The Alternative Investment Market (AIM) of the London Stock Exchange (LSE) is looking to admit more Indian companies this year. The exchange in general and its nominated advisors like investment banks also called â€˜Nomadsâ€™ in particular are cajoling more promoters to enter the â€œdeep equity pool of the London bourse.â€?
The exchange is specifically scouting for emerging Indian companies in sunrise sectors like power generation, media and telecom, IT/ITeS, Real estate and Infrastructure.
The number of Indian companies admitted to AIM has shot from three in 2005 to 13 in 2006. These companies raised capital to the tune of $2.7 billion through 12 transactions, including public issues of emerging growth companies and follow-on offerings in 2006.
On the contrary to popular belief, AIM is a not a general alternative for companies to raise capital. For this, India has a very strong capital market with decent turnover and appreciable foreign fund inflows. AIM is appropriate in specific circumstances, for good quality issuers to raise capital commented Hugh Sandeman, head of business for India, LSE.
AIM offers companies more access to investors beyond FIIs. Institutional investors own about 56% of the market, making it a liquid pool for companies trying to raise capital.
AIM also has a strong investor base in the US, Australia and the Gulf. This also helps companies to internationalize their capital structure. Promoters should keep in mind that AIM is not a substitute to Indian equities market.
Broadly, there are four â€œspecific circumstancesâ€? when Indian companies can raise money on AIM. Indian companies with significant overseas presence by way of subsidiaries or M&As (as in the case of Hardy Oil and KSK Power Venture), public issue of an overseas subsidiary of an Indian company, follow on GDR offering by an Indian-listed company like Noida Toll Bridge and foreign investment company raising money to finance Indian projects as in the case of Trinity Capital and Ishaan Real Estate, can be the reasons for an AIM admission.