Finance Minister Nirmala Sitharaman on Friday said domestic companies can now go in for direct listing on foreign exchanges and the International Financial Services Centre (IFSC) in Ahmedabad.
The provisions for direct overseas listing were approved by the government, as part of the Covid relief package announced in May 2020, but the rules in this regard are yet to be notified. The direct overseas listing will allow Indian companies to access foreign funds on various exchanges overseas. “A direct listing of securities by domestic companies will now be permissible in foreign jurisdictions. I’m also pleased to announce that the government has taken a decision to enable the direct listing of listed and unlisted companies on the IFSC exchanges.
“So, this is a major step forward. This will facilitate access to global capital and better valuation,” Sitharmanan said here. A senior government official said the rules for direct overseas listing of Indian companies will be notified in a few weeks. To begin with, Indian companies will be allowed to list on the IFSC, and later, they will be permitted in specified seven or eight foreign jurisdictions, the official said. Sitharaman made the announcement about the direct overseas listing of domestic companies while speaking at an event to launch a corporate debt market development fund, which is a bailout facility for debt funds.
The facility will act as a backstop facility for specified debt funds during periods of stress in debt markets, and this was announced by Sebi last month. Its function will involve purchasing investment-grade corporate debt securities when debt markets face a crisis. The move is liely to bolster the confidence of mutual funds and investors in the corporate debt markets while also improving secondary market liquidity in corporate debt securities. SBI Funds Management will serve as the investment manager of the CDMDF.
Existing market norms mandate a domestic firm looking for overseas float make a secondary listing on the domestic equity bourses or first going for domestic float. Currently, overseas listings by domestically listed entities are carried out through American Depository Receipts (ADRs) and Global Depository Receipts (GDRs), which companies like Infosys and Wipro have done. The new policy could be a shot in the arm for unicorns or startups valued at more than USD 1 billion, and the digital unit of conglomerate Reliance, which is eyeing a US listing after raising more than USD 20 billion from investors, such as KKR, Google and Facebook, among others. Earlier, media reports said the government was considering allowing foreign listings in seven countries initially, including Britain, Canada, Switzerland and the US.
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. Meanwhile, the corporate debt market development fund will act as a backstop facility for specified debt funds during periods of stress in debt markets, and this was announced by Sebi last month.