Should Mountains go to Mohammed?

A fresh crop of foreign bankers and exchange officials were in town. Their logic: If Indian companies are not able to attract enough foreign capital in India, they should go to the source of this capital, especially in North America and Europe.

Apparently, there is a significant demand for good Indian stories. Even after discounting typical i-banking hard-sell, foreign listing is fast becoming a difficult option to ignore, amid difficult money raising environment at home and the falling currency.

It is not good news for local intermediaries, but surely a ray of hope for those starved of capital. Anil Ambani, among the savviest, when it comes to raising money, is already said to be exploring opportunities of listing a telecom arm in Singapore. Telecom businesses are better valued in Singapore and allowed a unique trust structure that guarantees annuity-based income for investors.

Should state-owned telecom behemoth BSNL follow suit? Reams have been written about the Union government’s disastrous attempts at finding buyers for its share sale programme. Should it take its shares to such specialised markets, rather than meddle with rules in the local market?

Resources companies such as Hindustan Copper and MMTC, which hardly evoke investor interest in India, may find better valuations in markets like Canada, where there are peer business models and specialised investors. These investors will be better equipped to assess the earnings potential of these companies and, hence, value those appropriately.

Firms owning huge real estate can explore the real estate investment trust model available in Singapore. Oil companies can go to London, BHEL to Germany and so on. IRCTC can easily give the MakeMyTrip IPO an inferiority complex on Nasdaq.

A Wall Street banker I met last week pointed out how the privatisation programmes in Europe in the 80s brought significant business to the bourses in America. “When these governments looked to privatise, there were no significant markets in the East. So, they came to the US and raised money.”

But, this will be a deviation from the stated policy of selling shares to Indian public. Then, many of the options the government is exploring, such as buybacks and cross-holdings, are also not in line with this policy. Also, what is the point of clinging on to a lose-lose policy, when you can clearly see it’s not working?

In the initial years, many Chinese government companies went to the West for listing. Only recently, they chose Hong Kong, which is closer to home, as the preferred market. Riding on this, Hong Kong is positioning itself as a gateway to the huge consumer base in mainland China.

Specialisation and valuation are significant factors in choosing a listing location. But, they are not all. The Wall Street banker shared a secret about a recent foreign IPO, “The chairman (of the company) did not get permission to go to the US. Neither did he get one to London. The only place he could go was to Hong Kong. So, they listed it there.”