Most of the Indian companies were using existing investor's route for raising capital last year mainly due to economic turmoil. Awful market condition led loss of investor appetite in new share issues and also froze out overseas funding avenues.
Rights issues, the route through which companies raise funds by issuing fresh shares to existing investors emerged as the single-biggest fundraising route during the year as compared to initial public offers (IPOs) and overseas issues that dominated fundraising in the previous year.
According to Prime Database, companies raised Rs 12,622 crore through 23 rights issues in 2008-09 compared with Rs 2,023 crore through IPOs during the period. The amount raised through rights issues last year, however, more than halved compared to Rs 32,518 crore by 30 companies last year. However, the extent of decline was much less than IPOs, which tumbled 95 per cent during the same period.
Rights issues are the current flavour. Companies are looking to tap existing shareholders as valuations are too attractive to dilute to outsiders, says Ravi Sardana, senior vice-president of ICICI Securities.
|Source: Asian CERC|