Indian companies flocking to US markets for listing

Indian companies flocking to US markets for listing
ENS ECONOMIC BUREAU

MUMBAI, MARCH 30: Indian companies have started queueing up to list their shares on the US markets. The US markets expertise in analysing the new economy and the high valuations they have been putting on knowledge-based companies is drawing an unprecedented number of Indian companies to the Nasdaq and the New York Stock Exchange (NYSE).

A Reuters compilation published on Thursday of those wanting to tap overseas markets in fiscal year 2000/01 (April-March) showed 25 firms aiming to raise at least $4 billion. This compares with net Foreign Institutional Investor inflows of around $11 billion into Indian stock markets since 1993.

The Indian offerings on the ADR market in the next few months are expected to be a $1.5 billion issue from television conglomerate Zee Television, a $500 million issue from Wipro and a $200 million offering from pharmaceutical firm Dr Reddy's Laboratories Ltd. Another pharma firm Nicholas Piramal has decided to raise upto $100 million through an issue of American Depositary Receipts or Shares (ADR/ADS).

Silverline Technologies which has planned to raise $ 125 million is expected to begin ADR offering process before April. The computer education and software firm Aptech plans to raise upto $125 million through an ADR/GDR issue. It will seek shareholders approval at its annual meeting in April. Rolta India Ltd plans to issue up to 5 million shares by way of ADR/GDR or as a preferential allotment to foreign institutional investors. Polaris Software plans to make an offering of ADRs by September 2001.

Videsh Sanchar Nigam plans to convert its existing GDRs into ADRs within the next few months. Mahanagar Telephone Nigam is expected to file documents with the US Securities Exchange Commission by mid-April for an end-April or early May listing on the New York Stock Exchange. "The hunger for being seen as global players and enjoying high valuations is driving Indian companies to list abroad," said Shanthi Ekambaram, executive director at Kotak Mahindra Capital Company. Besides getting a higher price on the technology-ladenNasdaq, which has vaulted nearly 94 percent over the last 12 months, the firms also gain from a related surge in their local share prices.

India's first company to list in the United States, software firm Infosys Technologies Ltd offered its American Depositary Receipts (ADRs), each representing half a local share, at $34 in March, 1999. Adjusting for a stock split, the ADR has since risen about 15 times to close at $250 on Wednesday. Its local share rose six times to Rs 10,343 in the same period.

The private sector ICICI Bank made adebut on the New York Stock Exchange (NYSE) on Tuesday at a 27 percent premium to its offer price of $11 each. Based on Wednesday's closing price the premium is 36.36 percent. There are four Indian firms now listed on US markets.

US LISTINGS TO BOOST M&As:India's knowledge-based companies in software, media, pharmaceuticals and telecommunications have in the past year become aggressive on growth and many consider acquiring firms in developed markets the fastest way to achieve their goal.

Analysts said the overseas listings provided these companies with the money and global presence needed for such a task. "They are going to raise capital, get themselves a currencyand thirdly a global footprint because the kind of profile and currency they can get by an international acquisition clearly will fit into their strategy of becoming global conglomerates," Kotak's Ekambaram said.

Firms like Infosys and diversified firm Wipro Ltd, which on Tuesday announced plans to raise up to $500 million abroad, have been demanding more freedom to buy overseas firms. Last week, the government obliged with a series of measures. It said knowledge firms could buy companies abroad through ADR/Global Depositary Receipt (GDR) stock swaps up to 10 times the value of export earnings of the previous year.

Some Internet firms like Rediff want to directly make an overseas offering without an Indian listing because local bourses insist on a three-year profit record unless a bank or financial institution is willing to take a stake in the company. There have not been any overseas acquisitions by Indian companies listed abroad, though some smaller locally-listed software firms have struck deals with global companies.

SURGE IN AMOUNTS BEING RAISED OVERSEAS: The estimated $4 billion that Indian firms plan to raise inthe year from April, compared with $1 billion in 1999/2000, will make them Asia's biggest issuers of ADRs. "Last year, we listed 20 Asian companies. This year, because we expect more from ndia, I would put that figure up to about 25," Patrick Sutch, Nasdaq's director for Asia Pacific, said in Mumbai last month.

Globally, firms raised about $21 billion in 1999 through ADR offerings -- more than double the $10 billion raised in 1998, JP Morgan said. More than 43 per cent of the total were from telecommunications, media and technology.Investors have been flocking to Indian issues because ofthe enormous growth potential offered by India knowledge-based and manpower related companies. Indian software companies' cutting edge technology and E-commerce drive help them score over other companies, analysts said. Lower manpower cost and high talent also make Indian firms attractive.