FM Nirmala Sitharaman clears the decks for Indian companies to directly list overseas

By: |
May 18, 2020 2:20 AM

Start-ups and complex conglomerates and their holding companies, along with new-age technology companies, can now look at an overseas listing without listing in India first.

A host of Indian companies can now tap foreign capital by directly listing overseas.

A host of Indian companies can now tap foreign capital by directly listing overseas. Start-ups and complex conglomerates and their holding companies, along with new-age technology companies, can now look at an overseas listing without listing in India first.

Finance minister Nirmala Sitharaman on Sunday cleared the decks for Indian companies to directly list overseas. The move will allow Indian start-ups and other specialised sectors to list overseas, where investors are sophisticated enough to take bets on new sectors.

Vishesh C Chandiok, CEO, Grant Thornton India, said: “Direct listing overseas without the need to list in India is a massive benefit for start-ups, companies in high-tech and biotech, metals and minerals, etc. which are better understood by investors in specific markets overseas.”

Other than start-ups, holding companies, banks and select technology companies may find better valuations while listing overseas. For instance, conglomerates and holding companies trade at a discount due to the complexity of the business, but the same may enjoy a better valuation overseas.

This move would also allow Indian companies to raise foreign capital through direct overseas listing. Market experts believe the move is positive as foreign listing gives Indian companies better visibility too.

Rusmik Oza, executive vice president – head of fundamental – research, Kotak Securities, said, “A foreign listing would give access to overseas capital, better visibility and allows foreign investors to directly invest in those companies rather than coming through the foreign portfolio route. Additionally, foriegn investors can avoid INR currency risk by investing in them directly overseas.”

Investing in Indian equities comes with not only the asset class, but also carries a currency risk. A depreciating currency tends to impact dollar returns for foreign portfolio investors. With this move, a foreign listing would cut the foreign currency risk for this class of investors.

Deven Choksey, managing director, KRChoksey Investment Managers, said: “This is a big move where global investors could continue to trade their funds in global currency without converting them into rupee. Companies that are listing abroad may find better valuations.”

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