Will new funding programmes attract Indian firms to list in Singapore?

Last week, Singapore announced a series of initiatives aimed at enticing up and coming high-growth companies to raise capital in Singapore's public equity market and broaden the city-state's appeal as a financing hub.

Together with state investment company Temasek, the government will launch a new fund starting with SGD 1.5 billion (USD 1.11 billion) of capital in the first tranche. In addition, Singapore's Economic Development Board (EDB) will establish a new SGD500 million (USD 371 million) IPO fund that will help "future market leaders and technology innovators" which are two or more funding rounds from public listing to grow and prepare for an eventual public listing in Singapore.

Furthermore, enhancements will be made to the Grant for Equity Market Singapore (GEMS) scheme to "support enterprises seeking to list in Singapore and to help develop Singapore's equity research ecosystem".

The fourth initiative will see SGX provide bespoke capital market solutions to high-growth startups. These range from private fundraising to enhancing liquidity and profile-building.

Details and the rationale for the various schemes were revealed in a speech by Singapore's Minister for Trade and Industry Gan Kim Yong at the Singapore Exchange's (SGX) Securities Market Open event on Friday, September 17.

Mr Gan said, "In the coming years, many Singaporean and Asian companies in high-growth, high-tech sectors will come of age, and seek to list on public markets. We should strive to anchor these companies in Singapore. To do this, we will make a concerted push to establish Singapore as the listing destination of choice for local and global market leaders, especially from high-growth and high-tech sectors."

Although Singapore's stock market has managed to outperform most of its regional peers, with the benchmark Straits Times Index climbing almost eight per cent since the start of the year, initial public offerings (IPOs) on the Singapore Exchange have been uninspiring. According to CNBC, in the first half of 2021, Singapore attracted just three IPOs that raised USD 200 million, while rival financial hub Hong Kong had 46 listings that raised USD 27.4 billion.

In the last decade or so, the Singapore government has successfully built a vibrant innovation and tech ecosystem which has incubated a host of startups through seed investments, grants, loans and various incubator and accelerator programmes.

The latest success story is that of Nanofilm Technologies International which provides nanotechnology coating solutions in the consumer electronics, communications and automotive industries. Since making its trading debut on the SGX last October, its share price has surged 64 per cent.

However, Nanofilm is the exception. The recent trend among Singapore tech startups is to seek public funding via the US capital markets. This is mainly due to the sophistication, depth and liquidity of the US markets. Proof of this is the 2017 listing of Singapore e-commerce and video game giant Sea Limited which has brands like Shopee and Garena under its umbrella, and the anticipated IPO of ride-hailing and food delivery "super-app" firm Grab later this year.

Although scores of Chinese companies have been listed in Singapore, only a smattering of firms from India is traded in the Singapore market.

Indian companies currently listed in Singapore include chemicals firm Meghmani Organics Limited which has a secondary listing on SGX and agricultural technology company UPL Limited which has its GDRs (Global Depositary Receipts) traded in Singapore. Indiabulls Properties Investment Trust and Religare Health Trust have both delisted in recent years.

The potential is there for Indian companies to seek a primary or secondary listing to tap the Singapore market for additional capital raising options and liquidity.

Central bank RBI (Reserve Bank of India) in its recent "State of the Economy" bulletin said that approximately 10 new unicorns were created in 2019, 13 in 2020 and three a month so far in 2021. It went on to say that it estimates that there are in total about 100 unicorns in India with a potential combined market capitalisation of about USD240 billion. Unicorns are startups with an estimated value of at least USD1 billion based on their latest investment round. There are also numerous startups based in Singapore which have Indian co-founders. These include technology-driven hospitality firm RedDoorz, mobile virtual network operator Circle Life, e-commerce platform Shopmatic and fashion tech commerce platform Zilingo.

The Singapore government through these new initiatives hope to make Singapore more attractive as a destination for capital raising by local and regional enterprises including Indian startups. They build on recent initiatives undertaken by SGX to strengthen its platform, connectivity, and its range of fundraising options. These include dual-listing collaborations with overseas exchanges and the launch of the Special Purpose Acquisition Companies (SPACs) framework.

Loh Boon Chye, Chief Executive Officer of SGX, said, "There are many Asian and home-grown companies which are at the cusp of global success. Anchored in Asia's only AAA-rated economy, SGX provides an international platform, network and ecosystem for these companies to access growth capital from private to public markets and across asset classes. This interagency initiative further sets Singapore apart as a capital markets hub and is a first of its kind within the region that ensures success for market leaders through deep collaboration between public and private sectors."

( With inputs from ANI )