After a lull of seven years, the primary market is set to witness a boom. As many as 579 companies are ready to enter the market.
The combined capital mobilisation is estimated to be Rs 50,000 crore (Rs 500 billion), says Prithvi Haldea, managing director of Prime Database.
Haldea said his company, which has been tracking the primary market for the past 15 years, collected the data from as many as 1,200 sources comprising 70 newspapers, CEOs of a whole range of manufacturing firms, merchant bankers and bankers.
However, he expected that only 100 companies would enter the market this year to raise Rs 8,500 crore (Rs 85 billion) if the buoyant market conditions continued.
"Although 579 companies I mentioned are ready to enter the market, all of them will not come out with public issues in a year. I expect the new entrants will be 100 or so," he explained.
Activity in the primary market has plunged in the last two years. The last two financial years witnessed introduction of six public issues in each year, compared with as much as 1,423 issues launched in 1995-96 alone.
Second, six issues, which came to the market last year, attracted only 700,000 applications compared with 8 crore (80 million) in 1993-94.
However, the primary market was showing signs of recovery. He said market regulators and companies themselves should take corrective steps to regain investor confidence.
According to him, Indian investors were not averse of taking risk on investments but there were not ready to take risk involved in fraudulent practices that rocked capital markets in recent years.
He said regulators should look into issue documents and ensure that had proper disclosures. Standardisation of face value should also be enforced.
"A company which decided to issue Rs 10 paid up share with a premium of Rs 30 failed to get clearance of the regulator. Now, it has split its one equity share of Rs 10 into five shares of Rs 2 and is come up with an issue with premium of Rs 6," he added.
In order to win investors' confidence, he suggested that companies fix exit price within a period, for example, of six months.
He said out 100 companies, which entered the market in 1992-96, the stocks of 88 firms were found to be trading below par in 1999.