For tapping foreign investors, Indian firms take the American Depository Receipt (ADR) or the GDR route.
The Department of Economic Affairs is working on a scheme to announce the rules for the regulatory clearances and the requirements companies need to fulfill to be listed abroad, a senior government official said on March 4.
"The current rules regarding the listing of GDRs (Global Depository Receipts) would likely be refined," he said.
On March 4, the Cabinet approved direct foreign listing of Indian companies. The Main beneficiary of enabling provision approved by cabinet on foreign listing of firms will be unlisted firms and startups. The move is expected to help Indian startups have access to a larger pool of investors, thereby easing the process of capital raising.
"These companies would want to first list abroad and then list in India to raise capital. What would be the jurisdiction, class of companies, instruments will be notified in the rules," the official said, post the Cabinet briefing.
Different wings of the government, like the Reserve Bank of India, Securities and Exchange Board of India (SEBI), the department of economic affairs and the ministry of corporate affairs would together work out the rules of listing.
"Public companies will get this opportunity. If the Companies Act amendments get cleared by Parliament in this session then we will try to prepare rules as early as the government can," the official said.
SEBI had set up a panel in 2018 to examine 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.
For tapping foreign investors, Indian firms take the American Depository Receipt (ADR) or the GDR route. Companies that have used the same to access the foreign investor pool are ICICI Bank, Infosys, HDFC Bank and Reliance Industries.
Depository receipts are those securities that are listed on foreign exchanges against the shares of listed domestic companies.
Apart from listing of companies abroad, the Cabinet cleared a host of other decisions. Finance Minister Nirmala Sitharaman also announced that the majority of changes made to the Companies Act pertains to removal of those sections which result in criminalisation.
Sitharaman added that the Cabinet had suggested 72 changes to 65 sections of the Companies Act, with a priority on decriminalising the Act. Out of the 66 compoundable offences, 23 have been decriminalised, and these 23 offences will now be dealt with under an in-house adjudicating framework, the finance minister said.
Of these, seven compoundable offences will be omitted, while punishment for 11 compoundable offences will be limited to fine alone and imprisonment will be removed completely.
Five offences will now be dealt with under different alternative frameworks, the finance minister said. She also mentioned that the quantum of penalties for the six defaults which were decriminalised earlier will also be reduced.
The Cabinet also allowed non-resident Indians (NRIs) to own 100 percent stake in Air India. Presently, NRIs are allowed to invest only 49 percent in Air India. The Cabinet did not tweak the foreign direct investment (FDI) limit in Air India, which is currently 49 percent through the government approval route.
The Cabinet also approved consolidation of 10 state-run banks into four. The finance minister had announced the merger of the four public sector banks in August last year.
The mergers are scheduled to come into effect from April 1. The finance minister said that the government is sticking to the deadline.
Oriental Bank of Commerce (OBC) and United Bank of India (UBI) are set to be merged into Punjab National Bank (PNB). The move will make PNB India's second-biggest public sector bank after State Bank of India.Union Bank of India, Andhra Bank and Corporation Bank will be merged together to create fifth largest public sector bank while Indian Bank and Allahabad Bank will be merged to form India's seventh largest public sector bank.