LSE emphasises cost advantage

Asks Indian, Chinese firms to also list debt papers

The London Stock Exchange (LSE) is targetting Indian and Chinese companies for attracting new listings of not just shares but also debt papers.

Martin Graham, director (market services), LSE, said, "We are adopting a more aggressive stance with respect to India."

Graham pointed out that the LSE has numerous advantages compared the American exchanges. Currently, US bourses are the preferred destination for most Indian firms.

However, the introduction of the Sarbanes-Oxley Act has made disclosures more stringent for those aspiring to list their shares either on the Nasdaq or the New York Stock Exchange (NYSE).

Graham said one of the reasons why Indian corporates do not look at the LSE for enw issues was that they had maintained a low profile and not been communicative enough. "We have been very English," he said. "Lack of knowledge has been a major stumbling block."

Incidentally, there is a huge appetite for investing in Asian equities among European investors, especially institutional ones, who form a large part of the investing population there.

"Most of Europe is still going through restructuring and opportunities are very little, and in the US, stocks are overvalued," Graham said.

Listing on the LSE is also far cheaper than listing on the US bourses, he said. "While the LSE has been wooing India for the past couple of years now, the pace has suddenly intensified in the last one or two months," Graham said.

Recently, Vedanta, the holding firm of Sterlite Industries, listed its shares on the LSE and stood as the second largest IPO in the European market last year.

There is another change in the way that the London bourse is focussing on India. It is not merely equities, but also debt, especially foreign-currency convertible bonds (FCCBs).

Graham, along with James Woodley, regional manager (Asia-Pacific) and also country manager for India, have been meeting with corporates in their endeavour to persuade Indian companies to list their debt issuances on the LSE.

The time taken for entire process of documentation, raising the money and listing is much quicker than in the Luxembourg exchange. "LSE also serves as a gateway to Europe," Graham said.

In 2003, there were 86 IPOs on the LSE compared with 65 on the Nasdaq. In the same year the exchange reported a turnover of $3 trillion.

At present, there are 18 Indian companies listed on the LSE, with a market capitalisation of $2.8 billion as on December 2003.

The cost of transaction is also lower in the LSE compared to that in the US, according to Graham. For instance, the average broker-cost in the UK is around 3 to 4 per cent, compared with 6 to 7 per cent in the US.

Around 95 per cent of the trades done on the exchange are institutional while in terms of trading value institutions have a share of 99 per cent.

Incidentally, the LSE also has around 48 per cent of the market share in global trades, compared with 23 per cent for the NYSE and 7 per cent for the Nasdaq.