Unlisted Indian companies will be allowed to raise capital abroad without the requirement of prior or subsequent listing in India initially for a period for two years, according to a press note issued by Department of Industrial Policy and Promotion. This note updates on the Consolidated FDI Policy, (pdf) that was issued in April this year by the Department of Industrial Policy and Promotion, that is part of Ministry of Commerce and Industry.
Prior to this, unlisted companies required prior or simultaneous listing in the domestic market while seeking to issue such overseas instruments. That is in case the company had not yet accessed the ADR/GDR (American Depository Receipts/Global Depository Receipts) route for raising capital in the international market.
That said, these companies shall list abroad only on exchanges in IOSCO/FATF compliant jurisdictions or those jurisdictions with which SEBI has signed bilateral agreements. Once listed, the companies are expected to file a copy of the return they submit to the proposed exchange/regulators, with SEBI for the purpose of Prevention of Money Laundering Act (PMLA).
As per the amended regulation, while raising resources abroad, the listing company shall be fully compliant with FDI policy in force. The catch here is that the companies will have to remit the money back to India within 15 days, if they don’t utilise the capital raised for retiring outstanding overseas debt or for operations abroad including for acquisitions.
It needs to be pointed out that Indian companies were stopped from raising funding via ADRs and GDRs in 2008. Before 2005, domestic companies could raise funds through ADRs and GDRs when the government put a blanket ban on unlisted companies from doing so. Unlisted companies that had issued ADRs and GDRs were asked to list within three years.
PS: Guess which typeface the ministry used for an earlier press note issued in August… wait for it… wait for it… Comic Sans! (pdf)