While on March 31 we have moved to the standard list of the main market, the experience on AIM was good as it set the platform for association with large institutional investors in a public company format vis-?-vis the traditional struggle and challenges on ground with private equity models. It set the ground for being a listed company, compliance to IFRS and periodic reporting mechanism, evolution of the business model and preparedness for investor/financial PR/media and analyst scrutiny, says S Kishore, executive director, KSK.
KSK Power Ventur was the first India-related company to obtain a standard listing on the main market. The KSK Group develops private power projects across India and was admitted to the AIM in November 2006. It raised an additional $ 50 million in April 2009 and transferred its listing to the main market on March 31, 2010. At the time of transfer, its market capitalisation had increased 5.8 times since its listing to approximately $1.2 billion.
Kishore says the reasons that lead him to explore the AIM were clear. ?The availability of capital from institutional investors with respect to high growth and robust and exciting business models is good and possible on AIM, even better than Singapore and Dubai (DIFX), who pitch for a similar audience. In 2006, for the power generation business, the traditional analyst/investor view in India was that power generation is a 14% regulated return on equity (ROE) business and there is no potential for market-based business models and returns. However, the investors in London were far more receptive to the business model.?
Kishore adds that the fund raising mechanism is far more simple and straightforward at the AIM. ?The broad spectrum of fund managers appreciate the larger perspective of the opportunity and need to deploy patient capital in infra business. In Mumbai, we find the requirement for short-term appreciation and flips even from certain apparently long-term investors.?
Kishore says while at the AIM, the cost of the Nomad, legal counsel and higher commission percentages on funds and cost of ongoing compliance are on the higher side, and the depth and breadth of the institution provides the benefit of repeat and continual support for the corporate.
With respect to the challenges faced in the listing process, Kishore says that familiarity to the Indian regulators and permissions was an initial challenge. Also, there were some initial cultural challenges for the Nomad and the legal counsel to get comfortable with Indian business practices and due diligence norms.