Nasdaq May Tap Core Firms For Listings

Nasdaq is looking at select Indian companies in the infrastructure sector and may offer them listing rights on the exchange.

"Companies operating in sectors such as cement, steel, aluminium, transport and housing, or those with viable information technology business backed by manufacturing muscle would be in a position to make the most of a Nasdaq listing," Patrick Sutch, Nasdaq's vice-president and managing director (Asia-Pacific) said.

These companies have the brightest future in the country because sustained infrastructure-related spending was expected to take place in the country. It would be up to the exchange to develop the right profile for these companies in the US investment market.

For example, Nasdaq would get research reports prepared by US analysts rather than merchant banks based in India, so that these reports are more acceptable to top investors in the US.

"This has become easier because Indian accounting standards are now closer to US standards," said Sutch.

The companies clearly on Nasdaq's horizon include diversified groups in the A V Birla fold or even professionally managed diversified companies with strong business units like Larsen & Toubro and ITC. While declining to name the companies, Sutch admitted US investors would be happier if the viable businesses were spun off into separate entities for better analysis. This would also enhance the fund-raising potential of these businesses, he implied.

The US exchange is selling what it calls the 'Israel model' in India, which enables Indian companies to tap cheap US funds. "Nasdaq is the bridge between Israel's high-tech sector and American money", said Sutch. However, the government of Israel only permits companies of impeccable track record to raise funds overseas, unlike the Indian system under which fly-by-night companies issued global depository receipts and then vanished because there were no checks or controls.

"The other advantage Nasdaq offers to listed companies and investors is liquidity and this is borne out by the fact that average trades in a Nasdaq listed Indian company such as Satyam is any day more than the combined trades of the nine Indian equities listed on other US exchanges" said Sutch.

This was because the Nasdaq system had several compulsory marketmakers for each scrip, while other exchanges had one monopoly trader.

Also, Nasdaq operated like a forex market through open bid-based trades, not auctions. Each Nasdaq marketmaker is backed by a US research firm and this begets investor confidence.