The primary markets advisory committee of the Securities and Exchange Board of India has made several suggestions for the revival of the primary market. These proposals include asking PSUs to use the domestic market for their divestment of equity, a relaxation of initial public offer norms, and other suggestions.

It is difficult, however, to escape from the impression that the committee has got hold of the wrong end of the stick. First, if the company is good and the pricing is right, primary issues face no difficulty. Good corporates which have accessed the equity market recently, and have secured heavy oversubscription include ICICI Bank, Corporation Bank, Gujarat Mineral Development Corp. And so far as pricing is concerned, that depends on the sentiment prevailing in the secondary market. Nor does this mean that companies are starved of funds -- for some corporates,long-term funds are available at 12.25 per cent for five-year paper. For the period April to October 1997, total equity issued was only Rs 1614 crore, compared to Rs 4642 crore for the corresponding period of last year. But total debt issued during April-October 1997 was Rs 8537 crore, more than the Rs 8007 crore raised during the same period of 1996. Clearly, the malaise is only in the equity markets. Given the conditions prevailing in the secondary markets, with FII outflows, corporate earnings under pressure, and political uncertainty, it is difficult to see why the secondary markets should be expected to perform. And if the secondary market is dull, the primary market cannot be enthusiastic. For quality issues, subscriptions are not a problem. But higher pricing will have to wait on better conditions in the secondary market.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.