financing alternative for indian & other companies on aim

8/6/2019 Financing Alternative for Indian & Other Companies on AIM

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Financing alternatives for Indiancompanies on AIM

July 2007



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Agenda

AIM: financing alternative forIndian companies

Indian issuers on AIM

Routes to AIM for Indian issuers

Case studies

AIM institutional investor base

AIM regulation

Deciding between markets



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AIM: financing alternative foremerging India

Transaction structures on AIM for Indian businesses:

IPO of holding company or subsidiary abroad(shares)

Follow-on offering for Indian listed company (GDRs)

IPO of India-focussed investment company



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Why choose AIM from India?

Internationalises capital structure

Locates financing, investor base in globalmarkets

Offers access to differentiated investor base

Objectives

New financingsource,

specialisedtool

Indian companies have a wider choice of equity sources pre- and post-IPO

QIPs mean international listings onlyworthwhile for strategic reasons

AIM is appropriate in specificcircumstances, for high-quality issuers

AIM is not a general alternative to theIndian equity market



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Indian domiciled companieson AIM

Great Eastern Energy Corporation

Coal-to-methane

December 2005

£19 million (shares)

Transaction undertaken prior to August 2005

ban on overseas IPO of Indian domiciledcompanies

Noida Toll Bridge Co.Ltd

Infrastructure project

March 2006

$50 million (GDRs)



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Foreign companies (holding Indianassets) on AIM

Hardy Oil & Gas plc

Offshore Bay of Bengal

June 2005 £15 million

Platinum Mining Corporation of India

Orissa mine

April 2005 £14 million

Eros International plc

Bollywood film content distribution

July 2006 £27 million

KSK Power Ventur plc

Power generation

November 2006 £31 million

West Pioneer Properties Ltd.

Retail real estate

December 2006 $40 million



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India-focussed investment companieson AIM

INDIA HOSPITALITY CORP

Trinity Capital plcReal estate investment company

April 2006 £250 million

Eredene Capital plc

Real estate investment company

May 2006 £57 million

India Hospitality Corp

Tourism infrastructure

August 2006 $100 million

Ishaan Real Estate

Real estate projects (K. Raheja)

November 2006 £207 million



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Hirco plcReal estate projects (Hiranandani)

December 2006 £383 million

Unitech Corporate Parks plc

Real estate projects (Unitech)

December 2006 £360 million

DEV Property Development plc

Real estate projects (Indiabulls)

February 2007 £138 million

DEV PROPERTY

DEVELOPMENT PLC

Naya Bharat Property Development plc

Investment in Indian land

March 2007 $60 million



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Evolvence India plcPrivate equity fund of funds

March 2007 $65 million

PROMETHEAN INDIA PLC Promethean India plcPrivate equity

April 2007 $100 million

The Indian Film Company

Film fundJune 2007 $110 million



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(1) IPO of shares in overseas entityholding Indian assets

IPO of sharesin overseas

entity holdingIndian assets

Applicable in case of:

significant overseas presence

international acquisitions

globalisation at early stage

start-up businesses not fully valued in India

equity stories with better acceptance overseas

Hardy Oil & Gas (AIM, June 2005): existingoffshore holding, attracted by AIM E&Pvaluations

KSK Power Ventur (AIM, November 2006):tapped AIM demand for early-stage Indianinfrastructure



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(2) IPO of shares in overseas subsidiaryof Indian company

IPO of business held outside India by anIndian parent company

Separate capital structure for financinginternational expansion

Promoter dilutes at subsidiary not parentcompany level

Possible applications:

capital for overseas is large relative to parent

risk profiles overseas / at home differ

international business has separate identity

equity story of international business moreattractive to global than domestic investors

IPO of sharesin overseas

subsidiary of Indian

company



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(3) Follow-on GDR offering by listedIndian company

Alternative to a QIP (or conventionalLondon-, Luxembourg- or other listed GDR)

Applicable where: equity story only attractive overseas

issuer targets international investors only

broader distribution than FIIs via aftermarket

Noida Toll Bridge (AIM, March 2006)

Follow-on GDR offering by

listed Indiancompany

Guidelines for use of GDRs on AIM

GDRs can be used only when external share offering is restricted, as in India

AIM disclosure on the DR programme same as conventional GDR offering in UK All rights associated with the underlying to be available with the DR (e.g. voting and

dividend rights)

No upfront payment to issuer, cost of depositary paid by company

DRs must be able to settle electronically via CREST, using depositary interest



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(4) Investment company to financeIndian projects

Ishaan Real Estate (AIM, November 2006):£207 million for FDI-compliant real estate

Investmentcompany to

finance Indianprojects

AIM offers access to global investorsseeking Indian real estate, infrastructure,private equity opportunities

AIM investment companies: vehicle forpromoters/corporates to raise equity away

from parent Investment company regulation:

disclosure of investment strategy

no % cap, control allowed

partially paid structures not allowed

follow-on offerings easy to execute



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KSK Power Ventur

IPO of offshore holding company

Effected via 29% capital increase

Structured via Isle of Man, withMauritius subsidiary holding Indiandomiciled operating company

