Sebi panel to examine direct listing of Indian firms on overseas bourses

The 9-member expert panel announced will review the Indian Depository Reciept (IDR) norms, which allow an overseas firm to raise capital in the domestic market

The Securities and Exchange Board of India (Sebi) has constituted a committee to examine the direct listing of Indian companies on overseas bourses. 

Under the current framework, a domestic company cannot list on overseas exchanges without listing in the home market.

The nine-member expert panel announced on Tuesday will also review the Indian Depository Reciept (IDR) norms, which allow an overseas firm to raise capital in the domestic market. Currently, Standard Chartered Plc is the sole listed IDR.

Deep Kalra, chairman, Makemytrip.com, Cyril Shroff, managing partner of law firm Cyril Amarchand Mangaldas and Ranu Vohra, co-founder of Avendus Capital, are among the members of the committee.

A framework to list on overseas bourses could help Indian start-ups list in a jurisdiction of their choice. Most ecommerce companies prefer listing on Nasdaq, a platform for technology companies in the US, as it fetches better valuations. 

“Considering the evolution and internationalisation of the capital markets, it would be worthwhile to consider facilitating companies incorporated in India to directly list their equity share capital abroad and vice versa. In this regard, it has been decided to constitute an expert committee to look into this aspect in detail,” Sebi said in the press release.

A framework to enable direct overseas listing has been in the works for many years. In 2014, a committee headed by MS Sahoo had recommended relaxing the rules for overseas listing. However, the project never took off.

“This is a positive development for the Indian companies looking to list overseas as if allowed will permit the issuer to choose the best market to list its shares,” said Sudhir Bassi, partner, Khaitan & Co.

 Some Indian companies, such as Rediff, Videocon DTH and Makemytrip, have listed aboard using the ‘holding company structure’ route.

This involves creating a holding company outside India, mostly in tax-friendly countries like Singapore, and listing the company on Nasdaq. However, tweaks to the tax regime such as the introduction of general anti-avoidance rules (GAAR) have made such structures impermissible.

Angel investors and start-ups cheered the Sebi move.

Ravi Gururaj, president of TiE Bangalore, serial entrepreneur and angel investor, said, “Liquidity in general is a good thing, and in that sense any step by the Sebi to enable start-ups to go the public is a positive step. Initiatives to make the process frictionless will definitely help Indian start-ups.” 

According to Deepak Sharma, CFO, ShopClues, the Sebi move will be towards ease of doing business. 

“The move will help start-ups listing abroad access to not only funds but also to deep and mature markets. Moreover, the outlook of investors in mature markets are different as they have helped conceptualise, mature and scale businesses multiple times,” Sharma said.

Rahul Jain , COO of OTT entertainment platform Flickstree, said, “ It would be a great move if it helps start-ups find an easy set of protocols to invest abroad or get foreign investor’s capital to work for us here. Start-ups are often constrained for legal resources and if the Sebi is trying to ease it then the primary requirement would be simpler protocols.”

On the other hand, Yaashish Dahiya, CEO and Founder PolicyBazaar said, “It’s a great initiative but some of the concerns that should be looked at immediately would be around FDI restrictions, which are a serious hindrance for entrepreneurs. Another area which is directly related and should be considered under the same umbrella would be to bring some clarity on taxes faced by founders and promoters of these companies.” 

With inputs from Debasis Mohapatra and Romita Majumdar in Bengaluru