Empowering Indian Companies with Overseas Listing to Access Global Capital

Listing a company in an overseas market is a transformative step for Indian businesses with global ambitions. It provides access to larger and more diversified pools of capital, enables benchmarking of valuations, and enhances brand visibility in developed markets. In May 2020, as part of the Aatmanirbhar Bharat Abhiyan, the Government of India announced measures to facilitate direct listing of Indian companies in overseas markets. This move aims to enhance the competitiveness of Indian businesses by providing them with access to diverse and cost-efficient sources of capital, a broader investor base, and improved valuations.

The Indian government has recently made a significant announcement that will open new doors for domestic companies seeking access to global capital. Finance Minister Nirmala Sitharaman revealed that Indian companies can now go for direct listing on foreign exchanges as well as on the International Financial Services Centre (IFSC) bourse in Ahmedabad. This move, which comes after three years of anticipation, is part of the Covid relief package and aims to provide much-needed financial flexibility to Indian businesses.

Facilitating Access to Global Capital

The approval to enable direct listings of securities by domestic Indian companies in foreign jurisdictions is a major step forward. It will allow these companies to tap into foreign funds by listing their shares on various exchanges overseas. This decision will not only provide access to global capital but also enhance the valuation of Indian companies, attracting international investors. The government's move is expected to have a positive impact on the growth ambitions of Indian businesses.

Why Indian Companies Seek Overseas Listing?

Indian companies are eager to explore overseas listing as it offers several advantages. By listing on foreign exchanges, companies can expand their investor base and attract international capital. This increased access to funds can fuel growth, support expansion plans, and enable companies to explore new markets. Overseas listing also enhances the global visibility and reputation of Indian companies, making them more attractive to potential investors.

1. Access to Broader Investor Base

Listing overseas opens doors to a larger pool of international investors, allowing Indian companies to diversify their investor base. International markets offer a more diverse range of institutional investors, including those with a deep understanding of emerging technologies and high-growth sectors. These investors are better equipped to value securities and appreciate the growth potential of new-age Indian companies, which often follow performance indicators that differ from traditional profitability and growth metrics.

2. Improved Valuations

Overseas listing provides Indian companies with access to specialized investor classes that can better value their securities. This leads to improved valuations, especially for technology-driven companies that may not be profitable in their early stages. International markets, such as the US stock exchanges, have a deeper technology investor ecosystem that understands the risks and potential of startups and technology firms. By tapping into these markets, Indian companies can achieve valuations that reflect their true potential and growth prospects.

3. Brand Visibility in Developed Markets

Listing overseas enhances brand awareness and recognition for Indian companies in developed markets such as the United States and Europe. Companies like Infosys, Wipro, ICICI, and HDFC Bank have already gained global recognition through their listings on international exchanges. Overseas listing provides an opportunity for Indian businesses to establish their presence on the global stage, attracting international investors and expanding their customer base. It positions them as global players and opens doors for international collaborations and partnerships.

The Journey Towards Overseas Listing

1. Eligibility Criteria

To pursue overseas listing, Indian companies must meet certain eligibility criteria. While specific regulations are yet to be framed, the Companies Act, 2013 will serve as the foundation for the framework. The eligibility criteria may include factors such as track record, financial performance, corporate governance practices, and compliance with international accounting standards. These criteria ensure that only companies with a proven track record and strong financial standing can access the benefits of overseas listing.

2. Regulatory Framework and Compliance

The regulatory framework for overseas listing is being developed by the government, the Securities and Exchange Board of India (SEBI), and the Reserve Bank of India (RBI). The framework will outline the rules and guidelines for the process, ensuring transparency, investor protection, and compliance with international standards. Indian companies seeking overseas listing will need to adhere to the regulatory requirements of both their home country and the jurisdiction in which they plan to list. This includes fulfilling disclosure obligations, financial reporting standards, and governance requirements.

