London’s Alternative Investment Market (AIM) for small and mid-level companies is again trying to attract Indian companies to raise funds. Marcus Stuttard, head of AIM, London Stock Exchange (LSE) Group, was in Mumbai for a road show in this regard. He spoke to Rajesh Bhayani on issues concerning AIM-listed companies and prospects post the financial crisis. Edited excerpts:
Post the 2008 financial crisis, how has the Alternative Investment Market at the London Stock Exchange performed?
Globally, markets and exchanges have seen turmoil. But, they are back on track. In 2009, companies raised £5.5 billion. Although this figure is only nearly a third of the amount raised in 2007, the good sign is that institutional investors are back and willingly participating. Generally, money raised through initial offerings (IPOs) is the barometer and historically 60 per cent of the funds raised have been through IPOs. In 2009, ninety per cent of the funds raised were through follow-on offers.
Did you have to change regulations for the AIM market after the crisis?
No. We changed norms in 2006 and 2007 and that, too, because we had grown too large. We tightened rules before the crisis. This is a sign of maturity of AIM. The number of companies listed on the segment fell from 1,700 to 1,270 in 2009. This is because many companies got acquired or grew bigger or found that remaining private may be more beneficial. Such contraction is, however, a global phenomena.
The rush from Indian companies to raise funds from the London AIM seems to have slowed.
In 2009, two companies raised funds on AIM, of which one was a further (follow-on) issue. There were 25 companies, of which one has moved to the London Stock Exchange’s main market, while one fund has closed down. However, what is interesting is that the Grant Thornton share price index of companies having business in India went up by 212 per cent in 2009. We are very optimistic about Indian companies raising funds on AIM. Till now, road shows in India used to be organised by advisors. This time, LSE has organised a road show and the participation has been very good.
We see many Indian companies across industries raising funds from AIM in the months to come. The scope for doing so is good. In general, small and mid-cap companies preferred to raise funds through debt but, nowadays, equity has became an important source of fund-raising, apart from capital raising.
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In the past, some AIM-listed Indian companies tried to behave like private company players. How do you prevent such cases?
The London Stock Exchange has a system where companies wanting to raise funds through AIM have to have a good relationship with advisors approved and nominated by the exchange, who help them in floatation. If companies remove such advisors, they can face suspension. These ensure they don’t behave like a private company. There are enough regulations to ensure investors’ interests.
Another good thing about AIM-listed companies is they are well covered by analysts and good fundamental research is available on a majority of them. Such research keeps companies in the limelight.
