Financing alternatives for Indian companies on AIM

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Financing alternatives for Indian companies on
AIM July 2007
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Agenda

• AIM financing alternative for Indian companies
• Indian issuers on AIM
• Routes to AIM for Indian issuers
• Case studies
• AIM institutional investor base
• AIM regulation
• Deciding between markets

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AIM financing alternative for emerging India

• Worlds most successful market for growth stocks
• New path to international financing for emerging
  Indian companies
• AIM offers
• Access to investors beyond FIIs
• Liquidity for small companies
• High quality disclosure, appropriate for smaller
  companies
• World-class profile of London Stock Exchange
• India-related companies / investment funds
  raised 2.7 billion on AIM in 2006

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AIM financing alternative for emerging India

• Transaction structures on AIM for Indian
  businesses
• IPO of holding company or subsidiary abroad
  (shares)
• Follow-on offering for Indian listed company
  (GDRs)
• IPO of India-focussed investment company

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Why choose AIM from India?

Objectives

• Indian companies have a wider choice of equity
  sources pre- and post-IPO
• QIPs mean international listings only worthwhile
  for strategic reasons
• AIM is appropriate in specific circumstances, for
  high-quality issuers
• AIM is not a general alternative to the Indian
  equity market

New financing source, specialised tool
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Indian domiciled companies on AIM
Great Eastern Energy Corporation Coal-to-methane D
ecember 2005 19 million (shares) Transaction
undertaken prior to August 2005 ban on overseas
IPO of Indian domiciled companies
Noida Toll Bridge Co.Ltd Infrastructure
project March 2006 50 million (GDRs)
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Foreign companies (holding Indian assets) on AIM
Platinum Mining Corporation of India Orissa
mine April 2005 14 million
Hardy Oil Gas plc Offshore Bay of Bengal June
2005 15 million
Eros International plc Bollywood film content
distribution July 2006 27 million
KSK Power Ventur plc Power generation November
2006 31 million
West Pioneer Properties Ltd. Retail real
estate December 2006 40 million
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India-focussed investment companies on AIM
Trinity Capital plc Real estate investment
company April 2006 250 million
Eredene Capital plc Real estate investment
company May 2006 57 million
India Hospitality Corp Tourism infrastructure Augu
st 2006 100 million
INDIA HOSPITALITY CORP
Ishaan Real Estate Real estate projects (K.
Raheja) November 2006 207 million
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India-focussed investment companies on AIM
Hirco plc Real estate projects (Hiranandani) Decem
ber 2006 383 million
Unitech Corporate Parks plc Real estate projects
(Unitech) December 2006 360 million
DEV Property Development plc Real estate projects
(Indiabulls) February 2007 138 million
DEV PROPERTY DEVELOPMENT PLC
Naya Bharat Property Development plc Investment
in Indian land March 2007 60 million
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India-focussed investment companies on AIM
Evolvence India plc Private equity fund of
funds March 2007 65 million
Promethean India plc Private equity April 2007
100 million
PROMETHEAN INDIA PLC
The Indian Film Company Film fund June 2007
110 million
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(1) IPO of shares in overseas entity holding
Indian assets

IPO of shares in overseas entity holding Indian
assets

• Applicable in case of
• significant overseas presence
• international acquisitions
• globalisation at early stage
• start-up businesses not fully valued in India
• equity stories with better acceptance overseas
• Hardy Oil Gas (AIM, June 2005) existing
  offshore holding, attracted by AIM EP valuations
  
• KSK Power Ventur (AIM, November 2006) tapped AIM
  demand for early-stage Indian infrastructure

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(2) IPO of shares in overseas subsidiary of
Indian company

• IPO of business held outside India by an Indian
  parent company
• Separate capital structure for financing
  international expansion
• Promoter dilutes at subsidiary not parent company
  level
• Possible applications
• capital for overseas is large relative to parent
• risk profiles overseas / at home differ
• international business has separate identity
• equity story of international business more
  attractive to global than domestic investors

IPO of shares in overseas subsidiary of Indian
company
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(3) Follow-on GDR offering by listed Indian
company

Follow-on GDR offering by listed Indian company
Guidelines for use of GDRs on AIM

• GDRs can be used only when external share
  offering is restricted, as in India
• AIM disclosure on the DR programme same as
  conventional GDR offering in UK
• All rights associated with the underlying to be
  available with the DR (e.g. voting and dividend
  rights)
• No upfront payment to issuer, cost of depositary
  paid by company
• DRs must be able to settle electronically via
  CREST, using depositary interest

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Investment company to finance Indian projects

