Indian companies will soon be able to get listed directly on foreign stock exchanges as the Ministry of Corporate Affairs is set to notify regulations allowing Indian companies to get listed in select foreign jurisdictions, according to government officials.
Currently, Indian companies are able to list their shares on foreign stock exchanges through Global Depository Receipts and American Depository Receipts. As part of the Companies Amendment Act, 2020 passed in the monsoon session of Parliament, an enabling provision was brought by the government allowing certain companies to list securities in foreign jurisdictions.
“The conditions under which companies will be allowed to list directly on foreign exchanges will be based on meeting certain thresholds including average profit over the past three years, paid-up share capital, securities premium and the value of intangible and tangible assets of the company,” said a government official aware of developments.
The official said a company would likely be required to meet any three of six such criteria to be eligible for direct foreign listing.
The ability for Indian companies to list ordinary shares on foreign exchanges is expected to help them get better valuations, besides being an alternative source to raise capital. The Centre had received representations seeking provisions to all companies to directly list securities on foreign bourses, especially from start-ups.
The official also said that initially, companies would only be permitted to list in the US, UK, Japan, South Korea, Germany and Canada and that the Ministry would progressively add to the list of permissible jurisdictions.
Another government official noted that certain issues regarding foreign listing still needed to be ironed out and that companies being listed abroad may need to publish two sets of financial statements to deal with any differences in regulatory requirements between India and the jurisdiction in which they are being listed.
“In the case of other regulations, it is likely that they would have to follow the stricter of two regulations,” said the official.