Indian listings in London: AIMing for the long term
Saturday, July 16, 2011 | Posted by: Grant Thornton
Categories:
India,
India Watch Issue 13
| Tags: India,
India Watch,
UK,
South Asia Group,
AIM,
Capital Markets,
Hugh Sandeman,
liquidity,
PLUS,
main market,
raising finance
One of the first things that investors ask Indian companies planning a London listing is how this fits with their financial strategy. They’re not expecting a single answer to this question: it can make just as much sense for a domestic Indian power generator to go offshore and IPO in London, as it can for an Indian company with global ambitions and operations. But what investors do want to hear is that the Indian promoter is going to put his or her full confidence in the long term in the London market as the vehicle for growing their company.
Without that confidence in the market, it won’t make sense for the Indian company to keep up the investment of time and money needed to make a listing work.
Successful Indian stories on the Main Market and AIM have generally all been:
operating businesses. Companies that regard a London IPO as a one-off funding, or as a form of parallel equity (such as promoter-managed investment funds), will not succeed. The promoter and the investor must have identical interests in focusing exclusively on the equity of the whole enterprise.
good communicators. The London markets, AIM included, are institutional markets. These institutions expect to see senior management a couple of times a year for a detailed discussion of progress and outlook.
properly advised. They may not always get good advice, and may not always take it when it’s on offer, but companies that do well on the market are active users of a full advisory team: financial advisor (nominated advisor on AIM), broker, public relations advisor and English legal counsel.
well co-ordinated. An Indian operating business that is domiciled in the UK or offshore and has a London listing needs good co-ordination between the team in India and the executive and non-executive team elsewhere. This helps to avoid spending time and money on Indian advisors trying to educate UK advisors, and vice versa.
growth companies. Investors want a higher rate of growth from Indian than UK domestic companies in return for what they see as higher risks. That includes the benefits to investors and promoters of follow-on offerings, which deepen the market for a company’s shares and further align its interests with those of investors.
It also helps to think big. Setting a minimum target of raising $50 million from an IPO in London gives investors a chance of liquidity, and the issuer a reasonable ratio of proceeds to issuing costs and of effort to potential reward. Anything less than $50 million risks being seen as marginal: too small for investors to trade in and out, and perhaps too small to keep the promoter’s full attention.
Hugh Sandeman
Managing Director, Langham Capital
Non-Executive Director, West Pioneer Properties Ltd (AIM)
Non-Executive Director, JP Morgan Indian Investment Trust
Other articles in this issue of India Watch include:
Grant Thornton India Watch Index outperforms all major London indices for the first half of 2011
Sustained momentum in India M&A deal activity
India’s United Progressive Alliance must act decisively for effective change
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