Corporates to raise over Rs2,275 crore through rights issue in August

A flood of rights issues will be hitting the domestic market during this month. Domestic corporates have lined up a whopping Rs2,275 crore rights issue in August. The leading companies that are coming out with these issues include Sterlite Industries and Bharat Forge. While Sterlite Industries will be raising Rs1972 crore, auto ancillary major Bharat Forge is coming out with a Rs10-crore issue. Other companies include Centurion Bank (Rs91 crore), Balrampur Chini Mills (Rs59 crore) and South Indian Bank (Rs48 crore). The rise in rights issue moblisations comes in the wake of the boom in the IPOs market, which saw the successful completion of TCS issue last week.

"Mobilisation of resources through rights issues has suddenly spurted this year," Prithvi Haldea of PRIME, the country's premier database on primary capital market said. "This month's mobilisation alone is more than twice the amount that was raised in the entire previous financial year through rights issue, says Haldea. During the last financial year about Rs1,006 crore was mobilised through rights issue, while five issues aggregating Rs2275 crore are tapping the rights route in August this year.

Just four months into the financial year, the total resources raised through rights issues have reached Rs2,303 crore. This includes Rs15 crore and Rs12 crore raised by Texmaco and Moschip, respectively in May. In the previous fiscal, the amount raised till August was a meagre Rs27 crore. Incidentally, the amount already raised in the current year is higher than each of the preceding seven full years. However, the present mobilisation is still a meagre 18 per cent of the Rs12,630 crore which was raised in the boom year of 1992-93 through 488 companies. The turnaround in the fortunes of rights issues is because of the bullishness in the domestic secondary market and drying up of the ECB market, says Haldea. Companies are offering shares on a rights basis either to expand, diversify or simply to restructure their balance sheets.

However, scores of companies with good performance still prefer to meet their fund requirements through preferential allotments of equity or by way of private placement of debt. Already as many as 15 companies have applied for or have obtained the approval from the Securities and Exchange Board of India (SEBI) to collectively raise Rs546 crore. These include CESC (Rs50 crore), GIC Housing Finance (Rs16 crore), Parry Agro (Rs9 crore), Polyolefins Rubber (Rs30 crore), Schenectady Herdillia (Rs51 crore), Television Eighteen (Rs23 crore), United Breweries (Rs214 crore), Varun Shipping (Rs76 crore) and Vijay Industries (Rs48 crore).

In addition, according to PRIME, there are at least 20 companies who have in the last six months announced their plans to tap the rights market and may firm up their plans in the near future. These include Bajaj Hindustan, Gujarat Ambuja Exports, J&K Bank, Mascon Global, Noida Toll Bridge, Shiva Cement, SIEL Sugar, Sundaram Home Finance, Tata Teleservices (Maharashtra) and Welspun.