Sebi Panel Recommends Direct Listing of Firms On Foreign Stock Exchanges

An expert committee set up by the Securities and Exchange Board of India (Sebi) on Tuesday recommended that the market regulator allow listing of Indian companies on foreign exchanges even without getting listed in India. Such a framework would help Indian companies to access foreign capital at lower cost, said the report. Under the current regulations, any company incorporated in India but not listed on an Indian exchange is not permitted to list its shares on a foreign stock exchange. Similarly, companies incorporated outside the country cannot directly list their equity shares on Indian stock exchanges.

The committee in its 29-page report also advised the security markets regulator to allow foreign companies to get directly listed in Indian stock exchanges.

Sebi has sought comments on the report by December 24.

"Listing may be allowed only on specified stock exchanges in 'permissible jurisdictions'," read the report submitted to Sebi.

A "permissible jurisdiction" would mean a jurisdiction which has treaty obligations to share information and cooperate with Indian authorities in the event of any investigation. The exchanges where Indian companies can list their shares as per the report include the NASDAQ, NYSE in the US, the Shanghai Stock Exchange and Shenzhen Stock Exchange in China, the London Stock Exchange and the Hong Kong Stock Exchange, among others.

The report further said: "As regards listing of a listed Indian company on foreign stock exchanges, such a company shall comply, at all times, with rules/regulations/laws/initial and continuous listing/disclosure requirements, as are applicable to companies listed in India."

Companies incorporated in India, under the present legal framework, have to list their debt securities on foreign stock exchanges directly through the "masala" bonds or foreign currency convertible bonds. On the other hand, companies incorporated outside India can access the Indian capital markets only through the Indian Depository Receipts framework. 

According to the panel, along with allowing cheaper access to foreign capital for Indian firms, the permission for listing would also in turn help the Indian economy grow further.

"Similarly, equity listings of companies incorporated outside India on Indian Stock Exchanges would improve the efficient allocation of capital and diversification for investors across the Indian economy," said the report.

SEBI had constituted the committee to look into the prospects of Indian companies getting directly listed on foreign exchanges on June 12.