'Companies can list different vehicles on AIM'

INTERFACE

The Alternative Investment Market (AIM), the London Stock Exchange's market for early-stage growing companies, is a firm believer in the Indian growth story.

It is in constant dialogue with Indian SMEs looking to raise capital through equity and debt. About 20 companies have already listed on the AIM in the last two-and-a-half years.

The AIM's India business development head Ibukun Adebayo in an exclusive interview to Prashant K Sahu says that the most encouraging aspect is that many of the 20 listed companies are planning follow-on equity offers.

Why should an Indian SME tap the AIM?

There are a number of reasons for an Indian SME to tap the AIM. The AIM is of the view that please don't come us if your story is about domestic financing.

The reason being simple enough, the Indian capital market is extraordinarily efficient. You see money raised in billions of dollars in India by companies like Reliance, GVK and IDFC. Money can be raised in India for Indian stories.

If the story is wider than India and for something that has global perspective or the company has strategic motivations for going abroad""whether for acquisitions, expansions or investments.

Then, the AIM is the only international market to offer opportunities and to access capital offer liquidity to the small-cap companies. No other market can do that.

Is lower disclosure a factor in small firms preferring the AIM?

The AIM is a small-cap market. Our idea is to attract companies that have disclosure norms or rather eligibility norms that are appropriate for small companies.

If you are a small company, you may have issues in terms of how much your company wants to give away, if you give away too much in the beginning then you are going to be in a position that you don't control the company or destiny in the future.

So when a company comes to the AIM, we suggest the minimum information required. Disclosure, as far as we are concerned is what you do in the after-market: How do companies communicate with investors, when do they release time sensitive information and what are the issues that directors have to keep holdon to run the company well.

There is no lower disclosures on the AIM in case of ongoing obligations. But in terms of entry and eligibility requirements, yes there are lower and more appropriate standards.

What are the trends among Indian firms tapping the AIM?

The companies looking to tap the AIM are from infrastructure, certainly media and also from the natural resources side.

There are a lot of Indian companies that are manufacturing houses, who are looking into backward integration and getting money for mining or primary productions of the natural resources needed for manufacturing segment. Companies are capitalising these businesses.

From India, a lot of media companies and media funds have shown interest. A couple of other firms with global aspirations are also in the pipeline. The average size of issues from India is approximately $30 million to $40 million.

The 20 companies listed in the AIM, have raised $3.6 billion over a two-year time frame. Seven companies have raised $725 million so far this year.

Last year, 10 companies raised $2.7 billion on the AIM. There could be a similar number of companies coming in, but possibly there could be reduction in the amount of capital raised this year. The reason being companies are looking at more conservative deals.

What about the performance of Indian firms listed on the AIM?

The feedback from the investors is very good. Of the 20 companies that are listed on the AIM from India, all of them but four are trading above their issue price. It shows there has been very positive investor appetite.

Investors are very interested and are still keen on the Indian growth story. There is no doubt about that. The companies also feel the experience has been a good one. What's most interesting is that a lot of them are considering further capital raising. Eros has already done that. I believe others may follow suit.

Any special strategy to attract more Indian firms to the AIM?

One of the great thing about India is it's continuously changing. That's also true for the financing requirements of the Indian companies. We as an exchange have to be aware of that. We are speaking to advisory communities continuously and so also with issuers.

Many companies do not realise that companies from India can list different vehicles on the AIM.

Companies can list warrants, bonds, and preference shares. But, before they do that they must list plain vanilla equity so that market has a certain level of comfort that the promoters are willing to give a share of their company and subsequently other instruments that are non-dilutive can be listed.

What you expect from Indian companies?

I think the AIM is not just a place to come and raise money. Your life on the AIM is about your brand image and national profile.

Indian companies have a responsibility now as the whole world is looking to India. Investors in the the AIM market require well-run companies, companies that have a long life span and are transparent.