The Indian government has taken a significant step by allowing Indian companies to list on foreign exchanges, subject to specific conditions. The corporate affairs ministry has issued a notification regarding the relevant section under the companies law, marking an important development in the corporate landscape.
As of now, Indian companies seeking overseas listings typically resort to American Depository Receipts (ADRs) and Global Depository Receipts (GDRs). The notification issued on October 30, 2023, specifies the date on which the provisions of section 5 of the Companies (Amendment) Act, 2020 (29 of 2020) will come into effect. It’s important to note that while the government has taken this step, the detailed rules for direct overseas listings are yet to be officially established.
Section 5 of the Companies (Amendment) Act empowers certain classes of public companies to list their securities on stock exchanges in foreign jurisdictions that are deemed permissible or as prescribed by relevant authorities.
The move to enable Indian companies to directly list overseas was announced by Finance and Corporate Affairs Minister Nirmala Sitharaman in July. The idea behind this development is to facilitate Indian companies’ access to capital from global markets. Notably, this proposal was initially introduced as part of the COVID-19 relief package in May 2020.
A senior government official indicated that the initial plan is to permit companies to list at the International Financial Services Centre in GIFT City, Ahmedabad. Later, they may have the opportunity to list in any of the specified overseas jurisdictions, creating a more open and diverse pathway for Indian businesses to raise capital.
The Securities and Exchange Board of India (SEBI) had previously suggested a framework for enabling direct overseas listings, offering insights into the future regulation of this process. The SEBI framework proposed allowing listings on stock exchanges in ten “permissible jurisdictions,” which include recognized international exchanges like the NYSE, Nasdaq, LSE, and more, provided they maintain strong anti-money laundering regulations.
This step represents a significant shift in India’s approach to capital markets and international listings, potentially opening new doors for Indian businesses to access global investors and resources.