3. Choosing the Right Overseas Stock Exchange

Indian companies will have the opportunity to choose from a range of overseas stock exchanges for their listing. Initially, the International Financial Services Centre (IFSC) in GIFT City, Ahmedabad, will serve as a platform for companies to list. Subsequently, companies will have the flexibility to list on specified exchanges in various jurisdictions. This opens up possibilities for listings in established financial centers such as London, New York, Singapore, and others. The choice of stock exchange will depend on factors such as the company's target investor base, industry focus, and regulatory requirements.

4. Listing Process and Timeline

The listing process for Indian companies in overseas markets involves several key steps. These include:

  1. Preparation and Due Diligence: Companies must ensure they meet the eligibility criteria and undertake thorough due diligence. This includes assessing their financial position, compliance with regulations, and readiness for international listing.
  2. Engaging with Advisors and Intermediaries: Companies often engage with investment banks, legal advisors, and financial consultants who specialize in overseas listings. These experts guide companies through the entire process, from preparing the necessary documentation to coordinating with regulatory authorities and stock exchanges.
  3. Preparing the Prospectus or Offering Memorandum: The prospectus or offering memorandum is a comprehensive document that provides detailed information about the company, its business operations, financials, risks, and growth prospects. It is a vital component of the listing process, serving as a key communication tool for potential investors.
  4. Filing and Regulatory Approvals: Once the prospectus or offering memorandum is prepared, it is filed with the regulatory authorities in both the home country and the jurisdiction of the chosen stock exchange. Regulatory approvals and clearances are obtained to ensure compliance with relevant laws and regulations.
  5. Marketing and Investor Roadshows: Companies engage in marketing activities to create awareness and generate interest among potential investors. This includes conducting investor roadshows, participating in industry conferences, and leveraging the expertise of investment banks to attract institutional investors.
  6. Pricing and Allocation of Securities: The pricing of the securities is determined based on market conditions and investor demand. The allocation of securities is done in consultation with investment banks and underwriters, ensuring a fair and transparent process.
  7. Listing and Trading: Once all regulatory requirements are met, the company's securities are listed on the chosen stock exchange. Trading commences, allowing investors to buy and sell the company's securities.
  8. Ongoing Compliance and Reporting: Following the listing, companies must adhere to the ongoing compliance and reporting requirements of the stock exchange and regulatory authorities. This includes regular financial reporting, disclosure of material events, and adherence to corporate governance standards.

Government's View and Implications for Global Capital Access

The government's decision to enable direct overseas listing reflects its recognition of the potential benefits for Indian companies seeking global capital. While the move to bolster the local capital market is understandable, overseas listing provides Indian businesses with an opportunity to access a wider range of capital sources, attract foreign investments, and expand their global footprint. It also fosters competition and innovation, as companies strive to meet the stringent standards of international exchanges.

From the perspective of global capital access, overseas listing opens doors for international investors to participate in India's growing startup ecosystem and invest in high-potential Indian companies. It allows for greater diversification of investment portfolios and provides international investors with exposure to the fast-growing Indian economy. This move aligns with India's vision of becoming a preferred investment destination and further strengthens its position in the global financial landscape.

In conclusion, overseas listing presents a significant opportunity for Indian companies to unlock global opportunities, access diversified sources of capital, and enhance their visibility on the global stage. While the government's decision to enable direct overseas listing marks a positive step, it is crucial for companies to navigate the regulatory landscape, engage with experienced advisors, and ensure compliance with international standards. With the right approach, Indian companies can leverage overseas listing to fuel their growth, attract global investments, and establish themselves as competitive players in the global market.

Corpzo: Your Partner in Overseas Listing

For Indian companies considering overseas listing, Corpzo is here to assist and guide you through the entire process. As a leading financial services provider, Corpzo has a deep understanding of the international listing landscape and can provide comprehensive support tailored to your specific needs. Our team of experts will ensure compliance with regulatory requirements, conduct due diligence, and help you navigate the complexities of overseas listing. With Corpzo by your side, you can confidently explore new avenues for growth and access global capital