Govt framing eligibility norms for direct listing of firms overseas

The proposed rules for enabling direct listing of Indian companies in overseas stock exchanges will specify an eligibility criteria for entities availing such a facility. The criteria could include minimum period of operations for a company, but unlikely to stipulate adherence to any minimum governance standards for any overseas float, official sources said. 

The aspect of setting minimum governance standards for large unlisted companies in general will be deliberated by a separate company law committee and would have no bearing on the proposed direct listing Rules, it was emphasised.

The Corporate Affairs Ministry (MCA) and the Department of Economic Affairs (DEA) in the Finance Ministry are at an advanced stage of firming up the rules including the eligibility criteria, they added. However, no specific timelines can be given for the release of the Rules, sources said.

Companies Act rules

The proposed rules are being drawn to implement a provision in the Companies Act 2013 that already allows direct listing of Indian equities in stock exchanges abroad. Rules will only provide a framework for Indian companies and unlikely to provide any dedicated provisions or carve outs for Startups, sources said. 

“For Indian Companies Act purposes, the termstart-ups is not used or recognised. The rules will be for Indian companies in general”, sources said.

“The Rules are not going to help companies born yesterday and looking to list tomorrow. There will be a minimum time of operations of a company in India before direct listing in exchanges abroad, ” sources added.

Currently, Indian companies can access overseas equity markets only through depository receipts or by listing their debt securities on foreign markets. 

Gift City listing

The Centre had in 2020 amended the Companies Act allowing the direct listing of Indian companies on foreign stock exchanges, but the framework has not been put in place so far.

The Finance and Corporate Affairs Minister Nirmala Sitharaman had recently said the government is currently focused on enabling direct listing of Indian companies in GiftCity before looking at allowing them to list directly overseas.

In July this year, Sitharaman had at a SEBI event in Mumbai said that government has decided to enable the direct listing of listed and unlisted companies on overseas exchanges at the IFSC. 

The move will enable “start-ups and companies of like nature to access the global market through GIFT IFSC”, Sitharaman had said. “This will also facilitate access to global capital and result in better valuation for Indian companies.”