Proceeds for new powergeneration projects, developmentof coal resources

Transaction profile

Date November 2006

Amount raised £31 million

Market cap at IPO £138 million

Commission on placement 4% of capital raised

Nominated advisor fee £175,000

Format Shares

Nominated adviser Arden Partners

UK law Lawrence Graham

Isle of Man law Cains Advocates

Reporting accountants Mazars

Competent person·s report IMC Group Consulting

Board of directors One UK-based director

Highlights

Case study



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Ishaan Real Estate

Independent closed-endinvestment company

Indian FDI-eligible real estate

(SEZs, IT parks) Target IRR of 20%, leveraged

78% invested at launch in 8projects

Co-invest with K. Raheja entities,ensuring quality pipeline

Ishaan to invest via Mauritius

holding and SPVs, holding stakes inRaheja Indian property ventures

Board of 5 non-executives

Transaction profile

Date November 2006

Amount raised £207 million

Domicile Isle of Man

Commission on placement 3.0% - 3.5%

Fees as % gross proceeds 4.3%

Format SharesNominated adviser + broker Deutsche Bank

Joint Glo-Co, books Deutsche, JP Morgan

Special advisor ENAM

UK, US law Lovells

Isle of Man law Simcocks Advocates

Reporting accountants Ernst & Young

Property valuers Cushman & Wakefield

Highlights

Case study



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Ishaan Real Estate

All investors with more than 3%disclosed at admission to AIM

Major investors in Ishaan:

Alliance Capital

Blackrock International

Capital International

Fidelity Investments

Henderson Global Investors

HSBC Investments

Jardine Fleming Asset ManagementLone Pine Capital

Franklin Templeton Investments

ZA Capital

Investors

Case study

Execution issues

Transaction completed in about 6 months

Due diligence required on 8 projects, forimmediate investment upon completion

Valuation of all targeted projects byCushman & Wakefield

Reg S and Rule 144a components to theoffering

Disclosure focussed on structure of fund,agreement with investment advisor, andinitial portfolio of investments

Detailed disclosure on board of directors

Lock-up under AIM rules requiring directors

of a newly created company not to sellshares for 12 months

170 page offer document



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Noida Toll Bridge

First follow-on offering by anIndian-listed company on AIM

Effected via 50% capital increasewhen Noida was reporting netlosses

Objectives:

re-finance debt

finance new road link

raise profile in capital markets

broaden shareholder base

Transaction profile

Date March 2006

Amount raised $50 million

Over-allotment 10%

Total cost 5% of capital raised

Format GDRs +DIs

GDR ratio 1:5 sharesNominated adviser Collins Stewart

Co-financial adviser Edelweiss Capital

UK law Mishcon de Reya

Reporting accountants SR Batliboi (E&Yo)

Competent person·s report Halcrow

Highlights

Case study



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Noida Toll Bridge

Execution issues

Transaction completed in 3 months

Substantial size of transaction relative toexisting capital (33.33% of enlarged sharecapital)

Placing on best-effort basis

Extensive due diligence: CPR deemednecessary for offer document

Consent from debt restructuring procedurereceived

Accounts: IFRS summary, Indian GAAPhistorical, all IFRS from 2007

Extensive disclosure on material contracts,

board, articles

12 month working capital statement as perAIM rules

250 page offer document

Investors had option to take GDRs(clear via Euroclear or Clearstream)or GDRs + Depositary Interest (CDIs)

All investors took GDRs + CDIs

Fees waived for investors in GDRsand CDIs ² company to pay fees

GDR/GDR + CDI holders exercise vote

Depositary Bank to inform holders of

shareholder meetings, ensure votesexercised only as instructed byholders

GDR structure

Case study



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Hardy Oil and Gas trading

12mth turnover of shares % of outstanding 27%

12 month annualised turnover of shares % of free float 95%

Shares outstanding (m) 57.2

Free float 27%

IPO price £1.44

Current price £4.56

Change + 217%

2006/7 #Trades

Value(£m)

#Shares(m)

MarketCap(£m)

Av.Value

trades £

Jun 203 5.4 1.8 155.0 26,601

Jul 373 7.0 2.5 175.2 18,820

Aug 89 1.9 1.9 177.1 21,348

Sep 86 1.4 0.5 159.87 16,530

Oct 120 2.3 0.9 140.0 19,170

Nov 196 2.2 0.9 154.6 11,470

Dec 145 1.0 0.3 172.5 7,007

Jan 215 2.3 0.7 178.1 10,516

Feb 152 2.0 0.6 174.8 13,171

Mar 106 1.6 0.5 192.9 15,385

Apr 259 5.1 1.4 222.3 19,624

May 257 11.3 2.6 272.5 43,935

Total 2006/7 14.6



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Eros International trading

Jul-May annualised turnover of shares % of outstanding 26%

Jul-May annualised turnover of shares % of free float 104%

Shares outstanding (m) 110.0

Free float 76%

IPO price £1.76Current price £3.98

Change + 119%

2006/07 #Trades

Value(£m)

