The Indian government is in advanced stages of formulating rules for the direct listing of Indian companies on foreign stock exchanges. This is a significant development, as it will give Indian companies more flexibility in raising capital and accessing global markets.
The direct listing of companies abroad is already allowed under the Companies Act, 2013. However, the government is now working on developing a specific framework for this purpose. The framework is expected to include guidelines on the eligibility criteria for companies, the process for obtaining approval from the government, and the disclosure requirements for companies that list abroad.
MCA sources told CNBC TV-18 that there would be a checklist for companies to avail the direct listing facility. A senior MCA official said that the criteria for direct listing could include the minimum period of operations for a company in India.
“There will be a minimum eligibility for companies to avail the direct listing facility. We are working on the rules. The company can’t be born yesterday and look to list tomorrow. There would be a minimum time of operation a company would need before it looks to list abroad,” said an MCA official.
MCA officials also told CNBC TV-18 that adherence to corporate governance standards is not being stipulated for the overseas listing of companies. “Minimum governance standards for large unlisted companies are being deliberated by the company law committee but not in the direct listing rules,” a senior MCA official said.
The consultations between MCA and DEA are in advanced stages, but no specific timelines has been set for the release of the rules.
The proposed framework is in works to implement direct listing of Indian equities in international stock exchanges abroad. Such listing is already allowed according to the Companies Act 2013. The act was amended in 2020 to allow the direct listing of Indian companies on foreign stock exchanges. However, the framework to do so has not been formulated yet. Currently, Indian companies can access overseas equity markets by listing their debt securities or through depository receipts.
The government is currently looking to enable direct listing of Indian companies in GiftCity before allowing them to list directly overseas. MCA officials say that centre is looking to facilitate the direct listing in a phased manner.
The government is also working on developing a mechanism for the exchange of information between the Securities and Exchange Board of India (SEBI) and foreign regulators. This is important to ensure that Indian companies that list abroad are subject to the same high standards of corporate governance and investor protection as companies that list in India.
The direct listing of Indian companies abroad is expected to have a number of benefits for both companies and investors. Companies will benefit from having access to a wider range of investors and from being able to raise capital at more competitive rates. Investors will benefit from having access to a new asset class and from being able to invest in Indian companies with strong growth potential.
The direct listing of Indian companies abroad is also expected to boost the Indian economy by attracting foreign investment and by creating jobs.
The government is expected to finalize the rules for the direct listing of companies abroad in the coming months. Once the rules are finalized, Indian companies will be able to start listing on foreign stock exchanges directly, without having to go through the process of an initial public offering (IPO) in India first.