• AIM offers access to global investors seeking
  Indian real estate, infrastructure, private
  equity opportunities
• AIM investment companies vehicle for
  promoters/corporates to raise equity away from
  parent
• Investment company regulation
• disclosure of investment strategy
• no cap, control allowed
• partially paid structures not allowed
• follow-on offerings easy to execute

Investment company to finance Indian projects

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KSK Power Ventur
Case study

• Transaction profile
• Date November 2006
• Amount raised 31 million
• Market cap at IPO 138 million
• Commission on placement 4 of capital
  raised
• Nominated advisor fee 175,000
• Format Shares
• Nominated adviser Arden Partners
• UK law Lawrence Graham
• Isle of Man law Cains Advocates
• Reporting accountants Mazars
• Competent persons report IMC Group
  Consulting
• Board of directors One UK-based
  director

Highlights

• IPO of offshore holding company
• Effected via 29 capital increase
• Structured via Isle of Man, with Mauritius
  subsidiary holding Indian domiciled operating
  company
• Proceeds for new power generation projects,
  development of coal resources

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Ishaan Real Estate
Case study

• Transaction profile
• Date November 2006
• Amount raised 207 million
• Domicile Isle of Man
• Commission on placement 3.0 - 3.5
• Fees as gross proceeds 4.3
• Format Shares
• Nominated adviser broker Deutsche Bank
• Joint Glo-Co, books Deutsche, JP
  Morgan
• Special advisor ENAM
• UK, US law Lovells
• Isle of Man law Simcocks Advocates
• Reporting accountants Ernst
  Young
• Property valuers Cushman Wakefield

Highlights

• Independent closed-end investment company
• Indian FDI-eligible real estate (SEZs, IT parks)
• Target IRR of 20, leveraged
• 78 invested at launch in 8 projects
• Co-invest with K. Raheja entities, ensuring
  quality pipeline
• Ishaan to invest via Mauritius holding and SPVs,
  holding stakes in Raheja Indian property ventures
• Board of 5 non-executives

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Ishaan Real Estate
Case study

• Execution issues
• Transaction completed in about 6 months
• Due diligence required on 8 projects, for
  immediate investment upon completion
• Valuation of all targeted projects by Cushman
  Wakefield
• Reg S and Rule 144a components to the offering
• Disclosure focussed on structure of fund,
  agreement with investment advisor, and initial
  portfolio of investments
• Detailed disclosure on board of directors
• Lock-up under AIM rules requiring directors of a
  newly created company not to sell shares for 12
  months
• 170 page offer document

Investors

• All investors with more than 3 disclosed at
  admission to AIM
• Major investors in Ishaan
• Alliance Capital
• Blackrock International
• Capital International
• Fidelity Investments
• Henderson Global Investors
• HSBC Investments
• Jardine Fleming Asset Management
• Lone Pine Capital
• Franklin Templeton Investments
• ZA Capital

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Noida Toll Bridge
Case study

• Transaction profile
• Date March 2006
• Amount raised 50 million
• Over-allotment 10
• Total cost 5 of capital
  raised
• Format GDRs DIs
• GDR ratio 15 shares
• Nominated adviser Collins Stewart
• Co-financial adviser Edelweiss Capital
• UK law Mishcon de Reya
• Reporting accountants SR Batliboi
  (EYo)
• Competent persons report Halcrow

Highlights

• First follow-on offering by an Indian-listed
  company on AIM
• Effected via 50 capital increase when Noida was
  reporting net losses
• Objectives
• re-finance debt
• finance new road link
• raise profile in capital markets
• broaden shareholder base

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Noida Toll Bridge
Case study
GDR structure

• Execution issues
• Transaction completed in 3 months
• Substantial size of transaction relative to
  existing capital (33.33 of enlarged share
  capital)
• Placing on best-effort basis
• Extensive due diligence CPR deemed necessary for
  offer document
• Consent from debt restructuring procedure
  received
• Accounts IFRS summary, Indian GAAP historical,
  all IFRS from 2007
• Extensive disclosure on material contracts,
  board, articles
• 12 month working capital statement as per AIM
  rules
• 250 page offer document

• Investors had option to take GDRs (clear via
  Euroclear or Clearstream) or GDRs Depositary
  Interest (CDIs)
• All investors took GDRs CDIs
• Fees waived for investors in GDRs and CDIs
  company to pay fees
• GDR/GDR CDI holders exercise vote
• Depositary Bank to inform holders of shareholder
  meetings, ensure votes exercised only as
  instructed by holders

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Hardy Oil and Gas trading
12mth turnover of shares of outstanding
27 12 month annualised
turnover of shares of free float
95 Shares outstanding (m)
57.2 Free float 27
IPO price 1.44 Current price 4.56 Change
217
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Eros International trading
IPO price 1.76 Current price 3.98 Change
119
Jul-May annualised turnover of shares of
outstanding 26 Jul-May annualised
turnover of shares of free float
104 Shares outstanding (m)
110.0 Free float 76
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Price performance
At offer (/) 12-06-07 change

