Debt private placement market comes to a halt, post-SEBI norms

Mumbai: The thriving debt private placement markets has come to a virtual standstill, ever since the Securities and Exchange Board of India (SEBI) issued new guidelines in September 2003 on listing of corporate bonds.

The market regulator recently mandated initial public offering (IPO)-like disclosures and listing for private placements. "The guidelines took the market by surprise and have since put fresh placements under a limbo, at least for the time being," says Prithvi Haldea of Prime, India's premier database on primary capital markets.

This is borne out by the measly mobilisation of Rs 1,700 crore in the October-November period. Prime says there have been only eight issuers in this two-month period. The major ones have been Andhra Pradesh Water Resources (Rs 350 crore), Kerala Power Finance (300) and NTC (500). In addition, IDBI placed Rs 340 crore. The only other issuers have been GE Capital, IL&FS and Mecon, all with very small amounts.

It may be mentioned here that as per Prime, the first half of the current fiscal (April-September) had witnessed a mobilisation of Rs 23,275 crore. In the previous full years too, there were huge mobilisations: Rs. 48,424 crore in 2002-03; Rs 45,427 crore in 2001-02; Rs 52,456 crore in 2000-01.

While the market is awaiting clarifications on several aspects of the new SEBI guidelines, one thing that is certain: the days of free-for-all placements without disclosures and / or listing are over.

According to Haldea, the market did require some degree of disclosures / regulations to at least prevent dubious issuers from tapping resources. Huge concerns had been raised, for example, on the mobilisations of state-level undertakings (SLUs). In the last three-and-a-half years, SLUs had collectively mobilised a massive Rs 33,814 crore, mostly on the strength of questionable state guarantees.

The market is hopeful that while addressing such concerns, the new SEBI guidelines will be streamlined to allow good issuers to continue to tap this cost-efficient and speedy source of raising funds.