07-Nov-2023
2 mins read
In a significant move for Indian corporations, the Ministry of Corporate Affairs has activated a new provision as of October 30, under the Companies Act, 2020. This comes following prior announcements by Finance Minister Nirmala Sitharaman, paving the way for public companies in India to reach global markets.
The Amendment in Detail
The pivotal amendment to Section 23 of the Companies Act now permits “such class of public companies” to issue securities for listing on stock exchanges in foreign territories deemed permissible. This change ushers in an era where Indian companies can directly tap into overseas capital markets, offering a greater flexibility and scope for raising capital.
Global Exposure, Local Growth
This move is anticipated to benefit the Indian economy by attracting foreign investment and improving corporate governance. It is a strategic component of the Covid relief package announced back in May 2020, which included provisions for direct overseas listing to foster economic recovery.
Finance Minister’s Vision
Highlighting the importance of this development, Finance Minister Sitharaman expressed her enthusiasm about Indian companies gaining direct access to foreign jurisdictions for listing their securities. Emphasizing the positive implications, she pointed out the potential for accessing global capital and securing better valuations.
Phased Implementation Strategy
The government’s cautious approach will first see listings at the International Financial Services Centre (IFSC) in GIFT City, setting a precedent before expanding to other international exchanges. This strategy aims to streamline the transition for Indian businesses to international markets.
Impact on Indian Market Norms
Previously, Indian companies aiming for international listings had to contend with stringent domestic listing prerequisites. The norm dictated a secondary listing in India post an overseas one, with ADRs and GDRs being the primary methods used by giants like Infosys and Wipro.
A Boon for Startups
This regulatory relaxation is particularly beneficial for startups seeking capital infusion from global public markets without the limitations of domestic listing. It stands as a progressive move, potentially altering the Indian entrepreneurial landscape by offering a broader platform for fundraising.
As the Indian business community awaits further details from the MCA on the specific securities allowed for foreign issues, the trajectory points towards an interconnected global market where Indian companies stand to make their mark more significantly than ever.