Cabinet clears proposal for direct overseas listing of Indian companies


New Delhi: Union Minister Prakash Javadekar briefs the media on cabinet decisions, in New Delhi, Wednesday, Oct. 9, 2019. (PTI Photo)

New Delhi: Union Minister Prakash Javadekar briefs the media on cabinet decisions, in New Delhi, Wednesday, Oct. 9, 2019. (PTI Photo)

In a significant move, the Cabinet on Wednesday approved a proposal to allow direct listing of Indian companies overseas.

Amendment would be made in the Companies Act, 2013, for having enabling provisions that would permit foreign listing of Indian corporates.

Currently, quite a few Indian companies have American Depository Receipts (ADRs) that are traded in the US. Some other corporates have their Global Depository Receipts (GDRs).

Briefing reporters about the Cabinet decisions, Union minister Prakash Javadekar a proposal allowing listing of Indian companies abroad has been approved.

In a release, the corporate affairs ministry said listing of Indian companies in foreign stock exchanges is expected to increase the competitiveness of Indian companies in terms of access to capital, broader investor base and better valuations.

“The framework for enabling such listing under the foreign exchange and securities laws would be finalised by the Ministry of Finance in consultation with Ministry of Corporate Affairs, Reserve Bank of India and the Securities and Exchange Board of India,” it added.

Amendment would be carried out in Section 23 of the Act to include enabling provisions to allow direct listing of securities by Indian public companies in permissible foreign jurisdictions. The ministry is implementing the Act.

Under the Act, public companies should have at least seven shareholders and have no restriction on transferability of their shares, among other criteria.
Corporate Affairs Secretary Injeti Srinivas said the Act would have enabling provisions for listed as well as unlisted companies in India to list their shares abroad. These provisions would be subject to certain conditions.

“So making this enabling provision(s) that is the proposal which Cabinet has approved,” he said.

According to him, there would be broad enabling provisions. The class of companies, types of instruments that can be listed and other things would be notified in the rules.

The rollout of the scheme in this regard might take a few months, he added.

“Now, like just you had a scheme for GDR/ADR, what will be the tax treatment and other issues?. Most of it (will) get covered in subordinate legislation. It does not involve any amendment per se to the best of my understanding,” Srinivas said.

Srinivas along with Finance Minister Nirmala Sitharaman were also present at the briefing.

A depository receipt is a foreign currency denominated instrument, listed on an international exchange, issued by a foreign depository to a domestic custodian and includes GDRs.