#Shares(m)

MarketCap (£m)

Av.Value

trades £Jul 42 2.5 1.3 192.5 59,620

Aug 10 1.7 0.9 193.5 173,644

Sep 9 0.1 0.1 193.5 13,667

Oct 22 5.4 2.7 209.5 243,467

Nov 159 8.7 3.6 265.5 54,485

Dec 205 13.7 4.9 351.4 66,893

Jan 812 16.9 4.9 413.1 20,877

Feb 376 25.0 6.8 407.6 66.524

Mar 300 22 5.7 438.4 74,854

Apr 183 6.9 1.7 431.8 37,604

May 212 8.6 2.2 435.1 40,870

Total Jul-Feb 2006/07 25.2



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AIM investor base: major institutionsMost active institutions

Number of AIM companiesinvested, 2006

- Fidelity 160

- Artemis 130

- F & C 120- AXA 118

- Gartmore 90

- AMVESCAP 84

- RAB Capital 78

- Goldman Sachs 72

-Merrill Lynch 67

- HSBC 65

Most active Institutions

Total invested in AIM companies,$ million, 2006*

- Fidelity $ 1,968

- Artemis 1,286

- New Star 1,245- AMVESCAP 1.237

- Merrill Lynch 1,130

- AXA 1,070

- Gartmore 1,034

- Schroders 952

- Goldman Sachs 850

- UBS 720

New issues

Most active institutions bynumber of IPO investments

- Fidelity 32

- Artemis 31

- RAB Capital 25- AXA 20

- Gartmore 17

- UBS 17

- AMVESCAP 16

- Henderson 16

- Merrill Lynch 15- CSFB 14

Source: Teather & Greenwood, Growth Company Investor* Translated into $ at £1.00 = $1.90Data for mid-year 2006



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AIM investor base: interest by sector

Number of institutionalholdings by sector, 2006

- General Financial 880

- Mining 802

- Software, IT

services 568- Support services 494

- Oil & gas 441

- Media 415

- Real estate 301

- Pharma, biotech 301

- Travel, leisure 300

- Electronics 195

Value of institutional holdings bysector, 2006

$ billion*

- Mining $ 13.0

- Oil & gas 10.4

- Real estate 9.0- General financial 8.8

- Support services 5.1

- Industrial metals 4.3

- Travel, leisure 4.2

- Pharma, biotech 3.5

- Media 3.1

- Software, IT services 2.2




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AIM investor base: leading investors

Fidelity InvestmentsValue of largest holdings, 2006

$ million*

- Sportingbet Leisure $268

- Imperial Energy Oil & gas 117

- First Calgary Oil & gas 91- Centurion Electronics Electronics 60

- PIPEX Comms Telecoms 57

- Highland Gold Mining 53

- ClipperWindpower Electricity 47

- Star Energy Oil & gas 41

- Asia Energy Coal 39- Serica Energy Oil & gas 39

Artemis Investment Management

Value of largest holdings, 2006

$ million*

- Star Energy Oil & gas $ 60

- Develica Deutschld Equity fund 49

- Cape Support ser 47- Genesis Oil & gas 44

- Coda Software 41

- Speymill Real estate 30

- European Goldfields Mining 30

- Prosperity Minerals Bldg Mats 30

- Equest Balkan Real estate 29- Imperial Energy Oil & gas 28




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AIM regulation

Admission rules adapted to suit young,growing companies

Rules allow market to decide on free float,track record

Eligibility

Disclosure Short, principles-based rule book

Market practice-driven disclosure

IFRS financial data

Advisors prepare document, Exchangedoes not approve it

Similar concept to SEBI filing for QIPs

Supervision Exchange supervises, licences advisors



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AIM data

AIM companies 1,642 Overseas AIM companies 294 Market value $187 bn Market turnover 2006 $113bn UK company admissions 2006 293 Overseas company admissions 2006 107 IPOs on AIM, 2006 261 Capital raised (new & further) since 1995 $72 bn Total capital raised in 2006 $26 bn

Note: translated at £1.00=$1.95



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Hybrid order-driven and market makersystem: SETSmm



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AIM admission ceremony

Admission ceremony:

opening of market

reception with representativesfrom the company, advisersand Exchange

Benefits:

completion event for theissuer and working group

media coverage to raiseprofile at launch

featured on Exchange website



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Visual guide to AIM website



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What we provide in AIM service

� Initial Public Offering (IPO) on AIM through GDR application approvalfrom Ministry of Finance, Government of India.

� AIM Listing application process, guidance and advisory services,selection and coordination with all the Capital Market agencies /professional firms involved for AIM listing, on your behalf.

� Advising and assisting you in preparing Financials and otherDocuments eligible to get the company admitted in the AIM ²LSE,before due diligence is carried out by Law Firms and CharteredAccountants.

� International Tax Planning.� Incorporation of Offshore Companies as strategic corporate decision.

� Consultation and arrangement on the Finance through otheralternatives.