This would especially help emerging startups in India to have access to a larger pool of investors, thereby easing the process of capital raising.
The government is considering allowing firms to list overseas directly, the Times of India reported. This would especially help emerging startups in India to have access to a larger pool of investors, thereby easing the process of capital raising.
The plan to permit the direct overseas listing of Indian firms would also mean a step towards greater capital account convertibility.
Sources told TOI that the government hopes to enable Indian companies to go global with this move, along with previous decisions like the recently- announced corporate tax cut.
A similar proposal was endorsed by of the Securities and Exchange Board of India (SEBI) in 2018, as per a Business Standard report. The panel, set up by SEBI in June 2018, was tasked with examining the economic benefits of direct listings and various regulatory aspects to facilitate the move. It had also suggested certain ways to encourage foreign companies to list on Indian exchanges.
However, the existing legal framework prevents the same. So, for the government to implement the plan if and when a formal decision in this regard is taken, several laws would need to be amended. This includes the Foreign Exchange Management Act (FEMA), the Companies Act and some regulations of market regulator SEBI.
At present, in order to tap foreign investors, Indian firms resort to the American Depository Receipt (ADR) or Global Depository Receipt (GDR) route. Some companies which have already used the same to access the foreign investor pool are ICICI Bank, Infosys, HDFC Bank and Reliance Industries, the report added.
Depository receipts are those securities that are listed on foreign exchanges against the shares of listed domestic companies.However, concerns pertaining to increased volatility in the markets and sudden fluctuations in exchange rates have been associated with higher capital account convertibility. But, sources told the paper that the Reserve Bank of India and the Finance Ministry aim to ensure that the introduction of this move does not add to volatility.