Small Talk: Indian firms put in a hot performance
Monday 25 February 2008
Indian companies have outperformed on the Alternative Investment Market in the past year, with more set to arrive in London in 2008 as they look for international investment and recognition.
Seymour Pierce, the brokerage house, released a report last week into whether Indian stocks on Aim deliver value. Nicholas Linington, an analyst at the group, wrote: "There has been a steady addition of Indian companies listing on Aim in the last two years. We expect a greater number of small and medium-sized Indian companies to seek international investors as the economy opens up."
Stand-out companies on the growth market include KSK Power Venture, the largestIndian group on AIM by market capitalisation, and the media and entertainment group ErosInternational.
KSK listed in November 2006 at 107p, raising £30.9m in the process. The group has enjoyed life on the growth market, quadrupling by the end of last year to 463.5p. KSK, which now has a market cap of £597.4m, has developed power plants in India for the past eight years. Its growth has, in part, been boosted by several prestigious strategic alliances, including an Indian power sector investment venture with Lehman Brothers. It also announced a strategic relationship with General Electric three months ago.
Eros has also performed strongly since it listed in July 2006. The group, which releases up to 40 films a year and has a distribution network in the UK and US, has seen its shares more than double to 377.5p since floating. The last bit of good news emerged in November:it announced a strong set ofinterim results, with pre-tax profits jumping 75.9 per centto $13.6m.
Seymour Pierce found that Indian companies on AIM had delivered 21 per cent absolute performance over the past year, compared with flat results for the rest of the market. Over the same period, the FTSE Small Cap index fell 21 per cent.
Seymour Pierce tracks the Indian companies on AIM with its own index and said these companies have grown from a market value of £250m to £3.3bn since January 2006. The Seymour Pierce India Index comprises 22 Indian companies and funds. They are predominantly financial – almost half – followed by media and utility companies, which each account for a fifth. The index concentrates solely on AIM, as there are a further 27 Indian companies listed on the main market or onPlus markets.
The rise of Indian groups in London has not been halted by the credit crunch. In a market that has seen the brakes slam on for new listings, three Indian companies have floated on AIM in the past three months, and all are trading at a premium to their listing price.
These comprise the clean energy group Greenko, which raised £30m when it listed in November and has risen 17 per cent higher since. This was followed by DQ Entertainment and Origo Sino-India the following month, which were also welcomed by the market.
That said, the investment-related groups have not faredso well. Out of the broker's index nine companies are trading ata discount, with seven of those either fund or investmentcompanies.
Despite the huge increase, Indian companies fail to match AIM listings from another emerging dominant player in the world economy, China, which has about 50 companies on AIM.
Mr Linington said Seymour Pierce expects Indian companies to increase as the economy opens up to match the representation by China in the medium term. "In our view, India's growth drivers are, arguably, more favourable than China."
He added: "This stems principally from the ability of companies to raise funds in their domestic markets, and the desire of those companies to bring on board international investors and gain an international stock market presence."
Investors in Firestone Diamonds have been nervously twiddling their thumbs, sweating over the long-awaited evaluation of the company's diamond fields in Botswana. The company, which announced last week that it had commissioned a bulk sampling plant in the country after nine months, will today release the results of its findings. Whichever way it goes, the results will have an all-too-obvious impact on the company's share price. A nice few micro-diamonds in their kimberlite pipes – the rocks that sometimes contain diamonds and named after Kimberley in South Africa – and it's happy days; if the cupboard is bare, the shares could well suffer. The odds are against them, as normally one kimberlite pipe in 100 is economic, although the company said last week that of its 83 such kimberlites in the Botswana field, 14 looked "high interest". All will be revealed today.
The broker Ambrian said that while Firestone faced the "classic problems" of diamondexplorers, investors could still be rewarded. It concluded:"Firestone is probably one of the most likely juniors to reach that 'holy grail' of momentum, and define more than one economic project. High risk, but look for high rewards."
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