SUMMARY
Existing legal framework doesn’t allow a startup incorporated in India to list on foreign markets
Anandan said that currently, NASDAQ is a better place to list a high-growth tech startup
A SEBI panel has also recommended allowing startups to list outside India
Sequoia India MD Rajan Anandan has argued that the Indian government should allow startups to list outside the country where there is a better understanding of economics related to startups. Currently, the existing legal framework doesn’t allow a startup incorporated in India to directly list on foreign markets.
Speaking at an industry event, Anandan said that currently, New York-based stock exchange, NASDAQ, is a better place to list a high-growth tech startup with strong unit economics but which is still investing in its growth.
Further, Anandan clarified that the startup ecosystem is not requesting for a dual listing, wherein startups list their business in India as well as other foreign stock-exchange markets, but rather is looking for a direct listing on exchanges such as NASDAQ or NYSE. “There are at least 10 to 20 companies which are ready to get listed if the government enables this,” he was quoted as saying by ET.
Anandan also discussed how Indian startups are targeting foreign shores and said that instead of building in India for India, startups are now building in India for the world. Citing examples of Ola and OYO, he said that Indian startups want to go global from Day 0.
The Indian MD of Sequoia further praised Indian startups about their role in promoting employment in the country. “Between Ola, Uber, Swiggy and Zomato, 2.5 million Indians have been employed,” he added.
What Are The Current Norms
According to the existing legal framework, companies incorporated in India are not allowed to directly list themselves on a foreign stock exchange. Similarly, companies, which are incorporated outside India, cannot directly list their equity shares on the Indian stock exchanges — National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).
If Anandan’s suggestions are considered by the government, around one dozen unicorns and nearly 100 companies with a valuation of more than $100 Mn are expected to benefit from it, according to a BS report.
Notably, similar recommendations were also recently suggested by a panel incorporated by the Stock Exchange Board of India (SEBI). The panel recommended that startups should be allowed to list in countries that are members of the International Organisation of Securities Commissions (IOSCO) and the Financial Action Task Force.
