In the last seven months of 2021, as the market regained momentum after reeling under pressure for long under the pandemic, 28 companies have completed IPOs, 34 have filed offer papers, and over 50 others are in line. The burgeoning startup world is going public to tap the unprecedented liquidity.
As startups are lining up for Dalal Street, with Policybazaar and Nykaa putting out their draft red herring prospectus to list in India, several others want the option to list abroad. However, India that always have been a conservative market, has concerns with direct overseas listings.
Meanwhile, local startup founders have recently written a letter to Indian Prime Minister Narendra Modi explaining that concerns about direct listing abroad will hurt the domestic market are unfounded. A group of founders of local Indian startups are asking for Indian companies to be allowed to list on overseas markets directly.
Government of India thinking on similar lines
In December 2019 consultation paper from SEBI (Securities and Exchange Board of India) was made that proposed to allow Indian companies to list on foreign exchanges without first being listed in India. Currently, a locally incorporated company can only list on a foreign stock exchange after first being listed in India.
Cut to May 2020, Finance Minister Nirmala Sitharaman indicated that the government would allow domestic companies to list their shares on overseas exchanges directly. However, nothing concrete was done in this direction in regards to policy change.
As per reports, the government is said to be concerned that allowing overseas listings could mean that companies seeking higher valuations would choose only to list abroad, thereby hurting the prospects of Indian markets.
The letter signed by around 22 investors and founders of prominent Indian startups noted that the government has previously indicated its intent to allow direct overseas listing of Indian companies by amending the Companies Act. The letter also stated that government concerns on setbacks to the domestic markets are speculative.
The letter mentions that “Most Indian startups do not have a level playing field with their counterparts in other global startup hubs.” It further reads that the inability to tap international markets to raise capital is “an impediment to the growth ambitions” of Indian startups and results in the migration of firms to other jurisdictions.
Since the May 2020 indication, the government has yet to announce rules to govern overseas listings by domestic companies, which it says will offer major exchanges worldwide the option to compete for India’s rapidly growing startups.
The letter said allowing overseas listings would be the “single most significant, big-bang reform” for the startup ecosystem. It would instantly pave the way for many Indian companies to be on the global map.