NEW DELHI: The government said on Friday that it will allow unlisted Indian companies to list directly and raise capital overseas to retire debt or for acquisitions or operational needs abroad. The move comes at a time when the government is battling to trim the current account deficit and attract dollar inflows.
A finance ministry statement said unlisted Indian companies would be allowed for two years, on a pilot basis, to list and raise capital abroad without the requirement of prior or subsequent listing in the country . “At present, unlisted companies that are incorporated in India are not allowed to directly list in overseas markets without prior or simultaneous listing in Indian markets,” the statement said. After the initial two year period, the impact of this arrangement will be reviewed . While raising resources abroad, the listing company shall be fully compliant with the FDI policy in force, the finance ministry said. In case funds raised are not utilized abroad such companies would be asked to remit the money back to India within 15 days and these funds would be parked only in AD category banks recognized by RBI.The finance ministry, the department of Industrial Policy and Promotion (DIPP) and the RBI will issue the notifications soon to implement the listing process. The approval to list abroad would be subject to several conditions. Unlisted companies may be allowed to list abroad only on exchanges in International Organization of Securities Commissions ( IOSCO)/ Financial Action Task Force ( FATF) compliant jurisdictions or those jurisdictions with which Sebi has signed bilateral agreements.
The companies will have to file a copy of the return, which they submit to the proposed exchange /regulators and also to Sebi for the Prevention of Money Laundering Act (PMLA) rules. They will have to comply with Sebi’s disclosure requirements . Some experts said the new rules are more to address the sentiment issue. The new rule does not change much for companies to list, but it’s more sentimental in nature. “A company’s listing depends on several factors like liquidity that an exchange can offer, robust trading and settlement system, strong listing rules and governance structure, nearness to a pool of large and loyal retail investors ,” said Avinash Gupta, senior director & leader financial advisory, Deloitte India.