India weighs compulsory domestic listing for firms joining foreign markets

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Indian companies that list overseas will have to later launch on a domestic bourse under policy changes being considered by government officials, sources told Reuters, a move that global investors fear will harm valuations.

India said in March it would allow local firms to directly list abroad to better access foreign capital for growth, but the rules have yet to be decided. Currently, only certain types of securities such as depository receipts are able to be listed in foreign markets, and only after the companies go public in India.

The new policy, aimed at helping local firms achieve better valuations, could be a shot in the arm for Indian unicorn startups valued at over $1 billion and Reliance’s digital unit which is eyeing a US listing after raising over $20 billion from global names like KKR & Co.

But in recent weeks Indian officials told global investors and companies in meetings they were considering mandating a secondary listing for local companies on Indian bourses after they list abroad, five sources said. The time period under consideration for such a requirement ranges from 6 months to 3 years, sources said.

A separate senior regulatory source in India said “dual listing was being considered by the (finance) ministry for sure,” but a final position on the matter has not been reached.

Japan’s SoftBank and an Indian payment firm it backs, Paytm, as well as Reliance and US-based Sequoia Capital have conveyed to the government the secondary listing provision risks splitting trading volumes, hurting long-term valuations and raising compliance needs and costs, the sources added.

“To require companies to subsequently list in India will make these rules meaningless,” said a senior executive working at a global venture-capital firm.

SoftBank and Sequoia have invested in various Indian firms like ride-hailing company Ola and hospitality firm Oyo. Foreign listings could provide exits for such investors at higher valuations but also allow Indian firms, especially from the tech sector, to access specialised investors abroad who can better value their companies.

The rules are being drafted by the finance and corporate affairs ministries, in discussion with the capital markets regulator Securities and Exchange Board of India (SEBI), and will be finalised in coming weeks.

Spokespeople for SEBI and the two ministries did not respond to a request for comment. A SoftBank spokeswoman said “we never comment on confidential policy discussions”. Sequoia, Paytm and Reliance did not respond to requests for a comment.

Going for growth

Currently, Indian companies can list locally and then access foreign equity capital through instruments like American Depository Receipts (ADRs), a route used by India’s Infosys and ICICI Bank.

India is concerned that the upcoming policy change will mean that companies hunting for higher valuations through access to a wider group of investors, would choose to only list abroad, the sources said. That risks hitting the growth ambitions of Indian capital markets and depriving local investors of the wealth-creation opportunity.

“The government needs to balance Indian aspirations so that (domestic) investors can invest in these companies,” said Siddarth Pai, Founding Partner at Indian investment firm 3one4 Capital. “This is a trailblazing endeavour, if India plays its cards right.”

India’s equity market has a capitalisation of $2 trillion, compared with $39.3 trillion for the United States.

Between January and June this year, companies raised $23.6 billion via 63 initial public offerings (IPOs) on the New York Stock Exchange and Nasdaq, compared with $2.3 billion raised on Mumbai’s stock exchanges through 18 listings, data from Refinitiv showed.

Lobbying group USIBC, part of the US Chamber of Commerce, has this week been seeking feedback on the plan from members in an e-mail saying “the hope is” there will be no dual listing requirement.

A 2018 SEBI report listed 10 possible foreign markets for overseas listings, including the United States and the United Kingdom.

Reuters

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.