Why 2021 may see more startups from India listing abroad
India’s internet ecosystem has been abuzz with the anticipation of finally witnessing IPOs of many celebrated tech startups. It seems 2021 may see a few listings either in India or overseas. Mint explores the ways for firms to list on foreign exchanges with or without an IPO
India’s internet ecosystem has been abuzz with the anticipation of finally witnessing IPOs of many celebrated tech startups. It seems 2021 may see a few listings either in India or overseas. Mint explores the ways for firms to list on foreign exchanges with or without an IPO.
Can Indian startups list overseas?
Last September, the Companies (Amendment) Bill 2020, earlier mentioned in budget 2020, was passed by the Rajya Sabha. The bill seeks to amend Section 23 of Companies Act 2013, which deals with public offerings and private placements. The Centre along with RBI and Sebi are working on the framework for such listings. A 2018 Sebi committee had suggested 10 permissible foreign jurisdictions for Indian companies to list overseas, including the US, the UK, HK, China and Japan. So far, firms can list their debt securities only through American Depository Receipt (ADR) or Global Depository Receipt (GDR).
What are the benefits of listing abroad?
An overseas listing will allow Indian firms to access larger and more diversified pools of capital, reducing their cost of capital and, thus, make them more competitive. For tech startups, listing on the US stock exchanges can help them attain more accurate valuation of their companies, since these markets have a deeper technology investor ecosystem that understands the risks involved in startups and technology firms better. An overseas listing can also increase brand awareness and recognition of Indian startups as they look to grow beyond India and make their mark in foreign markets.
Can tech companies list on the Indian bourses ?
Yes, new-age tech startups can list on Indian exchanges too. Particularly mature firms, which have achieved scale can go for a domestic listing. Sebi requires firms to have a minimum of ₹15 crore in pre-tax operating profits for at least three years, and a few other criteria. However, firms that do not meet these criteria can still go ahead with an IPO under the QIB route.
What is an SPAC and how does it work?
An SPAC or special purpose acquisition company, or blank cheque company, is an entity that has no commercial operations of its own, but raises money through an IPO with the specific aim of acquiring a company with operating assets. After raising the money, since there is no existing operational firm to price the shares, the SPAC has a two-year period to close an acquisition or the money has to be returned to investors. SPACs have seen a boom since the outbreak, which wrecked the traditional IPO market.
Have Indian firms used SPAC route in the past?
Yes, Indian companies can list on US stock exchanges through the SPAC route. In 2016, online travel portal Yatra.com merged with Terrapin 3 Acquisition Corp. in a transaction that valued the firm at $218 million. In 2015, Videocon d2h Ltd sold a 33.5% stake in the firm to Silver Eagle Acquisition Corp, a Nasdaq-listed SPAC, for $375 million. Mint has reported that Grofers is eyeing an indirect US listing through a SPAC merger. ReNew Power Pvt. Ltd, a major renewable energy producer, is also looking at US listing via SPAC.
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
- Top Gainers
- Top Losers
- 52 Week High