‘Fairly completed’ overseas listing process says Finance Minister

An Overview

The government will shortly finalise the taxes issues of Indian companies’ overseas stock listings. Finance Minister Nirmala Sitharaman said on Monday that government departments have attended a handful of discussions on tax problems related to offshore listing and that the process had been “basically done.”

Market participants have requested an exemption from capital gains tax on shares of an Indian firm transferred to an international market by non-residents. The Revenue Department was concerned about this. Officials from the department, as well as the ministries of Corporate Affairs and Commerce, have held two rounds of meetings on the subject, and the tax rules are nearing completion.

While the government works on tax concerns, Sitharaman claims that the Indian equities markets are becoming a refuge for raising capital. The recent successful listing of shares by several startups and mid-sized companies has boosted India’s fund-raising prospects.

Further Key Takeaways

The Centre declared in May that Indian companies would be able to list their shares directly on overseas stock exchanges, but rules and clarification on taxation issues are still pending. FM Sitharaman told reporters at a press conference on Monday that the economy is definitely emerging from the second wave’s hurdles and that recent legislative measures should boost economic activity. Even while the Centre continues to focus on growth, she expects inflation to remain low.

“Inflation will be well within its bounds, and I will not be concerned about that (the likelihood of growing inflation),” the FM stated. She also stated that the Centre would  not reduce excise duty on gasoline and diesel to provide relief from high costs, emphasising that payments in lieu of previously subsidised fuel are limited.

During the UPA government, petrol and diesel, as well as cooking gas and kerosene, were all sold at subsidised prices. Rather than spending for the subsidy to restore the retail selling price in line with the expenses that had risen due to international prices crossing $100 per barrel, the government generated crude bonds to state-fuel merchants totalling rupees one lakh crore. These oil bonds, as well as the interest on them, are presently being incurred.

“If I hadn’t had the burden of servicing the oil bonds, I would have been able to lower fuel excise duty… By issuing oil bonds, previous administrations have made our job more difficult. Even if I wanted to do something, I would have to pay through the nose for oil bonds,” she explained. In the last seven years, interest on oil bonds has totalled Rs 70,195.72 crore.

How about a hybrid model for direct Unicorn listing outside of India?

For a long time, Indian Unicorns and Startups have requested that their firms be listed outside of India without first being listed in India. And there’s no denying that this desire has merit: access to a larger pool of foreign capital, a broader investor base, much better valuations in some areas, and more freedom.

According to our existing legal framework, an Indian firm must first be listed in India before considering an ADR or GDR listing abroad (DRs). As part of the Atmanirbhar Bharat agenda, the Finance Minister committed action on allowing such an offshore listing, which the government followed through on by enacting an enabling provision in the Companies Act. The provision makes it easier to create rules for a listing transaction like this.

FAQs

What are the advantages of going public in a foreign country?

A foreign listing will provide Indian companies access to broader, more varied pools of capital, lowering their cost of capital and making them more competitive.

Is it possible for a foreign company to be listed on the NSE?

A foreign business can raise cash in the Indian securities market by issuing Indian Depository Receipts (IDRs).

Who has the authority to issue depository receipts?

A depositary receipt (DR) is a bank-issued negotiable certificate that represents stocks in an overseas business that are bought/sold on a domestic exchange. The depositary receipt allows traders to retain stocks in foreign countries’ stock and provides an alternative to trade on an international market.