Indian Companies To Soon Be Allowed To Directly List Abroad: Here's How It Can Benefit Them

Soon, Indian companies are likely to be allowed to list themselves directly on foreign stock markets. The Finance Ministry is working towards making this happen, and announcements regarding the proposal have already been made by India's FM Nirmala Sitharaman in recent weeks.

And now, the ministries of finance and corporate affairs are at an advanced stage of firming up a much-awaited framework for direct listing of Indian companies abroad, which could be introduced later this financial year, said people with knowledge of the matter, as per ET.

How Do Indian Companies Currently List Abroad?

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At present, Indian companies can access the overseas equity markets only through depository receipts or by listing their debt securities in foreign markets. In 2020, the Centre amended the Companies Act, allowing the direct listing of Indian companies on foreign stock exchanges, but a framework has not been put in place so far.

Last month, after the 12th India UK India-UK Economic Financial Dialogue was held in New Delhi, Finance Minister Nirmala Sitharman led the Indian side while the UK side was led by Chancellor of the Exchequer Jeremy Hunt to announce India mulling direct listing of local companies on London Stock Exchange.

¡°We are particularly pleased to make a big step forward to make a first confirmation by India that it will explore the London Stock Exchange as an international destination for the direct listing of Indian companies,¡± Hunt said.

Also Read: How A Science Genius Lost Millions In The Stock Market

What Did FM Sitharaman Say About The Proposal?

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In July, Sithraman announced a direct listing on GIFT (Gujarat International Finance Tec-city) which will help companies access the global stock market for funds, as per a Hindu Business Line report.

She said that the government had taken a decision to enable the direct listing of listed/unlisted companies on IFSC exchanges, which will be operationalised shortly enabling start-ups and companies of like nature to access the global market through GIFT IFSC. This will also facilitate access to global capital and result in better valuation for Indian companies, Sitharaman added.

Meanwhile, the joint statement hoped that the recent announcement to enable Indian companies to list their equity shares on the international exchanges in GIFT IFSC will facilitate access for the entities based in the UK to invest in Indian companies. In addition, a new UK-India Pensions and Insurance Partnership will support the growth of the sector in both countries. The partnership will focus on knowledge sharing, growing bilateral investment and diversifying risk, including through pension fund trade missions to encourage increased bilateral investment, the statement added.

Meanwhile, Sitharaman had said last month that the UK expressed willingness to further extend its footprint in the GIFT city. ¡°I am pleased with the tangible progress achieved through the India-UK financial partnership which has evolved into a public and private sector collaborative forum for dialogue across the financial sector,¡± she said.

¡°We have also launched the UK India Infrastructure Financing Bridge. It is a collaborative venture by NITI Aayog and City of London Corporation aimed at harnessing collective expertise in planning and implementing major infrastructure projects,¡± Sitharaman said.

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India¡¯s FM said with emerging technologies such as Artificial Intelligence and Machine Learning redefining financial services and India¡¯s new Digital Personal Data Protection Act, there are ample opportunities for both nations to collaborate on frameworks for secure and inclusive financial intermediation.

¡°The success of the India-UK Green Growth Equity Fund is a testament to the efficacy of public-private partnerships in channelling large-scale sustainable finance,¡± she said.

Also Read: Why Do Companies List Shares On The Stock Market?

Why Was This Plan Shelved Earlier?

The plan to allow direct overseas listing of Indian firms was first announced in 2020, but was shelved following concerns around tax losses and opposition from a faction of the ruling party, which feared less Indian regulatory oversight of domestic firms that list abroad.

But finally, after three years, it seems that Indian companies will finally be allowed to directly list themselves abroad.

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