The Hindu Business Line : Small cos cashing in on AIM listing

Mumbai May 14 When Promethean India, an investment company, wanted to raise £50 million for investment in India, it incorporated itself in the Isle of Man and listed itself on London's Alternative Investment Market (AIM) this April.

Promethean India is among the growing number of smaller Indian companies opting to list on LSE's junior market for raising funds. The Burmans of the Dabur Group is sponsoring the India-focussed private equity fund.

Offering the benefits of trading in a world-class public market, the AIM does not stipulate minimum requirements for company size, track record, number of shares in public hands and market capitalisation. The admission process is also simple.

Trinity Capital, a private equity fund, raised $500 million and Unitech, a real estate company, mopped up £360 million towards end-2006 on the AIM. Mumbai-based Hiranandani Group promoted real estate investment company, Hirco, raised £382.6 million towards the end of last year.

The K. Raheja Corp's property investment company, Ishaan Real Estate, too had raised $341 million.

Indian companies have reportedly raised over $3.5 billion since 2006 via AIM listings, cashing in on the junior market's low disclosure and less regulatory compliance norms.

Attractive

Mr Declan Gavin, Partner & Head-Outbound Tax Advisory Services, Ernst & Young, India, said for Indian companies that would like to keep certain profits outside India, this may be attractive, as otherwise those profits would be taxed at the high Indian tax rates.

"In other words, the benefit was two-fold; better access to funding and through lower taxes more money after tax was available for reinvestment," he said.

Listing at AIM gives companies access to funding in a more economical way, compared to listings in India and that the reason for this lay in the valuation given by the market to businesses.

The Isle of Man was often used to house companies that wanted to list at AIM, not only because of its friendly tax climate, but also the familiarity from the side of the regulators with Isle of Man companies compared to Asian entities.

However, he cautioned that the avenue usually was not as attractive for companies with operating activities in multiple jurisdictions.

The tax benefits offered were often largely eliminated by taxes in the other jurisdictions, due to the lack of tax treaties with the Isle of Man.

A preferred destination

The Isle of Man appears to be a preferred destination for the Indian companies for incorporation.

A report by business and financial service provider Hemscott, which surveyed 100 top non-UK companies listed currently on AIM, said 15 were incorporated on the Isle of Man, over twice as many as Bermuda (6) and Canada (5). The law firm said it advised 14 of the listings last year, including Unitech Corporate Parks, Hirco plc, Trinity Capital plc, KSK Power Venture plc and Eros International.

CAINS' senior lawyers, on a visit to Mumbai recently, said their clients were able to raise £1.6 billion in December 2006 alone.

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