Rights Issue: FY11 sees momentum, FY12 to see more action

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Rights Issue: FY11 sees momentum, FY12 to see more action

The amount raised by Indian companies during 2010-11 through rights issues increased 15% year-on-year to Rs 9,594 crore. However, only 24 companies used the right route to mobilise resources as against 29 companies in 2009-10, says a study report by Prime Database, a Delhi-based research house on the primary capital market.

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The amount raised by Indian companies during 2010-11 through rights issues increased 15% year-on-year to Rs 9,594 crore. However, only 24 companies used the rights route to mobilise resources as against 29 companies in 2009-10, according to a primary capital market study done by a Delhi-based research house Prime Database.

"The largest rights issue in the year was from Central Bank of India , which raised Rs 2,498 crore," said Prithvi Haldea, CMD, Prime Database.

"Significantly, nearly 50% of the mobilization was done by the banks. Rights issues were floated by State Bank of Bikaner and Jaipur for Rs780 crore, State Bank of Mysore   for Rs 583 crore, Karur Vysya for Rs 458 crore and Karnataka Bank for Rs 457 crore."

The other Rs 1000 crore plus issues were from Suzlon Energy (1,308), REI Agro (1,245) and EIH (1,179 ). The manufacturing and services sector preferred increasingly to use the QIP and the preferential issues route.

However, the amount still falls short of Rs 12,622 crore, raised in 2008-09 and is much lower than Rs 32,519 crore that was mobilized in 2007-08.

The new fiscal year 2011-12 promises some action on the rights front. According to the Prime report, 32 companies have already applied for or have obtained SEBI approval for raising Rs 1,781 crore. Some of the major ones include  Ankit Metal (175), Elpro International (100), Gayatri Projects (400 ), JK Paper (250), Rama Newsprint (50),  Rodium Realty (50),  Splash Media (50), Shree Ram Urban Infrastructure (75), SRM Energy (59 ), Uniphos Enterprises (75),  and Velan Hotels (65).

"There are at least another 40 companies who have in the last 6 months announced their plans to tap the rights market and may firm up their plans in the near future," added Haldea.

Right issues in the last 10 financial years