New Delhi: Undeterred by a 10% dip in rights issues mobilisation in 2006-07, India Inc looks all set to raise more than Rs9,000 crore this fiscal through this route, a new study says.
As many as 24 companies have lined up rights issues to raise Rs2,344 crore and at least another 50 companies have plans to mop up Rs7,700 crore on expectations of buoyant secondary market and impending revised SEBI guidelines, according to database firm on primary markets Prime.
Tata Steel, which plans to raise about Rs3,655 crore, GTL Infrastructure (Rs1000 crore), Zee Group’s Wire and Wireless India (WWIL) (Rs1,125 crore) and JSW Steel (Rs400 crore) would tap the rights issue route to raise funds, information available with Prime shows.
“Scores of companies continue to prefer preferential allotments of equity to meet their fund requirement. Several companies have also tapped the overseas market through GDR/ADR /FCCB route (in fiscal 2006-07),” Prime Managing Director Prithvi Haldea said.
Only Rs3,703 crore was raised through 38 rights issues in 2006, 10% less than Rs4,126 crore garnered by 36 issues in 2005, Prime said.
Aditya Birla Nuvo was the largest issuer in the year as it raised Rs779 crore while the other Rs100 crore-plus issues include Bajaj Auto Finance (Rs672 crore), Tata Teleservices (Rs491 crore) and Tata Coffee (Rs249 crore).
“Right offers are made at a discount to the ruling market price, and hence are able to draw shareholders’ response specially when the secondary market is doing well,” Haldea said.
In 2006-07, the benchmark 30-share index Sensex grew by 16%.
Companies offer shares on rights basis either to expand, diversify or simply to restructure their balance sheets, Haldea said, adding in some cases promoters raise their stake in the company at a reasonable price.
Prime said SEBI’s restrictive guidelines have tempered the rights issue market, and it is heartening that the capital market regulator has finally decided to rationalise the same. This has seen many firms announcing their plans to raise money through this route in the last six months, it added.
These include Aviva Industries (Rs30 crore), Bank of Rajasthan (Rs107 crore), Chemplast Sanmar (Rs200 crore), Federal Bank (Rs750 crore) and Thomas Cook (Rs225 crore), according to Prime.