India floats receive warm welcome in London
Four Indian companies have raised $387m (€249m) on London's Alternative Investment Market in the past month and all are trading above their issue price, providing a boost to the junior exchange that has been hit by a slowdown in dealflow as a result of the downturn in equity capital markets.
KSK Emerging India Energy Fund, which invests in the Indian energy sector, became the largest listing on Aim this year when it raised $200m on Monday. Shares in the company closed 11.5% above their 100p offer price yesterday. Liberum Capital managed the deal.
Shares in two other Indian energy companies have also risen sharply since listing on Aim. Oil exploration company Indus Gas, which raised $48.4m on June 6, closed at 36% above its 164p issue price yesterday. Meanwhile, shares in OPG Power Ventues, which operates power plants in India, were up 28% at yesterday's close, since it joined Aim on May 30.
The fourth Aim listing was by Mortice, a security and facilities management company, which raised $9.8m on May 15 and is trading up 5%.
Tracey Pierce, head of equity primary markets at the LSE, said: “The pipeline of growing, innovative Indian companies looking to admit to Aim remains strong.”
There has been a substantial slowdown in capital raising on Aim as a result of the downturn in equity capital markets. There was only £392m (€495m) raised through primary and secondary issues on Aim in the first five months of this year, just 20% of the £1.9bn raised at the same point last year.
One of the main factors is investors' concern about buying smaller, less liquid stocks. Craig Coben, managing director of European, Middle East and Africa equity capital markets at Merrill Lynch, said: "Liquidity has become an increasingly important issue for all small and mid-cap companies, not just those from emerging markets, because investors want to know they can redeem their money quickly in the current market."
However, there have been positive signs in terms of the secondary market in emerging market securities on the LSE's International Order Book. The value of trading in Indian securities was $5.08bn in the year to May 8, compared with $4.55bn at the same point last year.
There are now 52 Indian companies with a combined market-cap of $16.8bn listed on the London Stock Exchange: 24 on Aim, 11 on the main market and 17 on professional securities market.
Hardy Oil and Gas, a UK-based oil exploration company mainly focused on India, also graduated from Aim to the London Stock Exchange's main market in February.
Nine Indian companies raised £425m (€536m) in total when they joined Aim last year. The figure raised in 2006 was £1.4bn, more than three times higher, after four large real estate floats at the end of the year raised nearly £1bn combined.
The LSE appointed Ibukun Adebayo as head of Indian business development last August, taking over from Hugh Sandeman, who was responsible for promoting the LSE in India for the three previous years. He is now a managing director at Jefferies International focused on corporate finance work with Indian companies.
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