Govt makes it easier for firms to list abroad

Local companies can now list and raise capital abroad without having to list within the country either before or after the event.

“At present, unlisted companies that are incorporated in India are not allowed to directly list in overseas markets without prior or simultaneous listing in Indian markets. It has now been decided... 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 release.

This will be implemented on a pilot basis for the first two years.

According to experts, the move serves the twin purpose of raking in foreign exchange and providing alternative fund-raising avenues to companies in order to fuel capital expenditure as the cost of funds within the country remains high.

“This is a step in the right direction. Eighty percent of the total borrowing of $390 billion is from the non-government sector, and it has been increasing. With this, the government has encouraged them to reduce debt as well as raise capital inflows,” said Bhupali Gursale, economist, Angel Broking.

The companies listing will, however, be allowed to list only in countries that are compliant with the International Organisation of Securities Commissions or Financial Action Task Force norms to make sure that the country concerned is not involved in any terrorism related activity.

Also, the listing company will have to remain compliant with the foreign direct investment policy in force.

The capital raised abroad may be utilised for retiring outstanding overseas debt or for operations abroad, including for acquisitions. This particular aspect may come very handy for the India Inc as short-term corporate debt worth $172 billion is maturing by March 2014.

If the money raised is not utilised abroad, it will have to remit the money back to India in 15  days, to be parked only in the institutions recognised by the Reserve bank of India.

“Ministry of Finance, Department of Industrial Policy and Promotion and Reserve Bank of India  would be issuing the necessary notifications in due course in order to implement the required changes to the existing rules,” the release stated.