Emerging Trends in Capital Market - Resource Mobilization from Initial Public Offerings to Corporate Bonds

Abstract

Capital Market is the important source of fund generation for corporate entities. Equity has been the major component of capital structure for Initial Public Offerings or Private Placement. Revolutionary change in traditional trends of fund generation can be seen with the introduction of Non-Convertible Debentures (NCD) since 2008. The NCD public issues have replaced equity public issues in capital structure of Indian corporate. Further it has been a significant contributor in overall fund generation and playing pivotal role by increasing the overall resources mobilized by the corporate.

Equity was the most preferred source till 2003-2004 with nearly 25% contribution in overall fund generation which is gradually replaced by NCDs by the year 2013-14, where equity contributing of just 2% including Private Issues is observed. While fund generation only through public issues is seen, corporate bonds have crossed 90% out of total funds generated through public issues.

To analyze and to assess this significant change correlation between total resources mobilized and resources mobilized though equity public issues and through corporate bond public issues between 2004-05 to 2008-09 and 2009-10 to 2013-14 has been calculated and further regression tool has been used to prove the reliability of the statement and to prove that it has been a significant contributor in overall fund generation, increasing the overall resources mobilized by the corporate.