The Ministry of Corporate Affairs (MCA) will release norms that will allow Indian companies to list themselves on overseas stock markets without having to list them in India first, Livemint reported. Unnamed officials told the publication that the ministry is close to releasing a draft report on proposed changes to the Foreign Exchange Management Act (FEMA), Income Tax Act and Companies Act.
The move could help India companies, especially start-ups, raise money in international markets. Currently, companies incorporated in India cannot get listed on foreign stock exchanges if they haven’t done so first in India. The report took the example of MakeMyTrip which had to incorporate itself in Mauritius so that it could list itself on US-based Nasdaq in 2010 without first going public in India.
An official told Livemint that the ministry is in favour of allowing listing in only key “permissible jurisdictions” that have strong anti-money laundering norms, KYC norms and complaint with the Financial Action Task Force (FATF).
Earlier in May, as part of the a COVID-19 pandemic economic relief package, Finance Minister Nirmala Sitharaman had announced various reforms to improve “ease of doing” business for corporates in the country. This included the decision to allow pubic companies in India to list securities directly in certain permissible foreign jurisdictions. However, this particular reform had already been incorporated into the Companies Act (Amendment) Bill, 2020 that was introduced in the Lok Sabha on March 17, 2020. It is yet to be enacted.
Move first proposed by SEBI in 2018
The proposal for direct listing of Indian companies in overseas markets was first made by an expert committee of the Securities and Exchange Board (SEBI) in 2018.
- How it can help India companies: The committee said that by listing on foreign stock exchanges, Indian companies would increase their competitiveness to global players. It said Indian companies would be able to tap into an alternate source of capital, and ultimately a better valuation.
- SEBI suggested listing only in “permissible jurisdictions”: The SEBI committee recommended that a framework be prepared wherein India companies could be listed only on “permissible jurisdictions” — which are located in jurisdictions that have treaty obligations to share information and cooperate with India authorities in the event of any investigation. Such a jurisdiction, it said, would be a member of the Board of International Organisation of Securities Commissions (IOSCO). Financial Action Task Force (FATF) and any other jurisdiction that may be notified by the Central government after consulting with SEBI or other regulatory authorities.
The committee also proposed the opposite — listing companies incorporated overseas to list themselves in India. It specially spoke of “leading Indian technology and internet companies” that are domiciled overseas, and hence were unable to list their securities on Indian stock exchanges.
‘Step in the right direction’
“The government’s proposed legislation to allow overseas listing of unlisted companies is a welcome move, and a step in the right direction. This would allow access to alternate means of capital and help attract better valuation and brand awareness for Indian companies,” Rajan Anandan, Managing Director, Sequoia Capital India told MediaNama. He added that the move would put many Indian companies on the global map, boost their attractiveness for top talent, while making the Indian economy more competitive.
***Update (18:30 IST ): Added comments from Sequoia Capital India’s Rajan Anandan. Originally published at 17:49 IST, September 9.