Home / Market / Stock-market-news /  Foreign bourses try to attract Indian firms to list overseas

Mumbai: Foreign stock exchanges are trying to attract Indian companies to list on them by taking advantage of a two-year window provided by the Indian government to unlisted companies to sell shares overseas before they do so at home.

Overseas bourses like the London Stock Exchange, Tokyo Stock Exchange and the SIX Swiss Exchange have been meeting Indian firms, trying to convince them of the benefits of listing abroad. No Indian company has taken advantage of the option offered by the government in December 2013.

Executives from SIX Swiss Exchange Ltd and Tokyo Stock Exchange Inc. were in Mumbai earlier this month to meet Indian companies. Officials of London Stock Exchange Plc started meeting company representatives in India earlier this year.

The recent visit saw extensive discussions with potential issuers and companies from certain sectors showed “excellent interest levels", said Tarun Gupta, the official SIX Swiss Exchange India representative.

“The sectors from which we get the major interest are life sciences, consumer goods—and food production in particular—speciality chemicals and industrials including auto components. There is special interest also from Indian conglomerates that have large European assets and businesses, and are looking to list those businesses separately," he said.

Indian companies stand to gain by listing in Switzerland, which has more than 2,000 active pension schemes managing assets of nearly $800 billion (around 50 trillion today), along with family offices and ultra high networth individual investors, according to Gupta.

Data from the World Federation of Exchanges (WFE) shows that overseas listings are yet to gain traction globally and in India. According to WFE, a total of nearly 44,000 companies are listed on 55 of the leading exchanges of the world and only 2,418—less than 6%—of these entities are categorized as foreign. Only a few exchanges like Bermuda Stock Exchange, Singapore Exchange, Luxembourg Stock Exchange and New York Stock Exchange have a significant number of foreign companies listed on their platform.

Nearly 100 Indian companies have securities listed overseas, but most of these are in the form of depository receipts with the underlying equity shares listed on the domestic bourses.

A few Indian companies have shown interest in listing in the Japanese market, said Hidetoshi Nagata, head of global listings at the Tokyo Stock Exchange.

“The advantage of listing at TSE (Tokyo Stock Exchange) is that the cost for making an initial public offer is low, but liquidity is very high," Nagata said. “The costs are low because of zero legal costs as companies do not hire lawyers for the listing process, though Indian companies will have to hire a legal team."

Some seven companies from the technology, biotech, medical and infrastructure sectors have approached the exchange for a possible listing, according to Nagata, who declined to disclose the names of the companies.

Experts say that companies from certain sectors could benefit from listing overseas due to a better understanding and benchmarking of those business models in developed markets compared with India.

“Some markets would be more familiar with certain sectors or industries and help with more effective price discovery. For instance, technology companies often list on the Nasdaq while there are many energy and resources companies listed in Canada," said Bobby Parikh, chief mentor and partner at BMR and Associates Llp, a financial advisory firm.

Prior to the government relaxation, it was mandatory for companies to list in India before listing any securities overseas. Dr Reddy’s Laboratories Ltd, HDFC Bank Ltd, ICICI Bank Ltd, Infosys Ltd, Sesa Sterlite Ltd, Tata Motors Ltd and Wipro Ltd are some of the Indian entities that have listed American depository receipts on US-based exchanges.

Last year, a report by the committee headed by former whole time member of the Securities and Exchange Board of India M.S. Sahoo suggested that the government liberalize norms related to issue of depository receipts and not insist on a prior domestic listing.

“If a domestic firm finds that offshore market serves its interests better, it should have unhindered access to that market even if it amounts to export of capital. The requirement of domestic listing before accessing offshore market does not gel with the contemporary thought process and current state of the Indian economy," Sahoo said in a phone interview on Friday.

He, however, added that there should be a complementary and competitive regime that allows for foreign firms to list in India more easily. While Indian regulations do allow foreign firms to list Indian Depository Receipts (IDRs) on domestic bourses, only one entity—Standard Chartered Plc—has opted for IDRs.

According to Parikh of BMR and Associates, the listing guidelines vary across the markets and one of the benefits that Indian companies can derive from an overseas listing is that certain bourses have more flexible listing regulations relative to Indian exchanges.

SIX Swiss Exchange says that under Swiss laws, the approval process for an initial public offerings has to be completed in only four weeks, which is a far shorter time frame compared with other exchanges.

Tokyo Stock Exchange highlights the fact that Indian companies do not need to have a presence in Japan to be eligible for a listing.

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.
Recommended For You
Edit Profile
Get alerts on WhatsApp
Set Preferences My ReadsFeedbackRedeem a Gift CardLogout