Govt gives lifeline to cash-starved India Inc, allows listing abroad easier

New Delhi: India has allowed domestic companies to list and raise capital overseas without first being listed on local exchanges, the finance ministry said on Friday, in the latest of a series of steps to boost capital inflows.

Policymakers have stepped up efforts in recent months to attract foreign investment as India faces a current account deficit of around $70 billion this fiscal year.

The rupee fell as much as 20 percent this year to a record low on August 28.

[caption id=“attachment_1138305” align=“alignright” width=“380”]  Foreign currency traders work inside a trading firm behind the signs of various world currencies. Reuters[/caption]

While the latest move is not expected to trigger a rush of overseas listings, bankers said it would be welcomed by companies in the information technology sector and those backed by private equity firms.

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“What we will see is an increase in level of conversations over the next few months but if you ask me whether we will see seven listings in the U.S. in the next one year or so, the answer is no,” said a banker at a large European bank in Mumbai.

Many unlisted mid-sized firms that would be candidates to list abroad would find it hard to meet regulatory requirements and cost structures for overseas markets, two bankers said.

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But some companies, especially in the export-driven information technology sector, are expected to explore listing opportunities in the United States or London in coming months, they said.

Big IT exporters, including Infosys and Wipro , are already listed both in India and in the United States.

Some private equity investors, who have been unable to exit their investments partly due to poor domestic market sentiment, may also explore overseas listing of their portfolio companies, bankers said.

The concession on listing abroad will be allowed as a pilot for two years, after which the finance ministry will review its impact, the ministry said in a statement.

Companies listing abroad can use the funds raised only to repay outstanding foreign debt or for overseas operations including acquisIions, the finance ministry said. If the funds are not used for these purposes, they will have to be remitted to India within 15 days of being raised.

Reuters