Millennium Post

Cos raised RS 2.81 trillion in April-Dec 2014

The trends remained sluggish in the primary stock market where the companies raise funds through the sale of shares via instruments like IPOs and FPOs despite a bullish equity market.

It has been private placement of corporate bonds that was used the most to meet funding requirements of businesses during April-December period of the current fiscal (2014-15).

According to the survey tabled in Parliament on Friday, Indian firms mobilised a total of Rs 2,80,885 crore from the primary markets during April-December period of the current fiscal, higher than Rs 2,27,398 crore garnered in the year-ago period.

In the primary market, funds were raised through equity (IPOs and rights issue) as well as
debt segments.

Of the total funds raised, a large chunk of this amount or Rs 2,69,245 crore from private placement of corporate bonds, Rs 7,348 crore from other debt insruments and a mere Rs 4,292 crore was raked in through equity markets.

Most of these funds were raised for expansion of business plans and to support working capital requirements.

“...private placements of corporate bonds account for the lion’s share,” according to the Survey.
Despite a rally in the stock market, most of the funds were garnered through debt route.

The BSE benchmark Sensex surged 27 per cent during the period under review.

‘Cap markets may be used as key funding source’

Capital markets can be used as a major source for meeting funding requirements of the country to reduce dependence on banking channels, the Economic Survey suggested on Friday.

Stressing on a need to diversify within and outside the banking system, the survey said that “more banks and more kinds of banks must be encouraged”, but there is a need to develop alternative sources. “Healthy competition from capital markets is essential too which will require policy support,” it said.

Looking at the global trend, the survey observed that that banking credit should shrink in size over the course of development relative to other sources of funding such as capital markets.
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