'AIM is no place to raise easy money'

Q&A/ Hugh Sandeman

Hugh Sandeman of the London Stock Exchange feels the alternative investment market is more than an IPO platform

Hugh Sandeman, now the head of the India business development at the London Stock Exchange, had spent more than a decade as a journalist with The Economist covering the four continents. Sandeman tells Ashutosh Joshi that the extraordinary confidence seen in Japan 25 years back is now being felt in India. Excerpts from an interview.

You have been observing the growth of Indian economy since long...

I think from the investors' point of view. They want to invest in the market and are confident about its growth. The ability of Indian companies to deliver results is interesting. Indian companies are going global, the returns on equity in India are impressive.

Can we say that rising foreign interest in India and the Indian firm's growing appetite for foreign companies are interlinked?

I see a clear link between the two. The increasing global investment in India and its widening global footprints has to do more with India's integration with the world economy. While the growth story is taking Indian companies abroad, global companies are investing here to participate in India's integration with global economy.

The LSE is keen on listing small and mid-size companies from India as well as other nations on the Alternative Investment Market. What has been the growth?

There has been phenomenal growth in the last two years...this not only reflects from the number of Indian companies listing on AIM. But, across the globe, firms are showing increasing interest in AIM. The number of AIM listings has doubled in this period and enormous amount of money is raised. On the Indian side, growth is a requirement of the Indian companies for more sophisticated investment alternatives and broader range of equity finance. That's why we see different companies coming to AIM to raise capital with very special requirements.

How is AIM fulfilling these special requirements? How different is it from Luxembourg or Singapore?

There are two types of benefits we see. One is from AIM side and the other is company-specific, which varies from firm to firm. The AIM investor-base increasingly covers worldwide institutions. There are many types of investors, which are different from depository receipt investors. We are also offering liquidity at a smaller market capitalisation. Even for companies those what to halve off 15-25 per cent of their equity, we are offering service. In most of the larger markets, you don't get this. Eligibility criteria for emerging companies are different, flexible but with very transparent regulations. Its not that you require less due diligence for listing here.

Why infrastructure firms are choosing to raise money at AIM instead of getting listed on the bourses? Has it become easy place to raise money?

There are few natural source players coming to AIM. Infrastructure firms require pools of capital for their long gestation projects. They need access to additional sources of equity finance. Its not right to say AIM has become 'the' place to raise easy money. To get on to AIM you have to do extensive due diligence. We have to understand there is difference between an IPO and raising money on the AIM. What these companies are doing is essentially raising capital for a specific project through an investment company. For example, if you are an infrastructure company, you can raise capital for specific projects than floating an IPO. So it is not about an easy route, it is about using an alternative.