Indian govt may allow unlisted companies to list overseas

To help startups access a global pool of investors, the government is planning to allow a direct listing of Indian companies overseas.

The proposal is to help unlisted companies or startups have access to a larger pool of investors and curb the migration of these firms to foreign countries such as Singapore.

The listing could be via the issue of shares or sale of existing holdings.

The government, which has already discussed the proposal, is yet come out with a formal announcement, according to a TOI report.

Though, it will have to amend several laws and regulations, including the Foreign Exchange Management Act, the Companies Act and the Securities and Exchange Board of India (SEBI) regulations, to implement the proposal.

The government may first allow listing in only select jurisdictions such as the US, the UK, China, Japan and Hong Kong which are part of Financial Action Task Force, the global anti-money laundering group, and the International Organisation of Securities Commissions (IOSCO), added the report.

Earlier in September last year, the government had also relaxed the client-verification requirement under the Prevention of Money Laundering Act for foreign investors.

According to the government notification, overseas investors, who want to put money in the depository receipts of Indian companies, will not need to complete any separate KYC process.

In August, Finance Minister Nirmala Sitharaman had said that the depository receipts scheme of 2014 would be operationalised soon by SEBI to enable local companies to access foreign funds through American Depositary Receipts and Global Depositary Receipts.

The government had also allowed the issue of unsponsored depository receipts. Though, SEBI has its concern over allowing the same.

According to a SEBI expert committee, the direct listing of unlisted firms overseas will not only allow then to tap a new pool of investors but allow companies to diversify and look beyond the domestic market for fundraising.

The market regulator had also recommended changes to the tax laws as well to ensure that income earned from transfer of equity shares of an unlisted Indian company listed on a foreign stock exchange does not face capital gains tax.

Existing rules allow only listed companies on the Indian stock market to list abroad. The companies that are listed overseas include Infosys, Reliance, HDFC and ICICI.