‘Markets to recover by mid 2009’

At a time when a number of investment banks are struggling to stay afloat, the UK-based Noble is targeting customers in India with its research services.

John Llewellyn-Lloyd, CEO, investment banking, Noble, spoke to Sachin P Mampatta about opportunities for raising capital for smaller Indian companies and how soon the global equity markets might see an end to the current downturn.

A man who speaks in measured tones, perhaps the result of his background as a qualified barrister, Llewellyn-Lloyd argued in favour of Indian companies raising capital on the London Stock Exchange’s Alternative Investment Market (AIM).

Why would companies want to list in the UK as opposed any other country such as say, the US?
Small companies have a greater amount of exposure to litigation and liability in the US. London is not very litigious. Besides, indices like the Nasdaq are more focused on larger companies. Also, London covers 70% of the international community when it comes to raising funds. The numbers involved are smaller, but it is an important exchange. World shipping, the airline industry can all be said to have a focus around London. The location of Europe is important from the perspective of time-zones as well.
What are the kinds of Indian companies that have  listed on the exchange and how have they fared?
Among the companies listed, there seems to be an over-concentration on property. Property tends to be centred on asset values and there isn’t a lot that even the best of management can do when those asset values start dropping. Sectors like utility, media, energy and resources are underrepresented on the exchange.

Has the current environment resulted in a lesser number of firms raising funds? Markets are cyclical. We have probably seen the lowest level of issues in 15 years. At its peak in 2006, AIM had 450 to 460 issues in the market of which 100-150 were international IPOs. If we see 100-odd IPOs in the next year, around 20 of them could be Indian.

There are listings happening in the current market as well. Most of them are in the form of secondary fund raisings by international firms. As of now, Indian firms aren’t among them.

When do you expect a turnaround in the market?
The markets tend to factor in events before they take place. So, the equity markets might see a recovery midway through next year. This would be in advance of the corporate recovery which might take place around 2010.

How should Indian companies be approaching the prospects in AIM?
AIM is a very big opportunity. Companies have to realise that the world is extremely competitive. So, in order that they can make use of avenues like AIM, they must make use of the best advisory services that they can find, so that they are in pole position when the time comes for listing.

What is your outlook on the Indian economy and as an extension, its equity markets?
India remains one of the most exciting investment destinations for our clients. So despite thecurrent jitters in the local stock market, we believe this is a country where global investors can find valuable investment opportunities. We intend to build an Anglo-Indian investment bank focusing on an increasing flow of business between India and the UK.

Where do you see opportunity in India?
India has a very youthful population, so sectors that are focused on this aspect of the demographic should be good bets. This would include media, technology... Also, energy and infrastructure should do well.

How have you been affected by the current financial crises and how are you dealing with it?
We have been affected on the primary fund raising side, but have a diversified income stream and have seen M&A income and secondary trading income hold up very well. The credit crisis presents an opportunity for Noble, as high quality staff is made redundant by some of our competitors, providing recruitment opportunities

sachin_m@dnaindia.net