The Union Cabinet may clear amendments to the Companies Act on Wednesday — including allowing Indian companies to directly list overseas — a proposal that has been backed by global investment giant SoftBank, Indian Venture Capital Association and industry lobby groups CII and Ficci.
The proposal, which has already been approved by a group of ministers looking into the Companies Act, will be part of a bill that seeks to decriminalise over 40 sections of the law to ease the compliance burden on the corporate sector. The amendment bill is expected to be moved by finance and corporate affairs minister Nirmala Sitharaman during the current session of Parliament.
While the proposed changes will pave the way for overseas listing, sources said the ministry of corporate affairs (MCA) will draft the guidelines, and tax authorities, Sebi & the RBI will also need to amend the statutes and rules.
“The ministry of finance (department of economic affairs), ministry of corporate affairs, Sebi and the RBI, etc, are involved to examine and implement framework to carry necessary amendments for enabling such listing. The listing on foreign stock exchanges is likely to increase competitiveness of Indian companies in terms of access to capital, broader investor base and better valuations, thus benefiting health of the Indian economy,” the MCA told Lok Sabha in reply to a question.
In its January 23 edition, TOI was first to report that the government is set to allow Indian companies to directly list overseas. Currently, they can raise capital through global and American depository receipts, which have become less attractive in recent years. Depository receipts are securities listed overseas as instruments against shares of listed domestic companies.
On Monday, the government informed Parliament that SoftBank has written to the economic affairs department, with sources saying the Japanese giant, which has invested in several Indian companies, ranging from Oyo, Ola to Paytm, has suggested that proposed move will open a new way to access capital, something that was allowed in several markets such as China, which provided a good exit option for investors, while also allowing global players to directly invest.
SoftBank refused to comment. “We do not divulge details of confidential discussions with government,” a spokesperson said.
Source : Financial Express