“The government has taken a decision to enable direct listing of listed and unlisted companies on the IFSC exchanges,” Sitharaman said, speaking at an event organised by capital markets regulator Sebi here.
Terming this as a “major step”, Sitharaman said this will help facilitate access to global capital and also get better valuations.
A senior finance ministry official said the government will notify the rules in the next few weeks.
Initially, companies will be allowed to list at the International Financial Services Centre in GIFT City, Ahmedabad, and later, companies can list in any of the eight to nine specified overseas jurisdictions, the official said.
Currently, overseas listings by domestically listed entities are carried out through American Depository Receipts (ADRs) and Global Depository Receipts (GDRs), which companies like Infosys and Wipro have done.
Some companies like Makemytrip have chosen to list in exchanges like Nasdaq abroad.
The new policy allowing direct overseas listing could be a shot in the arm for unicorns or startups valued at more than USD 1 billion, and the digital unit of conglomerate Reliance, which is eyeing a US listing after raising more than USD 20 billion from investors such as KKR, Google and Facebook.
The finance ministry official cited past instances of companies going abroad for listing, and added that this is an alternative given to investors.
For the direct overseas listing framework, an enabling provision would be made under the Companies Act, 2013.
Sitharaman is also in charge of the corporate affairs ministry, which is implementing the companies law.
However, an investment banker wondered about the need for such a move now, pointing out that the domestic capital market with a market capitalisation of USD 4 trillion are strong and liquid enough to take care of any company’s capital requirements.
Earlier, media reports said the government was considering allowing foreign listings in seven countries initially, including Britain, Canada, Switzerland and the US.
The Securities and Exchange Board of India (Sebi) had previously recommended a framework within which such direct listing will be facilitated, and it is expected that the Sebi framework will be the basis for future regulation in this area.
Sebi had proposed allowing listings on stock exchanges in ten “permissible jurisdictions” with strong anti-money laundering regulations, including the NYSE, Nasdaq, the LSE and Hong Kong, along with other major exchanges in Japan, South Korea, France, Germany, Switzerland and Canada.
Sitharaman made the announcement about the direct overseas listing of domestic companies while speaking at an event to launch a corporate debt market development fund, which is a bailout facility for debt funds.
The facility will act as a backstop facility for specified debt funds during periods of stress in debt markets, and this was announced by Sebi last month. Its function will involve purchasing investment-grade corporate debt securities when debt markets face a crisis.
The move is likely to bolster the confidence of mutual funds and investors in the corporate debt markets while also improving secondary market liquidity in corporate debt securities. SBI Funds Management will serve as the investment manager of the CDMDF.
Existing market norms mandate a domestic firm looking for overseas float to make a secondary listing on the domestic equity bourses or first going for a domestic float.
The corporate debt market development fund will act as a backstop facility for specified debt funds during periods of stress in debt markets, and this was announced by Sebi last month.
Sitharaman also launched repo clearing for asset management companies which is billed as a limited purpose clearing corporation backed by Sebi and funded by mutual funds.
