In bygone days, India was considered the jewel in the crown of the British empire. According to research published by the business consultancy group Deloitte earlier this month, it is Indian companies adding the sparkle to an otherwise rather depressed Alternative Investment Market.
The statistics are startling. Twenty four Indian companies have listed on AIM in the past two and a half years, and on average the share price of each is up 15 per cent since the start of trading. In the past 12 months, this group is up a collective 1 per cent, versus a fall of 21 per cent in the rest of the market. The biggest AIM IPO of the year was from an Indian company, the £100m listing by KSK Emerging Market India Fund, while £200m has been raised by other groups from the country.
Kevin Haimes, a capital markets director at Deloitte, says the stellar performance is largely due to India's growth rate and the fact that the Indian stock market has faltered badly this year. "There are many sectors showing significant growth potential in India, such as natural resources, energy, manufacturing, hospitality and infrastructure. With the [Mumbai] Stock Exchange falling by over a third since the start of the year, it is likely more Indian companies will be considering London when looking at ways to raise capital."
The group is planning to conduct similar research into another booming economy later this year – China. Mr Haimes agrees the conditions in India and China are similar, predicting they will have two of the three biggest economies in the world by 2030.
Greenko is one such Indian company enjoying the good times. The renewable energy group announced its first set of listed results last week with an impressive set of numbers; pre-tax profits stood at €4.2m (£3.4m), up from €265,000 last year.
It comes as no surprise to the group's finance director Tim Bowen, the only non-Indian employed as part of Greenko's 400-strong workforce. He reckons with GDP growth of between 8 and 10 per cent, an emerging middle class of 400 million people and a huge demand for power, "India is happening".
The company is set to benefit from the huge deficit between what is produced and what is needed to power this growth. Better still, Greenko has recently been licensed to sell its electricity directly to corporate India. Under a 2003 Act designed to deregulate the power industry, Greenko can sell its power to companies for 6 rupees per KW of power rather than the 3.2 rupees it gets from selling to the state.
Here is something you will not read about every day: a Texan oilman who spends his days worrying about the environment.
Not that JP Bryan, chairman of Resaca Exploration, is rooted in green campaigning. Rather, it is that Resaca's method of production, which uses carbon dioxide to extract oil and gas from sites abandoned by other firms, has environmental benefits. Now he says he is planning to move his operation out of its base in west Texas as soon as possible.
Today's announcement that the group has raised £53.3m as part of its IPO on AIM will help. The company has eight fields covering 15,000 acres of Texan desert, and hopes being a listed group will attract more investors to its work. Mr Bryan says the company is different to many oil and gas groups as it is already in production at its sites, and the use of carbon dioxide allows investors to buy into the booming oil market while preserving their green credentials.
He says the IPO was priced at a level to encourage investors, giving them a fair bit of breathing space should the prices of oil and gas start to fall. The money raised will go towards water flooding several wells, paying back debt and funding acquisitions.
Oil and gas groups closer to home reckon they are having a tougher time of it. In a note published by analysts at JP Morgan Cazenove, the watchers claim: "In the current stock market environment, AIM explorers have been penalised indiscriminately for poor liquidity and problematic access to fresh equity, the lifeblood for exploration."
This causes a Catch 22. Some exploration firms are on AIM to raise the money needed to finance projects they believe will make the company profitable. However, the fact they are on AIM, rather than the main list, prevents them from getting the cash as investors are seeking safer territory in the current financial maelstrom.
Plan B. Earlier this month, Serica Energy, which has oil and gas exploration and production interests around the world, looked at what it could flog off to a competitor to raise equity, which it hopes will finance other projects.
Last week, it sold a 15 per cent interest in the Glagah-Kambuna technical assistance contract and a 23.4 per cent interest in the Kutai production sharing contract, both in Indonesia, to Salamander Energy for $52.75m (£26.5m) – 23 per cent of Serica's market capitalisation.
As chief executive Paul Ellis says, exploration is a costly business and when a group has no cash flow because it is not yet in production, and can't raise money on AIM because the market is not listening, selling bits of the group is sometimes the only option open to fledgling companies.Reuse content