Come New Year, unlisted Indian companies will get an option to pick a market of their choice to list. The finance ministry will soon make changes to the regulations governing the issue of global depository receipts (GDRs) to enable companies to list abroad without having to list domestically, two people with direct knowledge of the development said. “The committee set up to review the norms governing GDR issuances has already submitted its report. After further consultation, we plan to soon amend the ADR/GDR scheme,” said a senior finance ministry official. The expert panel, headed by former Securities and Exchange Board of India (Sebi) whole-time member M S Sahoo, gave its recommendations to the government on November 24. The government, in September, had decided to allow foreign listing without the precondition of dual listing or having to list here.
Earlier, companies had to either list first in India before they could list aboard, or had to take the tedious overseas holding company route. Though most market players had welcomed the government move, they are awaiting the final guidelines to see the structure and the level of disclosures that companies would have to make. Recommendations made by the Sahoo panel are likely to be made public soon. Companies wanting to list abroad will have to issue DRs based on Indian shares. These DRs will be the derivative of Indian shares and will have to be kept with a custodian based in India. Experts say the norms with regard to disclosure requirements will be critical. “This thing (listing abroad) could be a doubtful starter if the companies wanting to list abroad have to meet all Sebi requirements as well,” says Sandip Bhagat, partner, S&R Associates. Bhagat says the Indian disclosure requirements are different from those in the US and having to comply with both could act as a deterrent. The issue of listing abroad was also deliberated upon recently at one of the panel discussions at a summit organised by AIBI, an association of investment bankers. V S Sundaresan, chief general manager, Sebi, who was part of the panel, said certain regulatory requirements were needed to avoid regulatory arbitrage and to take care of reputational risk. “As far as the reputational risk is taken care of, we have no objection with raising capital (abroad). If that is not addressed, the cost of raising capital will be much more for genuine issuers,” he said. Rohit Chatterji, managing director, investment banking, JPMorgan India, who was part of the panel discussion, said, “Listing abroad could be a good option for entrepreneurs looking for growth capital as they can look for the best locations to list at a time when the Indian markets have dislocated.” Chatterji, however, said that enabling overseas listing would not see a barrage of issuances as it would not be an option for everyone. “Consumer goods companies might get the best valuation in the domestic market itself, while it would be difficult for infrastructure companies to list abroad,” he said.