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Thursday, December 2, 2010

Corporate sector confident of capital market: Increase in Rights issues

Charumini DE SILVA

The number of rights issues by listed companies during this year have increased substantially showing much confidence by the corporate sector in raising funds through the capital market.

Trading at Colombo Stock Exchange

There have been 25 rights issues to-date. The companies raised a total of Rs 20.6 billion through rights issues, while recording a growth of 295 percent compared to last year, Colombo Stock Exchange (CSE) Business Development Manager, Thushara Jayaratne said to Daily News Business.

He said during last year there were only 13 rights issues that raised Rs 5.2 billion. There is an increase in earnings of Rs 15.4 billion through rights issues compared to the corresponding year.

There was a mix of sectors that went for rights issues during this year. However, the banking, finance and insurance sector topped with five rights issues, while the hotel sector was the second in line with four rights issues. The manufacturing sector and the plantation sector recorded three rights issues each.

The main reason for the growth in the rights issues was that the CSE performed significantly during the post war era. With the positive response, there is a shift towards raising funds from the capital market rather than raising funds through banks.

The corporates have shown much confidence in raising funds through the capital market, a Stock Market Analyst said.

There is also a good demand for the rights issues as these shares are being sold less than the actual market price. Another reason which investors are keen on is that the companies that go for rights issues have much potential and future profitability.

With the development in the tourism industry and having set targets of achieving 2.5 million tourist arrivals by 2016 the hotels are now refurbishing and new hotels are being constructed. For this reason the hotel sector showed a greater interest in going for rights issues.

The banking, finance and insurance sectors also raised funds through the capital market for their business expansion projects.

source - www.dailynews.lk