Total funding made available through the capital market amounted to 365 trillion rials ($1.1 billion) in in the first two months of current fiscal year (March 21- May 20).
This was 9.7% lower on the corresponding period in the last fiscal year when 404 trillion rials ($1.3b) was secured.
According to data released by the Tehran Chamber of Commerce, Industries, Mines and Agriculture, equity financing stood at 279 trillion rials ($900 million), contributing to 76% of the total funding in the two months. The figure is down slightly from 284 trillion rials ($916m) in the same period last fiscal year.
Debt financing dropped from 120 trillion rials in the first two months of last year to 86 trillion rials in the corresponding period this year.
Equity financing is the method of raising capital by selling company stocks while debt financing is the process of raising money by selling debt instruments to individuals and institutional investors.
Under equity financing companies raise funds mainly by boosting capital through initial public offering and asset revaluation.
Asset revaluation, selling debt securities and selling shares via IPOs are three major sources of funds.
Listed companies raised 265 trillion rials and newly listed companies generated 13 trillion rials via IPOs, accounting for 3.6% of the total in the two months.
In the debt market, corporate bonds played a key role in the period with government bonds having a meager share.
Corporate bonds issued by private firms amounted to 59 trillion rials or 69.6% of the total via the debt market. Corporate bonds rose 49.6% from the corresponding period last year.
Productive Credit Certificates (known by its Persian acronym Gam) accounted for 47% of the total corporate bonds issued in two months.
Gam securities worth 28.3 trillion rials were issued by companies in the said period, up 41.7% compared with the same period last year.
Gam is a market-oriented financial instrument traded in the money and capital markets. Through this instrument lenders help businesses by offering tradable credit certificates similar to LCs.
Like bonds, these certificates have maturity dates. The supplier can cash the certificate by selling it in the stock market. Liquidity is not exchanged between beneficiaries.
Gam is one of the components of the government’s initiative to implement supply chain finance (SCF).
Government bonds were worth 8 trillion rials or 9.3% of the total and municipalities raised 18.2 trillion rias via the debt market.
Although selling debt by the government in the two months was insignificant, the government generated more than 112 trillion rials from bond auctions that started in the third month of current fiscal year. Weekly bond auctions started in late May to raise funds for the government’s deficit spending.
