Remember, not a single Indian company has listed its shares in the US after Tata Motors’ 2002 listing. This being the record of large companies, it is not hard to understand why smaller companies are looking elsewhere. Says Sanjay Hegde, executive director, PricewaterhouseCoopers: “The choice of exchange is primarily driven by the depth of the market, availability of funds and the regulatory requirements of the exchange.
Indian companies have preferred Luxembourg mainly because of less stringent rules and also the time taken by the exchange for their review. The experience with Singapore is more or less like Luxembourg. Dubai is a new entrant, and is fast attracting attention.”
In addition to speed, another reason why companies already listed in India are attracted to the overseas market is the premium that they receive on their shares. “A follow-on public offer or a rights issue in India may not get a significant premium over the current price on the Indian bourses,” explains a merchant banker.
Proximity to India is also working in favour of exchanges like Dubai and Singapore. Local companies are increasingly getting attracted to the wealthy Gulf region. Institutional and private investors in the region hold more than $1 trillion in assets, so the demand for financial services is obvious. The biggest lure in Dubai, however, is a guaranteed zero corporate tax for the next 50 years. DIFX is all set to attract international institutional investors and foreign market participants with features — central counter party, linkages to international payment systems, market maker mechanisms — common to top global markets. Just six months old, this exchange is wooing small-and medium-sized companies across the globe.
Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.