During the first five months of the current financial year, equity raising is over Rs 1.4 lakh crore as against nearly Rs 2.4 lakh crore in both FY18 and FY19.
Securities and Exchange Board of India (Sebi) chairman Ajay Tyagi on Thursday said that an increase in private investments through higher fundraising by way of equity or debt instruments was crucial to attain the vision of a $5-trillion economy. Speaking at CAPAM 2019, a capital market conference organised by FICCI, Tyagi pointed that even as capital raising through initial public offerings (IPOs) have fallen, funds have been raised through other routes like rights issues and qualified institutional placements (QIPs).
“A robust financial sector which can continuously supply capital resources and efficiently allocate the same to seekers of funds is crucial for creating the savings and investment cycle,” added Tyagi. During the first five months of the current financial year, equity raising is over Rs 1.4 lakh crore as against nearly Rs 2.4 lakh crore in both FY18 and FY19. He said that Sebi has been taking measures for boosting investor confidence, easing capital raising and further refining the primary market framework.
In addition to equity market investments, in order to generate the desired growth, Tyagi believes there needs to be a conscious effort made to shift from bank credit to other forms of credit like the corporate bond market. “While private placement issuances have seen a rise in the last few years, the secondary market in terms of trading and liquidity is yet to develop,” said Tyagi. To achieve the $5-trillion GDP goal, credit supply needs to double to Rs 188 lakh crore from approximately Rs 98 lakh crore at present, Tyagi said in his speech. According to a Sebi framework, listed large corporates are now mandated to raise 25% of their borrowings from the debt securities market. “We are likely to see the outcome of this measure by end of this financial year,” said Tyagi.
In order to strengthen the robustness of the frameworks, the market regulator is working on several initiatives. “Rights issues, in particular, have recently seen a pick-up in activity. Sebi had put out a consultative paper to reduce the timeline for rights issues. We will be soon taking a view on this subject,” added Tyagi. A current rights issue process, through the fast track route, typically takes 55-58 days from the time the company decides to launch the rights issue till listing. The market regulator proposed to reduce the overall time taken for rights issue to around 31 days as well as make the application and allotment process more efficient.