The Hindu Business Line : `Growth, innovation, technology are our markers' -- Mr Patrick Sutch, Nasdaq MD, Asia-Pacific

NASDAQ has successfully executed a major restructuring programme in two phases and is now preparing for the last phase of restructuring. While the earlier phases helped it place the ownership of around 70 per cent of the exchange in the hands of investors, the next phase would make Nasdaq listed on itself.

It proposes to deploy a portion of the proceeds from the restructuring to strengthen its regulatory mechanism, maintain its independence, reduce its members' fees for its services, and significantly reduce administrative burden through increased use of technology, more specially, its advanced electronic surveillance.

As a part of Nasdaq's goal of evolving into a truly global, digital and accessible stock market, its Vice-President and Managing Director, Asia-Pacific, Mr Patrick Sutch, is currently on a visit to India to convince more Indian enterprises to get listed on Nasdaq. He spoke to Business Line at length on various issues.

Excerpts from the interview

How do you compare the liquidity advantages on Nasdaq with other markets the world over?

Highly impressive. In November last year, there were 853 trades a day in the stock of Satyam Infoway (Sify) on Nasdaq, which is more than that of all the Indian companies put together listed on the New York Stock Exchange (NYSE). The trades of Infosys at 370 a day and Rediff at 28 trades a day on Nasdaq were more than ICICI Bank and MTNL on NYSE. The market capitalisation of Rediff is far higher than MTNL.

Our trading model is very much similar to that of a foreign exchange market, which trades 24 hours a day seamlessly. We have sufficient back-up of market makers. For instance, Infosys has 18 market makers. That is how the liquidity comes into the Nasdaq system. The most important thing a company should consider while listing on the stock exchanges is the liquidity.

What sort of Indian companies are you looking at?

We are very bullish on the Indian market. We have a long-term business plan for India. We believe that when the market opens for IPOs in the next six months, there will be a fair number of listings from India.

Basically, what we are looking for is growth, innovation and technology. We did a survey among American individuals in the streets asking them why they were risking their monies in the capital market. The three reasons they gave were growth, innovation and technology. So, we are looking at the fast growing companies in India, with innovation and technology support, irrespective of the sector they are operating in.

What attracted some of the leading the Indian companies towards NYSE listing despite low market capitalisation?

They may have their own reasons to do so. But they are now beginning to realise that their trading volumes on NYSE are much lower than their peers on Nasdaq. Unfortunately, these Indian companies now cannot move out of NYSE because NYSE has a draconian rule called Rule-500 which stops companies from moving from NYSE to any other exchanges. Whereas on Nasdaq, if any company wants to move out of the exchange, it needs to give a notice of just 72 hours. In the US, unfortunately, a company can get listed on only one exchange.

How about making representation to the Securities Exchange Commission (SEC) to save the non-US companies that get stuck up with markets where market capitalisation is poor?

We have approached the SEC on the matter. SEC is yet to act on this. I agree that there is a need to amend such draconian regulations, which prohibit a company from choosing a market with better market capitalisation. Unfortunately, most of the non-US companies that got listed on NYSE were not aware of Rule-500. These non-US companies have started approaching the SEC seeking dual listings.

How do you attract the companies towards Nasdaq competing with other US markets?

We tell them about the underlying trading differences and the greater market capitalisation advantages at Nasdaq. We tell them how they can get more market makers on Nasdaq compared to any other exchange world over. We have minimum three market makers for a company on Nasdaq with no maximum limit, while there is only one market maker for a company on NYSE.

There seems to a drastic fall in the number of listings from non-US companies on Nasdaq during last year compared to 2000?

As against around 200 non-US companies listed on Nasdaq during 2000, the number has come down to 29 during 2001. This is because the IPO markets across the globe were slow. The Asia-Pacific region is no exception to this phenomenon.

How many Indian companies do you expect to get listed on Nasdaq?

A great number of companies were shortlisted. However, the timing of listing is spread over next 24 to 36 months. We expect at least 30 more Indian companies to get listed on Nasdaq during this period. These companies belong to almost all sectors, with a common factor of growth, innovation and technology.

We have 128 Israeli companies listed on Nasdaq. We have similar aggressive plans for India. Our plans are, however, hampered by the market sentiments at the moment. As a result, we are not expecting any listings from India in the next six months. The American investors are not currently interested in IPOs even from the American companies. They are more interested in picking stocks whose prices are at rock-bottom levels now.

Are the small-cap Indian companies part of your target?

No. We recommend a minimum amount of $ 50-million to be raised in the market. This is needed if they want adequate liquidity with minimum of three market makers. The Nasdaq SmallCap Market is meant for small cap American companies, and not for non-US companies. Every year, we have 200 to 300 companies from the SmallCap Market moving over to the Nasdaq National Market.

What type of Indian companies are you looking at, public and listed companies or the private enterprises?

Both. It makes no difference for us whether it is a publicly listed company or a closely held company. We look for good managements, transparency and corporate governance. We are very careful about Indian companies attracted towards Nasdaq. This is because if there were any problem with an Indian company listed in the US, the sentiment of investors towards Indian companies would get damaged. We want to grow the sentiment of American investors towards Indian companies. We think a few dozen Indian companies currently fit into our expectations in terms of management practices, accounting practices and corporate governance.

Do you have any preferences?

Yes. We prefer new companies to the old companies. This is because new companies with small balance sheet size can easily adopt themselves to the international accounting practices. We also prefer companies that focus on one segment than those having multiple segment focus. The valuation of companies becomes easy for the analysts if the company focuses on a single segment. Accordingly, we keep advising the major Indian conglomerates to spin off their multiple divisions into focussed companies.

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`Growth, innovation, technology are our markers' -- Mr Patrick Sutch, Nasdaq MD, Asia-Pacific

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