Many Indian infrastructure companies, including a GMR subsidiary, are looking to take the reverse takeover route, or reverse IPO, to list on the Singapore Exchange (SGX) and save on listing costs.
Under this, an Indian unlisted company will first acquire a listed company on the SGX. The Indian firm will then use its shares to exchange for shares in the listed company and get listed. This way, the Indian company saves on the listing costs and the lengthy process to get listed on the SGX, said a banker who is advising many Indian firms.
The acquirer may have to make an open offer to the remaining shares of the Singapore company according to the local takeover laws depending on the trigger clause.
In the second part of the "back-door" listing process, the Singapore-listed firm offers shares to new investors to bring down promoter holding as a follow-on offer, said the banker. "This is a good way to get listed on the SGX without going through the rigmaroles of a listing process. This is a fast and good way to get listing in a global exchange," said the banker.
GMR Energy, which has a joint venture with Sinar Mas that owns coal assets in Indonesia, was looking at this route to get itself listed, the banker said. But no final decision has been taken as yet, he added.
GMR Energy took over 30 per cent stake in PT Golden Mines (Gems) in 2011 for $450-550 million. The acquisition was funded by a combination of debt and internal accruals and was made by GMR via an offshore vehicle based in Singapore. GMR Energy is a subsidiary of GMR Infrastructure, which is listed on the Indian stock exchanges.
According to a lawyer specialising in mergers and acquisitions (M&A), the transaction as well as the issue of new shares has to be approved by the Singapore stock exchange. According to the exchange rules, the enlarged company has to re-comply with the SGX listing requirements and the Singapore company in the same way as an initial public offer.
According to bankers, this route is recommended for companies that are looking to list abroad and plan to raise funds in the near future. With costs of funds very high in India, many companies prefer to raise funds from overseas markets via selling equity as well as debt.