Amid the doom and gloom of the markets, it is good to find hope still springs eternal.
There have been no Indian initial public offerings on Aim since OPG Power Ventures in May. The company, which is developing gas and coal-fired power plants for industrial consumers, raised £65m at 60p a share.
In a trading statement last month the directors said they were pleased with the progress made since flotation and believed the company was well-positioned to deliver significant shareholder value. But the shares closed at 51p – well down on the peak of 80p shortly after the float.
Nevertheless Noble, the nomad, believes there are other suitable candidates from India just waiting to join Aim. It will be staging a conference in Mumbai and expects 25 mid-cap companies to attend. Also present will be Meghraj, a Mumbai corporate finance house specialising in mid-caps, and representatives from Lawrence Graham, the City solicitors, and the local office of the accountancy group PwC.
The move follows Noble’s acquisition in May of Clear Capital, the research firm that built a sound reputation by providing company analysis commissioned and paid for by institutional investors. Clear Capital has been operating in India for four years and Saurabh Mukherjea, who was with it from the beginning, is now Noble’s head of Indian equities.
Noble is planning to become a research-led boutique Anglo-Indian investment bank. Earlier this month it published its first research into about 100 of the country’s mid-cap companies. “It appears that Indian mid-caps are suffering from a cycle of analyst neglect and higher transaction costs, resulting in some of the most promising opportunities not receiving enough investor attention,” says the note.
Mr Mukherjea believes that, even in the current climate, there will be some interest in raising money on Aim for companies operating in the infrastructure and power sectors. But they will need to be well-prepared, he argues, and it will take at least six months to sort out management information and accounting systems before coming to London.
They must also have physical assets, and a near-term cash flow. Investors, says Mr Mukherjea, are not interested in a power plant that will not be running until 2011, but are interested in projects running next year. At the same time Indian companies are ready to go abroad for funds as the country’s own capital markets are subdued.
Indeed. G.K. Chesterton’s description of hope now seems apt. It is, he said, “the power of being cheerful in circumstances which we know to be desperate”.
Among the more vociferous American critics of Aim last year was John Thain, then chief of the New York Stock Exchange but more lately head of Merrill Lynch. In case you have forgotten, he said London’s junior market “did not have any standards at all and anyone could list”.
But let bygones be bygones. It seems the Americans are now keen to drum up some business from Aim companies.
Pink OTC Markets, the over- the-counter market in New York, staged a seminar for Aim professionals with Bank of New York Mellon at Standard & Poor’s London office. It was plugging its International OTCQX platform, set up early last year for non-US companies already listed on qualifying international exchanges.
Aim companies that decide it is worth having a secondary listing on this platform will be in good company. Last week Imperial Tobacco joined other fully listed companies already quoted there, including Marks and Spencer and Tate & Lyle.
Imperial’s move follows its delisting from the New York Stock Exchange. The company said it simply did not need to continue the NYSE listing, which was taken in the late 1990s in order to gain access to US capital markets.
At the other end of the scale, Aim companies may want to try to improve the liquidity of their stock by tapping into US investors without the burden of Sarbanes-Oxley and other regulations. According to Andrew Kyzyk of Pink OTC Markets, the cost of taking a secondary listing should be about $20,000 a year. As reported in this column in March, Phynova, which is developing prescription drugs from traditional Chinese medicine, is one of Aim’s pioneers on International OTCQX. Stephen Marshall, operations director, remains enthusiastic about the prospects but admits that liquidity has not yet improved as the company has delayed plans to visit the US and get itself known.
Even for small companies such as Phynova, the cash costs are not a problem. But the amount of time needed to woo American investors may be another matter.
Companies can still raise money on Aim if they are in the right business. Begbies Traynor has taken advantage of a steady rise in its shares this year to raise £13m for working capital.
The specialist in corporate insolvency needs the cash for “the significant anticipated organic growth” resulting from the slowdown in the economy.
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