14 Nov, 2008

The primary market in India has come down ten times since the meltdown in the stock market in the period between April-August 2008 over the corresponding period in 2007.

According to Reserve Bank of India (RBI) data in its November bulletin, only 25 non-government public limited companies managed to tap the capital market to mobilise  a negligible sum of Rs 2,661 crore between them. IPO's in the same period during previous year grossed Rs 26,957 crore during April to August 2007, which is ten times the amount collected through IPO now.

In face of severe negative sentiment in the stock market many companies have allowed their IPO clearances to lapse to avoid compromising on their valuations. Global economic turmoil has hit the primary market as much as secondry stock market.

44 companies have had themselves listed between April and August 2008, compared to 50 during the corresponding five month period last year, according to BSE.

According to a Delhi-based research firm as many as 28 companies planning to collectively raise Rs 19,463.91 crore, have allowed their IPO approvals to lapse as on October 17, 2008.

This includes big names like Reliance Infratel (Rs 6,000 crore), Jaiprakash Power Ventures (Rs 4,000 crore), UTI Asset Management (Rs 2,000 crore), Acme Telepower (Rs 1,200 crore), Mahindra Holidays & Resorts India (Rs 1,000 crore) and MCX (Rs 600 crore).

It is obvious that companies do not have the courage to tap the primary market because of volatility in the Indian stock market. It might be a little while before we see companies coming out with new IPOs to raise money.