primary market
Recent trends in the primary market – Explained! by Saritha Pujari Business
Average annual capital mobilisation from the primary market, which used to be about Rs. 70 crore in the 1960s and about Rs. 90 crore in the 1970s, increased manifold during the 1980s, with the amount raised in 1990-91 being Rs. 4,312 crore. It received a further boost during the 1990s with the capital raised by non-government public companies.
There is a preference for raising resources in the primary market through private placement of debt instruments. Private placements accounted for about 91% of total resources mobilised through domestic issues by the corporate sector during 2000-01. Rapid dismantling of shackles on institutional investments and deregulation of the economy are driving growth of this segment. There are several inherent advantages of relying on private placement route for raising resources. While it is cost and time effective method of raising funds and can be structured to meet the needs of the entrepreneurs, it does not require detailed compliance with formalities as required in public or rights issues.
It is believed in some circles that private placement has crowded out public issues. However, to prevent public Issues from being passed on as private placement, the Companies (Amendment) Act, 2001 made offer of securities to more than 50 persons a public issue.
The reforms in the capital markets during the 1990s in terms of market microstructure and transactions have ensured that the Indian capital market in particular is now comparable to the capital markets in most developed markets.
The early 1990s saw a greater willingness of the saver to place funds in capital market instruments, on the supply side as well as an enthusiasm of corporate entities to take recourse to capital market instruments on the demand side.
The size of the capital market is now comparable to other developing countries but there is still a long way to go. It is important to note that
Average annual capital mobilisation from the primary market, which used to be about Rs. 70 crore in the 1960s and about Rs. 90 crore in the 1970s, increased manifold during the 1980s, with the amount raised in 1990-91 being Rs. 4,312 crore. It received a further boost during the 1990s with the capital raised by non-government public companies.
There is a preference for raising resources in the primary market through private placement of debt instruments. Private placements accounted for about 91% of total resources mobilised through domestic issues by the corporate sector during 2000-01. Rapid dismantling of shackles on institutional investments and deregulation of the economy are driving growth of this segment. There are several inherent advantages of relying on private placement route for raising resources. While it is cost and time effective method of raising funds and can be structured to meet the needs of the entrepreneurs, it does not require detailed compliance with formalities as required in public or rights issues.
It is believed in some circles that private placement has crowded out public issues. However, to prevent public Issues from being passed on as private placement, the Companies (Amendment) Act, 2001 made offer of securities to more than 50 persons a public issue.
The reforms in the capital markets during the 1990s in terms of market microstructure and transactions have ensured that the Indian capital market in particular is now comparable to the capital markets in most developed markets.
The early 1990s saw a greater willingness of the saver to place funds in capital market instruments, on the supply side as well as an enthusiasm of corporate entities to take recourse to capital market instruments on the demand side.
The size of the capital market is now comparable to other developing countries but there is still a long way to go. It is important to note that