The London Stock Exchange (LSE) group is aggressively wooing Indian companies to list on its main market and the Alternative Investment Market (AIM). Tracey Pierce, director of equity primary markets for the group, says capital is available in London for established Indian companies with high quality management and strong growth prospects. Edited excerpts from an interview with Mehul Shah and Palak Shah:
Which types of Indian companies are showing interest in listing on your exchanges?
We have about 600 listed and traded (international companies) in London from about 110 countries. An attribute of London is that we attract companies from a wide range of sectors. Many sectors represent the composition of Main market and AIM. Our key focus, though, and where we have attracted a majority of our international companies, is in the emerging markets – Russia and CIS (Commonwealth of Independent States), India, Asia Pacific and, to a lesser extent, Latin America.
In terms of sectors, while we draw companies from a wide range, London is particularly strong in natural resources, oil & gas, mining, financial services, manufacturing, real estate and infrastructure. Those are the sectors we have attracted from India, too. Of the international companies, we have about 70 from India across the wide range of sectors on the Main market, either via a premium listing of equities or GDRs or on AIM, our market of smaller companies. What’s increasingly attractive to Indian businesses is also a specialist funds market. There are a number of specialist funds, for example in infrastructure, that will be looking to raise funds overseas.
Is there appetite among institutional investors based in the UK for Indian equity offerings?
Generally, the institutional investors based in London are used to investing in international companies. They want the growth that comes from the emerging markets. I think the capital is available in London for Indian companies that want to list. Generally, though, investors, particularly post-crisis, are very discerning. So, it has got to be more established companies, high quality management and strong growth prospects. There is particularly demand for certain sectors. If a company comes at that level of profile and quality, there is no reason either in the primary or secondary market why they can’t raise funds. Essar Energy is an example of that, $1.9 billion in May 2010, and it came back to the market in January to raise a further half-billion dollars.
What is the status of your alliance with NSE?
We signed a letter of intent with the National Stock Exchange last year. There are two key elements of that. Proposal one was cross-trading of index futures on FTSE 100 (the share index of the 100 most highly capitalised UK companies listed on the LSE) and the Nifty 50 (large-cap stocks favoured by institutional investors earlier on the NYSE) and also possible collaboration around development of the small-cap market. Those discussions are ongoing. I think there are further developments in the regulatory model in India before those ideas can be taken forward. So, we continue to co-operate.
In terms of the Indian authorities’ views on development of the domestic markets for smallcaps, that is moving forward as they are granting licences to different exchanges to develop those markets. Our interest would be in sharing our expertise in the development of the smallcap market as we have been extremely successful in developing AIM for both our domestic and international firms. But, that model might not translate directly into India. We will have to look at the Indian economy and the nature of smallcap to decide which kind of advice goes in.
When do you expect primary market conditions to change?
It is difficult to say when markets will improve, as there are macro-economic factors like the Arab spring, natural disasters in Japan, the US economic situation, affecting global markets. It is difficult to predict the kind of influence that will be on the markets. What we can say is across 2009, 2010 and 2011, the market improved. We hope to see that trend continue.
