Equities Playing Bigger Role

EghtesadOnline: Economic sectors benefited from the capital market to the tune of 3,030 trillion rials ($12 billion) in the first ten months of the current fiscal year that ends in March.

News ID: ۷۸۶۰۴۹

20 February 2021

This was more than double compared to the same period last year when funds worth 1,450 trillion rials ($5.8 billion) were made available.

Of the two main types of funding, namely equity financing and debt financing, data indicates a premium role for the former.

Equity financing is the method of raising capital by selling listed companies' stocks while debt financing occurs when a firm raises money by selling debt instruments to individuals and institutional investors.

As per data compiled by the Tehran Chamber of Commerce, Industries, Mines and Agriculture (TCCIM), the share of equity financing rose from 700 trillion rials ($2.8b) in the ten months to 1,380 trillion rials ($5.5b).

Likewise, debt financing amounted to 1,650 trillion rials ($6.6b) rising from 750 trillion rials ($3b) in the corresponding period a year earlier.

As to the share of each source, the chamber said issuing bonds was atop with a 54%. The government sold treasury bills worth 380 trillion rials ($1.5b) as per the budget law. It also offered Islamic bonds worth 1,020 trillion rials ($4b) in the ten months to plug budget deficit holes. Share of other form of bond issuance to raise money for private and public companies was 240 trillion rials.

In the equity market listed companies have a 36% share.  In addition, newly listed companies account for 10% of the total funds raised via IPOs offered in the equity market.

IPOs offered in the said period were five times higher than the whole of last year, according to the TCCIM. However, it merits mention that most IPOs were held early in the fiscal year when the stock market was at an historic peak. Most IPOs have been suspended now due to bearish market.

In one of the biggest listings, the Rouhani administration generated 69 trillion rials ($280 million) by selling 10% of shares in the Social Security Investment Company, the largest holding company, known by its Persian acronym Shasta.

The government tapped the bourse in the first few months of the year to raise funds by selling stakes in several listed companies. "It earned 320 trillion rials (1.3b) from selling assets in the first six months of the year. During the whole of last year it made 60 trillion rials from privatization," the Economy Minster Farhad Dejpasand said.

Most shares were sold during the heydays of the share market. The Tehran Stock Exchange entered a steep correction phase in mid-August after jumping 300% in the first five months of the year. The decline has continued and the future of this key player remains largely uncertain.

Despite the increase in private enterprises struggling to raise funds via the stock market, the market remains dominated by government and state-owned companies.