Govt to soon allow Indian firms to list on foreign exchanges

Finance Minister Nirmala Sitharaman on Friday said the government has decided to enable listed and unlisted domestic companies to directly list their equity shares on the International Financial Services Centre (IFSC) at Ahmedabad. Speaking at an event in Mumbai, the FM said domestic companies could now go in for direct listing on foreign exchanges, a move which will open a window for global capital access and result in better valuation for Indian companies. The minister stated that the decision will be operationalised shortly, enabling startups and companies to access the global market through GIFT IFSC.

“The government’s vision for GIFT-IFSC transcends much beyond the realm of traditional finance and ventures into the realm of thought leadership. We envision it as the true embodiment of Atma Nirbhar Bharat, a hub of ingenuity and innovation,” the minister said while inaugurating the Corporate Debt Market Development Fund (CDMDF) in Mumbai.

Sitharaman said that Indian capital markets have been a trendsetter of sorts in many aspects of trading, including being one of the fastest in settlement of trade and in certain areas related to risk mitigation and governance. “Our equity markets have witnessed broad-based participation from all segments – retail investors with more than 11.5 crore demat accounts on one side of the spectrum to small and medium enterprises (SMEs) raising funds through IPOs on the other. We are witnessing a robust and all-around growth of financial markets today,” remarked the FM.

According to a senior government official, the norms for direct overseas listing of Indian firms will be notified in a few weeks. Initially, domestic companies will be permitted to list on the IFSC, and later on specified foreign exchanges.

As per the existing legal framework in India, companies incorporated in India are not allowed to directly list their shares on foreign stock exchanges. Until now, the companies were allowed to sell their shares in the global markets only through American Depository Receipt (ADR) and the Global Depository Receipt GDR), which were introduced to help Indian firms sell their shares in overseas exchanges. However, the Indian government and the capital market regulator SEBI are working hard to create a framework for directly listing domestic companies on foreign exchanges, especially in the U.S. and Europe.

According to market experts, the decision to allow direct listing of Indian companies on foreign exchanges is a welcome move and it will have great potential to boost the Indian startup industry.

"The government’s decision to allow Indian companies to list directly on global exchanges even before being listed on domestic bourses is a very welcome move. Globally, and particularly in the U.S., some of the Indian businesses are getting much better valuation and much wider investor base compared to India. Obviously, it is a large pool of opportunities,” “says Amisha Vora, Chairperson & MD, Prabhudas Lilladher.

“Considering the fact that the Indian economy is on an upswing now, it will help attract more investments into India and allow Indian companies to attract more growth capital. Also, the decision will have great potential to boost the Indian startup industry,” he added.

Sriram BKR, Senior Investment Strategist at Geojit Financial Services, says the overseas listing will open a window for global capital access for Indian corporations. It will provide additional opportunity for fundraising and better price discovery, even when Indian markets are closed. While better valuation at international and deeply matured markets will boost brand and reputation, it will also give room for adopting international best practices on listing rules, information disclosures, investor interaction norms, etc.

Aryaman Vir, CEO, Aurum WiseX, says, “Overseas listing will enhance Indian companies' competitiveness with better capital access, broader investors base, improved valuations, and global brand boost. While awaiting further details, Indian companies should prepare to seize this transformative opportunity and solidify their position in the global market.”