To improve ease of doing business, the government on Sunday announced allowing Indian public companies to directly list their shares overseas. Also, private companies that list their debentures on stock exchanges will now not be regarded as listed firms.
The move will help Indian companies get access to multiple jurisdictions for raising capital, with differing costs and listing conditions, said experts. Besides, clarification with respect to listing of non-convertible debenture (NCDs) will ease compliance issues faced by private firms.
At present, some Indian companies have American Depository Receipts (ADRs) that are traded in the US, and several others have their Global Depository Receipts (GDRs). These include Infosys, ICICI Bank, HDFC Bank, and Reliance Industries.
“Necessary regulations allowing direct overseas listing by the Indian entity is expected soon after amendments to the Company Act and Foreign Exchange Management Act (Fema) regulations are passed,” said Finance Minister Nirmala Sitharaman, while announcing the fifth tranche of the stimulus package. This, even as the Cabinet okayed the move in February.
“Indian foreign exchange control laws don’t permit free convertibility of capital, and there are certain regulatory restrictions in relation to capital account transactions,” said Atul Pandey, partner, Khiatan & Co. According to him, this will give a much-needed shot in the arm to Indian firm looking at alternatives avenues to raise funds.
Sources say the existing window through ADR and GDR has been losing popularity, prompting market regulator Sebi and government to come out with the options, so that corporate could access larger pool of capital.
However, this proposal has been under deliberation between stakeholders and regulators for few years, especially on selecting the foreign jurisdiction. Sebi had in 2018 suggested that this route should only be available to the financially sound companies so that the platform can't be used for manipulation. Sources hinted that final rules in this regard would likely be based on the recommendations of the Financial Action Task Force.