India's debt market sees 14 percent drop in mobilisation

Tuesday, 18 February 2003, 08:00 Hrs
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NEW DELHI: Mobilisation of debt through private placement of equity by Indian companies witnessed a drop of 14 percent in the nine-month period ended December 31 from a year-ago period, said a study Monday.

The debt market saw mobilisation of 281.46 billion in the April-December quarter by 141 institutions, down from 327.51 billion mopped up by 167 firms in the same period last year, said New Delhi-based Prime Database Ltd.

"Fiscal 2001-02 witnessed a decline for the first time in six years on a year-to-year basis and this downward trend has continued into the current year," said Prithvi Haldea, managing director of Prime Database.

The study said a sharp fall in debt mobilisation by state level undertakings resulted in the overall downward trend in the market.

State level undertakings recorded a 32-percent fall in debt mobilisation through private placement to 31.53 billion in the April-December period compared to 46.50 billion in the corresponding period of the previous year.

Haldea said the directives of the Reserve Bank of India (RBI) to banks to become more diligent with investments in debt private placements, especially those made by state level undertakings, also resulted in the fall.

"The rising incidence of defaults on interest payments by state level undertakings was also one of major reasons for the decline," he added.

The April-December period also witnessed a 25-percent decline in mobilisation by financial institutions and banks to 93.10 billion, down from 124.09 billion.

Major financial institutional and banks who raised debt through private placement included IDBI (11.47 billion) and LIC Housing Finance (6.75 billion).

"Government organisations and financial institutions continue to dominate the debt market, mobilising a high 68 percent of the total amount, though down from 76 percent in the previous year," said Haldea.

In the private sector, leading debt mobilisers included Reliance Industries (11.90 billion), GE Capital (8.87 billion) and Associated Cement Companies (4 billion).

Source: IANS
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