Indian private firms temporarily allowed to go public overseas without the rider of local listing

The Indian government has decided to allow unlisted companies in India to raise capital abroad through a public listing without the requirement of prior or subsequent listing locally.

At present, unlisted companies that are incorporated in India are not allowed to directly list in overseas markets without prior or simultaneous listing in Indian markets. However, a few firms have devised ways to sidestep the rule by forming an overseas incorporated holding company which in turn owns firms or assets in India and take such firms public abroad.

In an official note, the Ministry of Finance (MoF) said it has been decided to allow unlisted Indian companies to list overseas on a pilot basis for two years to begin with.

After the initial two-year period, the impact of this arrangement will be reviewed.

The approval to list abroad is subject to certain conditions such as the firms can list only on exchanges in IOSCO/FATF compliant jurisdictions or those jurisdictions with which Indian securities market regulator SEBI has signed bilateral agreements.

It said that such companies shall file a copy of the return which they submit to the proposed exchange/regulators also to SEBI for ensuring compliance with the Prevention of Money Laundering Act (PMLA). They shall also comply with SEBI’s disclosure requirements in addition to that of the primary exchange prior to the listing abroad.

Such firms will also have to comply with the FDI policy in force. For instance, an e-commerce firm incorporated in India cannot go and list overseas through the window.

Another condition is that the capital raised overseas may be used for retiring outstanding overseas debt or for operations abroad, including for acquisitions. If such funds are not used abroad as stipulated, such companies shall remit the money back to India within 15 days and such money shall be parked only in AD category banks recognised by RBI.

The MoF, Department of Industrial Policy and Promotion (DIPP) and Reserve Bank of India (RBI) would be separately issuing the necessary notifications in due course to implement the required changes to the existing rules.

(Edited by Joby Puthuparampil Johnson)

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