New Delhi: In yet another move towards fuller capital account convertibility, the government has thrown open the doors for Indian public companies to directly list their shares abroad and access a larger pool of capital.
It has also allowed private companies that list NCDs on stock exchanges not to be regarded as listed companies.
Finance Minister Nirmala Sitharaman on Sunday said direct listing of securities by Indian public companies would be allowed in permissible jurisdictions.
Necessary regulations allowing direct overseas listing by the Indian entity is expected soon after amendments to the Company Act and FEMA regulations are passed.
At present direct listing by the Indian companies on foreign stock exchanges is not permitted. Likewise, foreign companies are also not allowed to directly list their equity shares on the Indian stock exchanges.
Indian companies are allowed to raise capital abroad through the depository receipts (ADR and GDR). But with this window increasingly becoming unpopular, Centre and market regulator Securities and Exchange Board of India (SEBI) are exploring other ways to mobilise capital for the corporate and provide larger play for overseas investors in the country.
Unlike direct listing, depository receipts are securities listed overseas against shares of listed domestic companies. At least 15 Indian companies have tapped the ADR and GDR route, including the Infosys, ICICI Bank, HDFC Bank and Reliance Industries.
"The move is also expected to prevent Indian companies to register in other markets such as London, Singapore for raising capital and going global. They can very well do so while remaining a purely Indian entity," said a market analyst, who did not wish to be named.
The debate over direct listing has been going in the government and among regulators for few years now, discussions have reached a stage of finality and time is considered right to give a go ahead to the move.
Though direct listing is expected to benefit all companies looking to raise capital but want to test waters in more mature and stable markets abroad, it is likely to be lapped by start-ups and companies in the technology space which are always looking at raising the capital from the market. The measure could also allow companies to offer an easier exit route to existing investors as well.
The permission, however, will be not without any safeguards and government is likely to go by the suggestions given by a SEBI panel in 2018 for permitting direct listing. It had suggested 10 overseas jurisdictions, including the US, the UK, China, Japan, South Korea, and Hong Kong for listing by the Indian companies. The selection was based as these jurisdictions are part of the Financial Action Task Force, the global anti-money laundering group, and International Organisation of Securities Commissions (IOSCO).
The SEBI panel had also said that this route should only be available to the financially stable companies so that chances of manipulation could be minimised. It had also said only the companies with at least 10 per cent of their paid up capital listed on the Indian exchanges be permitted to access the overseas listing.
The capital raising exercise abroad may also have impact on the currency market as flow of overseas capital may put pressure on the rupee and lead to volatility. The RBI and SEBI may be involved jointly to check this.