In the wake of a global slowdown in the initial public offerings market, Indian companies are losing appetite for listing on the Alternative Investment Market.

Once touted to be a favoured destination for small- and mid-size companies, London's AIM has managed to get only four companies to list on it so far this year as against 21 companies a year earlier.

AIM had become a lucrative listing platform for companies that wanted to raise capital without being listed in India. Many Indian companies have formed investment holdings in tax havens such as Cayman Islands to tap the London market.

However, with a steep slump in equity markets across the globe, AIM has been no exception. Some of the sectors, especially the real estate, have seen a severe value erosion, dampening the mood of prospective companies towards this market. Indian Film Company and Hirco are trading at 28.49 per cent and 28.20 per cent lower than their issue prices, according to Grant Thornton's AIM Tracker dated May 2008.

FTSE's AIM All-Share Index has plunged more than 25 per cent since January this year. Experts also believe that AIM has been facing a tough competition from new junior markets in Asia, especially Singapore's Catalist, previously known as Sesdaq. One of the problems with AIM is it is less liquid.

The monthly average liquidity of AIM was just 6 per cent in 2007 compared with 17 per cent on Singapore's Catalist. But the volatility on AIM has been quite low, attracting a lot of retail investors. The listing requirements on AIM are very simple, making it easier for companies to qualify. It does not require a track record and neither does it stipulate a minimum market capitalisation.

"There are some large investors who take positions on AIM such as hedge funds and pension funds, but since liquidity has been low, their interest has weaned away. For the first half of this year, there have hardly been any companies tapping AIM. But as global markets revive, the condition will improve.

Some of the issues have been deferred too," says Amit Khandelwal, partner, Ernst &Young. There is also a view that weak performance of some of the real estate companies on the London Stock Exchange's junior market is due to a lack of brokerage research on some of the stocks.

Adds Harish H V, partner, Grant Thornton, "Markets had corrected after January, but companies were demanding a premium over current valuations, which was not possible. But now they have come to terms. We are in talks with some 20 companies in sectors such as power, infrastructure and pharma." As on June 30, 2008, a total of 25 India-focused companies were listed on AIM with a combined market cap of over $7 billion.