IPOs
Follow-on
Investment companies
or
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AIM investor base major institutions

• Most active institutions
• Number of AIM companies invested, 2006
• Fidelity 160
• Artemis 130
• F C 120
• AXA 118
• Gartmore 90
• AMVESCAP 84
• RAB Capital 78
• Goldman Sachs 72
• Merrill Lynch 67
• HSBC 65

• Most active Institutions
• Total invested in AIM companies, million, 2006
• Fidelity 1,968
• - Artemis 1,286
• New Star 1,245
• AMVESCAP 1.237
• - Merrill Lynch 1,130
• AXA 1,070
• Gartmore 1,034
• Schroders 952
• Goldman Sachs 850
• UBS 720

• New issues
• Most active institutions by number of IPO
  investments
• - Fidelity 32
• - Artemis 31
• - RAB Capital 25
• AXA 20
• Gartmore 17
• UBS 17
• AMVESCAP 16
• Henderson 16
• Merrill Lynch 15
• CSFB 14

Source Teather Greenwood, Growth Company
Investor Translated into at 1.00
1.90 Data for mid-year 2006
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AIM investor base interest by sector

• Number of institutional holdings by sector, 2006
• General Financial 880
• Mining 802
• Software, IT services 568
• Support services 494
• Oil gas 441
• Media 415
• Real estate 301
• Pharma, biotech 301
• Travel, leisure 300
• Electronics 195

• Value of institutional holdings by sector, 2006
• billion
• Mining 13.0
• - Oil gas 10.4
• Real estate 9.0
• General financial 8.8
• - Support services 5.1
• Industrial metals 4.3
• Travel, leisure 4.2
• Pharma, biotech 3.5
• Media 3.1
• Software, IT services 2.2

Source Teather Greenwood, Growth Company
Investor Translated into at 1.00
1.90 Data for mid-year 2006
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AIM investor base leading investors

• Fidelity Investments
• Value of largest holdings, 2006
• million
• Sportingbet Leisure 268
• Imperial Energy Oil gas 117
• First Calgary Oil gas 91
• Centurion Electronics Electronics 60
• PIPEX Comms Telecoms 57
• Highland Gold Mining 53
• Clipper Windpower Electricity 47
• Star Energy Oil gas 41
• Asia Energy Coal 39
• Serica Energy Oil gas 39

• Artemis Investment Management
• Value of largest holdings, 2006
• million
• Star Energy Oil gas 60
• - Develica Deutschld Equity fund 49
• Cape Support ser 47
• Genesis Oil gas 44
• Coda Software 41
• - Speymill Real estate 30
• European Goldfields Mining 30
• Prosperity Minerals Bldg Mats 30
• Equest Balkan Real estate 29
• Imperial Energy Oil gas 28

Source Teather Greenwood, Growth Company
Investor Translated into at 1.00
1.90 Data for mid-year 2006
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AIM regulation
Eligibility

• Short, principles-based rule book
• Market practice-driven disclosure
• IFRS financial data
• Advisors prepare document, Exchange does not
  approve it
• Similar concept to SEBI filing for QIPs

Disclosure
Supervision
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AIM data

• AIM companies 1,642
• Overseas AIM companies 294
• Market value 187 bn
• Market turnover 2006 113bn
• UK company admissions 2006 293
• Overseas company admissions 2006 107
• IPOs on AIM, 2006 261
• Capital raised (new further) since 1995 72 bn
• Total capital raised in 2006 26 bn
• Note translated at 1.001.95

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Hybrid order-driven and market maker system
SETSmm
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AIM admission ceremony

• Admission ceremony
• opening of market
• reception with representatives from the company,
  advisers and Exchange
• Benefits
• completion event for the issuer and working group
• media coverage to raise profile at launch
• featured on Exchange website

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Visual guide to AIM website
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What we provide in AIM service

• Initial Public Offering (IPO) on AIM through GDR
  application approval from Ministry of Finance,
  Government of India.
• AIM Listing application process, guidance and
  advisory services, selection and coordination
  with all the Capital Market agencies /
  professional firms involved for AIM listing, on
  your behalf.
• Advising and assisting you in preparing
  Financials and other Documents eligible to get
  the company admitted in the AIM LSE, before due
  diligence is carried out by Law Firms and
  Chartered Accountants.
• International Tax Planning.
• Incorporation of Offshore Companies as strategic
  corporate decision.
• Consultation and arrangement on the Finance
  through other alternatives.

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