from public equity issues surged sevenfold to about Rs 5,450 crore in April-June, driven by a sharp increase in offers for sale to meet Sebi's deadline on minimum public shareholdings.
Of the funds raised, Rs 4,507 crore came from the offer-for-sale (OFS) route, while Rs 942 crore was garnered through initial public offerings, according to a report by Prime Database. In the April-June quarter of 2012, firms had mopped up Rs 718 crore via public equity issues.
"The huge increase in funds raised through the OFS route was due to many companies having to meet with Sebi's deadline for minimum public shareholding," according to the report.
During the first quarter of 2013-14, there were four IPOs and 51 OFS, compared with five initial share sales and three OFS a year earlier.
The amount raised through IPOs highlights the sorry state of fund raising in the country, Prime Database said, adding that the outlook for the primary market is optimistic as many companies are expected to come out with public offerings.
"The future of the primary market, however, is now showing some promise," Prime Database noted.
IPOs are planned by Ortel Communications (Rs 1,000 crore), IFCI Factors (Rs 750 crore) and Rs 700 crore each from Bharat Business Channel and Inox Wind.
Offerings may come from some of the 21 companies that have approval from the Securities and Exchange Board of India and 12 firms that are waiting for the go-ahead from the market regulator.
Lack of disinvestment by the government affected the primary market.
Of the target of Rs 54,000 crore (Rs 40,000 crore from government-owned companies and Rs 14,000 crore from the sale of residual stake), only one divestment (MMTC Rs 572 crore) took place in the first quarter, Prime Database said.
"The pipeline of divestment/PSU offerings continues to become larger by the day yet nothing of it has materialised. It is again feared that, like in the previous years, bulk of disinvestment target may be met only in the last quarter," the report noted.
"Instead of using the OFS route, wherein the retail has had no participation, the government should go back to the IPO/FPO route and offer shares to the retail at huge discounts thereby enlarging the investors' base and the capital market," it added.
