As India looks to shore up a battered rupee and increase the level of foreign investment, the government is likely to make a set of changes in capital market regulations with the aim of increasing medium-term to long-term inflows.

These include allowing Indian-registered unlisted companies to list on exchanges abroad without having to list on Indian bourses and letting foreign investors (FDI) to directly buy large blocks of shares in Indian firms through the stock exchanges anytime during the trading hours, official sources told FE.

Currently, Indian firms not listed in the country cannot get listed abroad and for both domestic and foreign investors, purchases above a certain threshold through exchanges are restricted to a 35-minute window between 9.55 to 10.30 am.

These apart, the government, which seeks to explore all possible options to accelerate inflows, is also planning to allow companies that don’t qualify to have their ADRs listed on a US exchange to trade over-the-counter through what are called level-1 ADRs, which have the the loosest requirements from SEC. This, sources said, would open up an easier and rather inexpensive way for Indian firms to raise capital from overseas markets.

While the UPA government’s latest round of opening up FDA caps in various sectors is one part of the plan, the capital market reforms will ensure more immediate inflows and enable increased liquidity in the markets. There has been a strong demand from India Inc. and apex industry bodies such as Ficci, CII and Assocham for ways to ease capital inflows. The requests for allowing block FDI stakes and ADRs have also come in from GMR, SREI Infrastructure Finance and other infrastructure players, most of which are seeking investment to finance various projects.

A meeting on the proposals was held in late June and was chaired by secretary, economic affairs, Arvind Mayaram, according to a finance ministry official. Officials from SEBI, RBI, and within the finance ministry’s capital market division attended the meeting.

?We will have a meeting again within a month’s time and expect to start implementing at least two of these proposals in two-three months. One proposal where concerns have been raised is the one regarding ADRs so that maybe delayed,? the official said.

An ADR (American depository receipt) is a certificate issued by a US bank representing a specified number of shares in a foreign company’s stock that is traded on a US exchange. ADRs are denominated in US dollars and the shares trade as domestic shares, but are offered for sale globally through the various bank branches. Currently, Indian companies are allowed by SEBI to issue only level three ADRs, which are listed on a USexchange in compliance with the regulatory requirements of the US Securities and Exchange Commission (SEC).

The proposed change will enable companies to also issue level one ADRs, the most basic type of the instrument. Sebi is of the view that allowing level one ADRs will lead to ‘an export of capital and may affect domestic markets’ liquidity,’ another official said.

With regards to block deals that FDI investors do, SEBI has a separate window for trades, with a minimum quantity of 5,00,000 shares or minimum value of Rs.5crore executed through a single transaction. This window is now open only for 35 minutes daily and has certain other requirements. Officials are planning to do away with this time-bound window for foreign direct investors looking to pick up large stakes in Indian companies. The idea is to provide greater transparency without putting the buyer or seller in a disadvantage.

?Now with so much transparency and dissemination of financial information, one anyways comes to know who the buyer is. There is complete disclosure. So we don’t feel the need for the (restrictive) window for FDI investments in a company’s equity,? the first official said, adding that the RBI and Sebi were in agreement with North Block regarding this proposal.

?Allowing companies to list abroad is a proposal that has been around for a while. Raising capital in domestic markets is getting difficult for a number of reasons. If we can raise it abroad then definitely inflows will come in,? Nirupama Soundararajan, deputy director at FICCI, told FE. ?If you need to attract inflows, you need to think out of the box. It includes raising FDI caps in various sectors as well as implementing more medium-term reforms,? Soundararajan added.

Economists however, say that while these measures will help in bring inflows to some extent, they won’t open the floodgates yet.

?These improvements will be helpful in a buoyant market but since the weakness is not just local but global, the risk appetite of investors keeps on falling. These are positive changes and may bring in medium to long-term flows but will only work if the global sentiment improves,? Sujan Hajra, chief economist of Anand Rathi Securities told FE.