SEBI to propose direct listing of Indian firms on foreign exchanges

Mumbai: A panel of 9 members was appointed by market regulator, Securities and Exchange Board of India (SEBI), to formulate new guidelines that can get Indian company shares directly listed in international stock exchanges. This will give overseas companies access to Indian stock markets.

If the report gets approved, Indian companies will be able to list their shares in jurisdictions like Hong Kong, Singapore, Australia, Luxembourg, Canada or even New York.

Simultaneously, MNCs can list their shares on Indian stock exchanges.

As per inside sources, the commission presided over by Mr Sujit Prasad (Executive Director of SEBI) will present the report and recommend amendments to Foreign Exchange Management Act (FEMA), Companies Act 2013 and Income Tax Act.

These amendments will affect (like impact on long-term and short-term capital gains taxes) accordingly.

Currently, FEMA specifies that overseas companies can only enter domestic markets via Indian Deposit Receipts (IDR). At the same time, Indian companies cannot list outside India without getting listed in India first unless the company goes through American Depository Receipts (ADR) and Global Depository Receipts (GDR).

IDRs have zero liquidity and trading volumes. GDRs and ADRs face currency conversion differences in the stock prices. This leaves investors the limited option of stocks.

It shows there is an apparent economic case to permit Indian equities to list directly on foreign exchanges.

The SEBI panel has already informed the Finance Ministry, RBI and Ministry of Corporate Affairs (MCA) about the recommendations. A meeting between the committee and representatives from MCA, RBI and Ministry of Finance was held on 27 November.

Risks related to currency fluctuations and current FEMA rule are the biggest hurdles here. Varying conversion rates will undoubtedly impact the rupee-denominated shares of Indian companies.

How India will handle this hurdle, only time will tell. For now, this risk would be on the investors.

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