IT dominates public issue market

IT dominates public issue market
ENS ECONOMIC BUREAU

NEW DELHI, JAN 4: Calendar 1999 was dominated by the services sector with IT leading the pack, quite in line with and as a follow up to the buoyancy in the secondary market. This has been reported by Prithvi Haldea of PRIME, the country's premier database on the primary capital market.

Despite the hype, the amount raised in the year through public equity issues was only Rs 2,237 crore, according to PRIME. While this represented a phenomenal increase of more than 500 per cent over Rs 365 crore in 1998, which was incidentally the worst year for the public issue market, it was just about comparable with Rs 2,182 crore in 1997 but significantly lower than Rs 13,887 crore raised in 1995 and even to Rs 5,733 crore raised in 1996.

Significantly, of the total Rs 2,237 crore, a high Rs 1,377 crore or 62 per cent was accounted for by the IT sector through 22 issues, as per PRIME study. Of the balance, Rs 541 crore or 24 per cent was taken up by five bank/institution issues (IDBI Bank, TimesBank, Centurion Bank,Syndicate Bank and ICICI). Thus, the IT and banking sectors accounted for 84 per cent of the total mobilisation.

Additionally, Rs 49 crore was raised by a TV software company, Rs 75 crore by a telecom service provider, Rs 41 crore by four NBFCs, Rs 17 crore by a toll bridge company, Rs 28 crore by a greeting cards company and Rs 15 crore by a power-sector investment company. On the other hand, the entire manufacturing sector was almost absent from the market with just two issues raising a meagre Rs 104 crore, and even of this, one issue failed to obtain the investors' support.

By numbers, the year closed with 38 issues, up 100 per cent from 19 in 1998, though nowhere near the high of 1,444 issues in 1995. In terms of response, almost all IT issues were hugely oversubscribed. Good response from investors is now being heralded as a revival of the primary market. This is far from true. First of all, most of the issues are from just one sector.

Secondly, the total number of issues at 38 in a year is toosmall to even suggest a revival. The primary market, according to Haldea, should be considered to have revived when there are more number of issues, these are from a wider spectrum of industries, and when investors respond favourably to most of such issues.