Mutual Fund

Sebi committee to recommend direct listing of Indian companies on foreign exchanges

A nine member committee constituted by Securities and Exchange Board of India (Sebi) is looking to make recommendations that could lead to Indian companies listing their shares directly on stock exchanges outside India and foreign companies accessing Indian stock markets. The recommendations, if accepted, could lead to Indian companies directly listing their shares outside India in jurisdictions such as Singapore, Luxembourg or even New York. At the same time multinationals, that don’t have a presence or permanent establishment in India, would be able to directly list their shares on Indian stock exchanges. The committee headed by Sujit Prasad, executive director of Sebi, would submit the report and make recommendations to tweak Foreign Exchange Management Act (FEMA)framework, Companies Act and Income Tax regulations, said two people with direct knowledge of the matter. As per the current regulations foreign companies can only access domestic markets through Indian Deposit Receipts (IDR). And Indian companies can list abroad, but they first have to list in India. The other way to access investors directly outside India is through Global Depository Receipts (GDR) and American Depository Receipts (ADR). While IDRs don’t have liquidity and One of the biggest problems that the direct listing of security would face is the currency risk and FEMA regulations. Unlike the Masala Bonds— a route to list Indian debt securities on international exchanges— stocks need to have a free float and could have currency fluctuation risks. For this to happen RBI needs to tweak the FEMA regulations and some changes have to be made in the Companies Act, both the persons quoted above said. The SEBI itself wants to focus on the KYC norms to make sure that dubious investors do not trade in Indian stocks when listed on international stock exchanges.

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