The government has permitted Indian companies to list on foreign exchanges, subject to certain conditions.

The corporate affairs ministry notified the relevant section under the company’s law on October 30.

At present, overseas listings by local listed entities are carried out through American Depository Receipts (ADRs) and Global Depository Receipts (GDRs).

“In exercise of the powers conferred by sub-section (2) of section 1 of the Companies (Amendment) Act, 2020 (29 of 2020), the Central Government hereby appoints the 30th day of October 2023 as the date on which the provisions of section 5 of the said Act shall come into force,” the ministry said in a notification on October 30.

The rules for direct overseas listing of Indian companies are yet to be notified.

Section 5 allows certain classes of public companies to list their securities on permitted stock exchanges in permissible foreign jurisdictions or such other jurisdictions, as may be prescribed.

Section 5 of the Amendment Act says, “The central government may, by notification, exempt any class or classes of public companies referred to in sub-section (3) from any of the provisions of this chapter, Chapter IV, Section 89, Section 90 or Section 127 and a copy of every such notification shall, as soon as may be after it is issued, be laid before both the Houses of Parliament.”

Abhimanyu Bhattacharya, Partner at Khaitan & Co. said: “There are several advantages for companies who want to directly list overseas which include attracting a larger and diverse pool of capital, improving corporate governance as well as benefits of dollar-denominated trades which enables investors to save hedging and currency conversion costs. This should also help the government’s plan to reverse flip holding structures of Indian companies as well.”

Nitesh Mehta, partner, M&A Tax, BDO India said: “This notification brings us one step closer to permitting Indian companies to list abroad. This could particularly be beneficial for new-age companies and start-ups looking to list abroad, where valuations and investor appetite/understanding may differ.”

“Depending on where the listing would be permitted, such companies could list without having to comply with listing parameters/requirements in India. However, one will need to wait for further details in this regard.

“Additionally, one of the key aspects to consider is the tax implications in India for foreign shareholders who trade such shares on overseas exchanges.”

The plan to allow public companies to list abroad was announced two years ago – and the Companies Act was also amended. But the proviso had not been notified at that time.

A senior government official, on July 28, said that initially, the plan is to allow companies to list at the International Financial Services Centre in GIFT City, Ahmedabad, and later, they can list in any of the eight to nine specified overseas jurisdictions.

There are two operational international bourses at the GIFT City — India INX of the BSE and NSE International Exchange (NSE IX). It is therefore likely that companies will be allowed to list on these bourses first. With inputs from
Mumbai Bureau