Global Listing of Indian Companies - SEBI

Why in news?

The Securities and Exchange Board of India (SEBI) has constituted an expert committee, which is considering allowing India-incorporated companies to list on foreign stock markets.

What is the need?

• For corporations with investment plans, raising finance locally had been hard in recent years.
• Access to bank finance has become difficult as a result of Indian banks’ huge bad debt.
• The weakening rupee has made foreign borrowing a risky proposition.
• Also, India’s corporate bond market still lacks some potential.

What are the benefits?

• Overseas listing offers access to a wider, global pool of relatively cheap risk capital.
• This avenue was open to Indian companies via the American Depository Receipts (ADRs), Global Depository Receipts (GDRs).
• But the modus operandi is complicated in these modes.
• Companies had to set up holding companies or special purpose vehicles and intermediaries (depository participants) to avail these.
• This makes it unworkable for mid-size and smaller companies in terms of time and cost.
• Further, most reputed bourses have stringent norms of disclosure and transparency.
• Direct listing in these would raise the standards for Indian companies.
• As companies still lack global best practices, despite reforms in accountancy standards recently.
• The gains for Indian shareholders too can be significant.

What are the challenges?

• SEBI has to synchronise its regulatory architecture with the leading global bourses.

• The treatment of such inflows of foreign funds is another issue.
• This gains significance both with monetary policy imperatives as well as economic policy.
• This is especially true in sectors with foreign direct investment restrictions.
• Taxation issues will be another complex issue to handle in this regard.
• All of these suggest that direct listing will not be an innovation that SEBI will materialise any time soon.
• However, there are significant gains to be garnered for both sets of players in such overseas listings norms.

Source: Business Standard