The recognition that the Indian IT sector has received in the US has been one of the main reasons for the mad rush toward the US markets. Moreover, capital is available cheap in the US. The Government of India issued guidelines recently giving a blanket nod for overseas acquisitions through stock swaps up to the limit of 10 times the company’s export earnings. This has given a shot in the arm of the Indian IT sector, which is in search of inorganic growth. The new policy allows automatic approval to companies that seek permission for overseas buy-outs through issuance of American Depository Receipts (ADRs) and Global Depository Receipts (GDRs), within the specified limit.

Inorganic growth

Acquisitions are one of the reasons that have prompted Indian companies to go for overseas listings. With Infosys and Wipro already asking the government for a nod for acquiring companies overseas, it is imperative that other software companies in search of talent and buy-outs take the ADR route. Moreover, with globalization, it has become clear that if Indian IT companies have to retain the talent pool, it is necessary that employees be given a dollar-based stock option. "Aspirations of Indian software companies to globalize are borne out by the objectives of reaching out to diverse geographical markets, moving up the value chain, providing a competitive mix of products and services and growing the revenue base inorganically. Overseas listing helps in achieving these objectives," says Mehta.

With the companies’ management realizing that their ideas will sell like hot cakes in the US capital markets, the greed to raise money cannot be discounted. As R Ravi, VP, ICICI Securities and Finance Company, says, "In a nutshell, make hay while the sun shines." The brand value attached to being listed on the US capital markets, given the stringent accounting and disclosure norms that the companies have to follow, is also looked upon by the companies as a way of increasing their valuations on the domestic bourses