In a significant move, the government has permitted Indian companies to list on foreign exchanges, subject to certain conditions.
The corporate affairs ministry has notified the relevant section under the companies law in this regard.
Currently, overseas listings by local listed entities are carried out through American Depository Receipts (ADRs) and Global Depository Receipts (GDRs).
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“In exercise of the powers conferred by sub-section (2) of section 1 of the Companies (Amendment) Act, 2020 (29 of 2020), the Central Government hereby appoints the 30th day of October 2023 as the date on which the provisions of section 5 of the said Act shall come into force,” the ministry said in a notification on October 30.
The rules for direct overseas listing of Indian companies are yet to be notified.
Section 5 allows certain classes of public companies to list their securities on permitted stock exchanges in permissible foreign jurisdictions or such other jurisdictions, as may be prescribed.
On October 13, a senior government official said the ministry was looking at various aspects, including the possible eligibility criteria, to prepare the rules for the direct overseas listing of companies.
On July 28, Finance and Corporate Affairs Minister Nirmala Sitharaman said the government has decided to allow domestic companies to list overseas to help them access capital from the world markets.
In May 2020, the move was announced as part of the Covid relief package.
“The Companies Act now allows Indian companies to list their shares in other specified jurisdictions. To make this happen there would be changes required to other regulations including FEMA. Additionally, some may also consider listing their equity shares on INX at IFSC once regulatory concerns are adequately addressed,” Yash Ashar, Partner & Head – Capital Markets at law firm Cyril Amarchand Mangaldas, said.
Indian companies will have another medium for raising capital and also need them to meet governance norms at such specified jurisdictions. Over the years, the requirements of Sebi and the Indian stock exchanges have surpassed these concerns and this would no more be an issue, he noted.
Even on the accounting front, Ashar said Ind AS (Indian Accounting Standard) is now aligned largely to globally accepted accounting norms and that would also help Indian companies and avoid the time consuming and costly preparations of accounts in US GAAP (Generally Accepted Accounting Principles) or IFRS (International Financial Reporting Standards).
“The likely challenge will be that relating to investors. Will global investors provide the same valuations as that in India? What would be the commercial benefits of these listings? These are the more important and relevant questions that Indian companies and their Boards would have to grapple with over the coming months and years,” Ashar said. Come from Sports betting site VPbet
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A senior government official, on July 28, said that initially, the plan is to allow companies to list at the International Financial Services Centre in GIFT City, Ahmedabad, and later, they can list in any of the eight to nine specified overseas jurisdictions.
The Securities and Exchange Board of India (Sebi) had previously recommended a framework within which such direct listing will be facilitated, and it is expected that the Sebi framework will be the basis for future regulation in this area.
Sebi had proposed allowing listings on stock exchanges in ten “permissible jurisdictions” with strong anti-money laundering regulations, including the NYSE, Nasdaq, the LSE and Hong Kong, along with other major exchanges in Japan, South Korea, France, Germany, Switzerland and Canada.
