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Indian Government Grants Permission for Local Companies to List on Foreign Exchanges Under Specific Conditions

The Ministry of Corporate Affairs has issued a notification under the Companies (Amendment) Act, 2020 (29 of 2020), setting the effective date as October 30, 2023. This move allows certain classes of public companies to list their securities on eligible stock exchanges in foreign jurisdictions, subject to future rules and notifications.

Previously, Indian companies conducted overseas listings through American Depository Receipts (ADRs) and Global Depository Receipts (GDRs). The direct overseas listing rules are yet to be finalized.

Direct overseas listing offers various advantages, such as accessing a broader and more diverse capital pool, enhancing corporate governance, and facilitating dollar-denominated trading, which can reduce hedging and currency conversion costs. This development aligns with the government’s objective to restructure the ownership structures of Indian companies.

Nitesh Mehta, Partner at BDO India, highlights the potential benefits for new-age companies and startups seeking international listings, but emphasizes the importance of understanding tax implications for foreign shareholders trading shares on foreign exchanges.

Initially, companies are expected to list at the International Financial Services Centre in GIFT City, Ahmedabad, followed by potential listings in specific overseas jurisdictions. The GIFT City currently houses two operational international bourses, India INX and NSE International Exchange (NSE IX), making them likely candidates for initial listings.

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