India to allow direct listing of companies abroad

Indian companies looking to raise funds from the capital markets through share issuances will soon have the option to do so directly in jurisdictions outside of India.

This will initially be available through a facility to be made available at the International Financial Services Centre—or IFSC—located at the Gujarat International Finance Tec-City in Gandhinagar, Gujarat, according to Finance Minister Nirmala Sitharaman.

The Finance Minister made the announcement at an address in Mumbai on Friday. Currently, companies desiring to list abroad must first be listed in India. They can then issue depository receipts, which can be listed in foreign markets.

The government has received feedback that the current system is onerous and favours companies that are well-established and have a certain size on the domestic bourses, according to a Finance Ministry official who spoke on the condition of anonymity. The ability to list abroad directly would be lucrative to some companies, which feel that their business models would attract better valuations in markets abroad, the person said.

The Finance Ministry will issue guidelines for listing on the GIFT IFSC in the coming weeks, the official quoted above said. Once this is done, a separate notification will be sent out detailing a list of jurisdictions abroad where listing will be permitted.

It is unclear which countries will make it to the list, but the official said it would number between eight and nine.

Currently, several Indian companies have depository receipts listed in the U.S. These are called American Depository Receipts, or ADRs. A few of the prominent names include ICICI Bank Ltd., Infosys Ltd., Wipro Ltd., HDFC Bank Ltd., and Dr Reddy’s Laboratories Ltd. Bloomerg