Share Issue Expenses in India

A survey of all the companies which went for public issue of equity between 1995-2005 shows that Indian companies on an average spend about 4.4 percent on issue-related expenses. The issue expenses were 5.3 percent between 1995-2000 and came down to 3.3 percent between the 2001-05 period.

There are two quick implications of this.

a) Issue related expenses have come down and this is a good news. This means the effective cost of capital of the Indian companies has also come down recently.

b) In the U.S. the underwriting spread is closer to 7 percent. And it is definitely heartening to know that Indian companies are able to raise funds at much cheaper rate.

(Source: My data source, as always, is Prowess of CMIE)


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