Indian companies planning Aim IPOs cautioned

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Joe Leahy in Mumbai and Stacy-Marie Ishmael in London, FT Syndication Service
Indian companies are on track for another active year on London's Alternative Investment Market (Aim) even as one of the country's most prominent bankers cautioned that it should not become a venue to avoid corporate governance norms.
Indian companies have already held seven initial public offerings on Aim this year and are forecast to at least match last year's total of 10 new listings, although the estimated proceeds of about $1.0bn are expected to fall short of last year's $2.6bn.
"The market needs to ensure that it caters to a niche segment and does not risk developing a reputation that it can be a platform to circumvent stringent regulations and disclosures, sacrificing the basic tenets of corporate governance," Deepak Parekh, head of India's second-largest private bank, HDFC, told a seminar on Aim in Mumbai. Indian companies have become among the most enthusiastic participants on the Aim market.
This represented 10 per cent of the total amount raised from new offerings on the market last year, making India the second-biggest source of listings on Aim after the UK.
The trend was last year driven by large, real estate-related listings, such as the $700m IPO of Unitech Corporate Parks.
This year, new listings have been dominated by smaller companies, including a number involved in India's burgeoning media and entertainment sector. Last month, the Indian Film Company, Bollywood's first film fund, closed a £55m ($111m) initial public offering on Aim, building on the success of Eros International, the first Bollywood company to raise money overseas with a $42m Aim offering last year.
"We are seeing increasing traction for film funds, real estate and infrastructure companies," said Ibukun Adebayo, who manages India and international business development for the LSE.
HDFC's Mr Parekh said many Indian companies were tapping Aim to get access to an international professional investor base that was less volatile than the retail-dominated markets at home.
He also believed that many companies were attracted by Aim's lower burden of regulatory compliance, with new listings, for instance, not required to have a minimum market capitalisation.
But some companies have found that Aim's lower regulatory standards have made fund raising more challenging.
Earlier this month, Ronnie Screwvala, chairman of UTV Motion Pictures, an Indian movie studio that raised $70m on Aim, said the exchange was suffering from "a perception issue" among US investors, who considered it "too risky".
Moreover, a number of Indian Aim shares were trading at discounts of up to 20 per cent of their issue price due to overly aggressive pricing and poor investor relations, Mr Screwvala added.
Mr Parekh added: "In the mad rush to get a piece of the India story, massive amounts of funds are chasing investments, some of which may not entirely be too credible."