The Indian government has decided not to mandate secondary listing for domestic firms which choose to list on overseas stock exchanges.
The Ministry of Corporate Affairs (MCA) and the Department of Economic Affairs have reportedly done away with the clause that required Indian startups and companies to list on domestic bourses as well, in case they chose to list in an overseas stock exchange.
The government is expected to announce the new policy in the next two weeks, sources told Reuters. The new policy is expected to allow domestic firms to list their shares in seven foreign countries for initial purposes, including UK, Canada, Switzerland and the US.
The policy would allow startups to directly list overseas without having to first list shares at home, as a way to help startups attain higher valuations and access capital more easily.
Last month, Inc42 reported that the Companies (Amendment) Bill, 2020, which allows companies to list certain class of securities abroad had been passed in Parliament.
In February, secretary at the department of economic affairs (DAE) in the finance ministry Atanu Chakraborty had confirmed that Indian startups would soon be able to list directly in both domestic and overseas markets. Chakraborty’s statement came after several companies had expressed interest in listing in both Indian and overseas markets at the same time.
In December 2019, Sequoia India MD Rajan Anandan had said that the Indian government should allow startups to list in overseas markets as there is a better understanding of economics related to startups, as well as more favourable policies for startups in markets such as the US and Singapore, among others. “There are at least 10 to 20 companies which are ready to get listed if the government enables this,” Anandan had said.
Meanwhile, several Indian startups such as PhonePe, PolicyBazaar and Flipkart, among others, are planning to issue an Initial Public Offering (IPO) and go public in the near future. Some of these companies have expressed interest in listing overseas as well.
While existing laws in India do not allow direct listing of Indian companies in overseas stock exchanges, many companies have set up parent entities in Singapore, Mauritius, the US and other countries to be eligible for a foreign listing. There is also the option of accessing foreign capital through the American Depository Receipts (ADR)/Global Depository Receipts (GDR) route, which has been used by companies like Reliance Industries and Infosys.
Last month, Anandan had told Inc42 that allowing startups to list abroad could be a game-changer for the Indian startup economy while adding that it shouldn’t be mandatory for companies to also list in India.
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