Govt looking at eligibility criteria for direct overseas listing of firms

The Ministry of Corporate Affairs is looking at various aspects, including possible eligibility criteria, to prepare the rules for foreign direct listing of Indian companies, a senior official said on Friday.

Currently, overseas listings by domestic registered entities are done through American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs).

The official said the ministry is in discussions with the finance ministry as well as other stakeholders to finalize the rules for listing Indian companies abroad.

Various aspects are discussed, such as eligibility criteria, for allowing registration abroad. It is also looking into whether both listed and unlisted local companies could be allowed to list overseas, but things are under discussion, the official said.

The provision is part of the Companies Act, which is enforced by the Ministry of Corporate Affairs. For the foreign direct listing framework, provision will be made for authorization under the Companies Act, 2013.

On July 28, Finance and Corporate Affairs Minister Nirmala Sitharaman said the government has decided to allow domestic companies to list abroad to help them access capital from global markets.

In May 2020, the move was announced as part of the Covid relief package.

“The government has decided to enable direct listing of listed and unlisted companies on the IFSC exchanges,” Sitharaman said.

Initially, the plan is to allow companies to list at the International Financial Services Center in GIFT City, Ahmedabad, and later they can list in any of eight to nine designated overseas jurisdictions, a government official said on July 28.

The Securities and Exchange Board of India (Sebi) has previously recommended a framework in which such direct listings will be facilitated, and the Sebi framework is expected to be the basis for future regulation in this area.

Sebi proposed to allow listing on stock exchanges in ten “eligible jurisdictions” with strict anti-money laundering regulations, including NYSE, Nasdaq, LSE and Hong Kong, along with other major exchanges in Japan, South Korea, France, Germany, Switzerland and Canada.