Condition free foriegn listing to help companies raise funds, finance govt's CAD

NEW DELHI: The government has allowed unlisted companies to list on overseas stock exchanges without any conditions, a move which will help firms raise funds and aid the government finance the country’s yawning current account deficit.


“It has now been decided with the approval of the Union finance minister that unlisted companies may be allowed to raise capital abroad without the requirement of prior or subsequent listing in India,” the finance ministry said in a statement on Friday.

Companies listing abroad will be able to use the capital to retire outstanding overseas debt or for operations abroad including acquisitions, the ministry said, adding that funds not used within 15 days will have to be remitted to India. The listing company, however, shall also have to comply with the FDI policy, which means sectoral caps, if any.

ET had reported on August 21 that the government was considering this proposal. Listing has been allowed only on exchanges in IOSCO, Financial Action Task Force compliant jurisdictions or those jurisdictions with which market regulator Sebi has signed bilateral agreements.

For compliance under the Prevention of Money Laundering Act, these companies will have to keep with Sebi a copy of the return they submit to the proposed exchange or regulators. They will also have to comply with Sebi’s disclosure requirements in addition to that of the primary exchange prior to the listing abroad, the statement said.

The high-level committee on external commercial borrowings, which has representation from the finance ministry and the Reserve Bank, had discussed the proposal after which the department of economic affairs was tasked to draft a scheme. Unlisted companies are allowed to raise overseas debt and letting them raise equity through listing abroad will bring balance in the policy.

The move is expected to benefit entities in sectors understood and appreciated better overseas and get them better valuations.

For example, mining and metals is a favourite on the Toronto stock exchange. The government has, in the recent months, relaxed its FDI regime and put investments in many sectors on the automatic route to attract long-term and stable capital. into the country to finance its current account deficit, which is pegged at $70 billion for the financial year 2013-14.