Sebi wants India Inc to list overseas directly

Principle-based listing norm need of hour

The high-level expert committee appointed by market regulator Sebi has recommended direct listing of Indian firms on overseas stock bourses and foreign firms on the domestic bourses.

Currently, the only available route for domestic firms to access overseas equity market is through the American Depository Route (ADR) and Global Depository Route (GDR) while foreign firms can access India through the Indian Depository Receipts (IDR). However, firms planning to use these channels should have prior listing on any domestic bourses.

The committee noted that several companies incorporated in India across various industries especially in the technology and internet sectors are increasingly facing competition from foreign multinational companies in India as well as globally as they expand into foreign markets. “Listing on a foreign stock exchange will increase the relative competitiveness of such companies incorporated in India vis-a-vis their global competitors by enabling them to derive the same benefits currently enjoyed by their international counterparts, whether in terms of access to capital (including at reduced costs) or in terms of other strategic advantages, thus benefiting the health of the Indian economy,” the committee said.

The committee said that several leading Indian technology and internet companies are domiciled overseas and are not currently able to list their securities on Indian stock exchanges.

Permitting these firms to list on Indian bourses will facilitate the development of specialised investor and analyst clusters with industry specific knowledge and valuation expertise.

This according to the expert committee will make Indian bourses more attractive to the technology and internet sectors.

“Given inherent inflation and relatively smaller domestic institutional and non-institutional pools of capital, the cost of capital in India is still higher vis-a-vis that for a foreign corporate thereby putting the Indian company at a disadvantage in the marketplace. Thus, a simple and principle based international listing regime which enables all companies incorporated in India to raise capital in the market which optimises cost and provides the greatest benefits in terms of value, quantum, quality and branding is the need of the hour,” the committee added.