Currently, Indian companies can list their shares through depository receipts abroad, while foreign companies need to go through the Indian Depository Receipt route for listing of equities.
A high-level panel Tuesday recommended market regulator Sebi to allow direct listing of Indian companies on overseas bourses and of foreign firms on Indian exchanges. Currently, Indian companies can list their shares through depository receipts abroad, while foreign companies need to go through the Indian Depository Receipt route for listing of equities. Moreover, Indian firms can list their debt securities directly on international exchanges through a security instrument known as ‘Masala Bonds’.
In its 26-page report, the committee has suggested for direct listing of Indian companies overseas and vice versa. It has recommended that the framework should allow listing only on specified stock exchanges in ‘Permissible Jurisdictions’. Permissible Jurisdiction, includes a jurisdiction which has treaty obligations to share information and cooperate with Indian authorities in the event of any investigation. Equity listings by companies incorporated in India on foreign stock exchanges would allow them to access foreign capital at a lower cost. The Indian economy, in turn, will experience added growth and economic development.
Similarly, equity listings of companies incorporated outside India on Indian bourses would improve the efficient allocation of capital and diversification for investors across the Indian economy. The panel has suggested, “listing of equity shares of unlisted companies incorporated in India on foreign stock exchanges would be governed by the listing framework of the concerned Permissible Jurisdiction. The relevant Indian laws like Companies Act would also continue to apply to such companies”.
The KYC (Know your client) and AML (anti-money laundering) framework existing in Permissible Jurisdictions should be taken as acceptable standards for compliance. The Securities and Exchange Board of India (Sebi) has sought comments from public till December 24 on the recommendations of the committee. The committee was set-up by Sebi in June to look into details of facilitating companies incorporated in India to directly list their equity shares on foreign stock exchanges and firms incorporated outside India to list on Indian bourses.
The panel was entrusted to look into various legal, operational and regulatory constraints as well as examine in detail the economic case for permitting direct listing of Indian firms overseas and vice versa. The expert committee have nine members including Avendus Capital Managing Director Ranu Vohra, Amarchand Mangaldas Managing Partner Cyril S Shroff, Kotak Investment Banking Managing Director and CEO S Ramesh, MakeMyTrip.com Chairman & Group CEO Deep Kalra and Zodius Capital Advisors Senior Managing Director & CEO Neeraj Bhargava. Morgan Stanley Managing Director (Technology, Media and Telecom Banking) Kamal Yadav, Latham & Watkins LLP Partner Rajiv Gupta and KPMG and LLP Global Head of Accounting Advisory Services Jamil Khatri are also part of the panel. Sebi Executive Director Surjit Prasad was the convenor of the committee.