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India's Companies Soar: Direct Listings Abroad Unleashed



  Nov 10, 2023

Direct Foreign Listing of Indian Companies



Overview:

The Indian government recently approved direct listing of certain Indian companies on select foreign stock exchanges. This move aims to enable these companies to access global capital and enhance capital inflows.

Q: What does the Ministry of Corporate Affairs' notification entail?

The MCA, in its October 30 notification, announced that Section 5 of the Companies (Amendment) Act, 2020, permitting certain public companies to list securities on foreign exchanges, is now in effect.

Q: What changes does the amendment bring?

It allows specific categories of Indian public companies to list on prescribed foreign stock exchanges, including the GIFT IFSC in Ahmedabad. The amendment also enables the government to exempt these companies from certain procedural requirements.

Q: How have Indian companies traditionally listed on foreign stock exchanges?

Until now, Indian companies typically used American Depository Receipts (ADR) or Global Depository Receipts (GDR) for foreign listings, involving issuing depository receipts to foreign investors against shares held by an Indian custodian.

Q: What are the benefits of direct foreign listing for Indian companies?

This provision enables domestic companies to directly access foreign markets for fundraising, potentially leading to better valuations and trading in foreign currencies like the US dollar. It's particularly beneficial for startups and unicorns, enhancing their global profile and contribution to India's foreign exchange reserves.

Q: What challenges could arise with direct foreign listings?

Key challenges include understanding global investor valuations and the commercial benefits of such listings. Companies must navigate investor perceptions and potential valuation differences between Indian and foreign markets.

SRIRAM’s


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