Those companies not listed in India but planning to get listed on foreign stock exchanges won’t have to comply with Sebi’s disclosure norms or that of the primary (Indian) exchange any longer. They would only need to take into account the corresponding rules of the foreign regulator and exchange concerned. A finance ministry notification on an amendment to the relevant section is expected this week, sources told FE.
This would make it easier for companies to raise capital abroad through this route and use it for repaying their foreign debt or for overseas operations including acquisitions. The government had allowed unlisted companies to get listed overseas in September last year. Earlier, a simultaneous listing on Indian exchanges was mandatory for overseas listing. According to the finance ministry’s notification, unlisted Indian companies getting listed on foreign stock exchanges were required to comply with Sebi disclosure norms and the primary (Indian) exchange.
Mostly, Indian IT companies are expected to use the new route for overseas listing.
Domestic companies are allowed to list on only those exchanges that are compliant with the International Organization of Securities Commission and the Financial Action Task Force or those under foreign regulators that have entered into bilateral agreements with Sebi.
“We have decided to give this leeway to unlisted firms looking at overseas listing in consultation with Sebi and the RBI. We had sought the Election Commission’s approval to notify the amendment (doing away with need to comply with Sebi’s disclosure norms for them) and the EC has now given it,” a finance ministry official said. He added the amendment to the relevant rules would be notified in a day or two.
Market experts and corporate finance lawyers said that companies looking for an overseas listing faced multiple issues, including the conflicts between disclosure requirements in India and those specified by the overseas regulators. One of the biggest issues, they said, has been the differences between Indian and overseas accounting standards. Indian companies planning to listed on a US stock exchange found it cumbersome and costly to follow both Indian and American accounting standards.
It would be good to get a clarity on the provision where Sebi disclosure requirement would be applicable. Ideally, there should not be any need to comply with any Sebi disclosure requirements if the overseas exchange requirements are strict and robust. If the expected new notification removes these requirements, it would be a welcome change. The ruling will encourage some Indian companies to get list on an overseas exchange… The US remains the top focus for Indian companies for listing followed by Singapore and UK. If there are indeed any Sebi disclosure requirements, we will need to make sure that they are not in conflict with those of the overseas exchanges? said Rajiv Gupta, partner, Latham & Watkins in Singapore.
The government allowed unlisted companies to list abroad without subsequent listing in National Stock Exchange or BSE, in September 2013. Officials say the other conditions will remain unchanged, including compliance with the FDI policy of the sector in which the company operates.