India prepares for direct listing of companies abroad

In a significant move for India’s financial landscape, the ministries of finance and corporate affairs are in the final stages of crafting a framework that will enable Indian companies to directly list their shares abroad.

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The ministries of finance and corporate affairs in India are in an advanced stage of finalizing a long-awaited framework for the direct listing of Indian companies abroad. This framework is expected to be introduced later in this financial year, according to sources familiar with the matter. 

The initiative aims to provide unicorns and other entities with easier access to a larger pool of foreign capital. Additionally, it is anticipated that this move could encourage a greater number of startups, led by Indians, to incorporate within India instead of opting for jurisdictions such as Singapore. 

Initially, the framework will be applied to enable direct listings at the International Financial Services Centre (IFSC) located in Gujarat’s GIFT City. Subsequently, it will govern listings in other jurisdictions as and when the government decides to permit such listings.

“The Department of Economic Affairs (DEA) and the Ministry of Corporate Affairs (MCA) are in the process of finalizing rules that will facilitate the direct listing process. The comprehensive framework being developed will apply to future listings in all international jurisdictions, not limited to the IFSC.” mentioned by one individual, who preferred to remain anonymous.

In July, Finance and Corporate Affairs Minister Nirmala Sitharaman announced that Indian companies would soon have the opportunity to directly list their shares on the exchanges at the Gujarat International Financial Services Centre (IFSC). She stated, “This is a major step forward. This will facilitate access to global capital and better valuation.”

The revenue department has expressed concerns regarding the potential loss of revenue resulting from direct listings, especially concerning tax treatment involving big foreign investors in cases where they exit a domestic company listed on foreign exchanges.