With a recent move by the Indian Government, listing at overseas markets is no more a tricky job for those Indian companies that want to expand.
With a view to encourage Indian companies do business abroad an overseas expansion scheme is currently encouraged by the Indian Government. Any Indian company that seeks global market recognition now has the right to flaunt and build its own name and brand in overseas market and help to strengthen the rupee. In a recent move, the Indian Government has allowed the Indian unlisted companies to directly list in overseas market without any prior listing in India. As per the information by the Union Finance Ministry to the media, this announcement will be allowing the unlisted Indian companies to list in any overseas market for two years. Before 2008, when the same liberation was granted to Indian companies, most of them went overseas to seek new business opportunities. Post 2008, the scenario has changed and unlisted companies were not allowed to go global without prior listing in Indian market.
Why to List Overseas?
Listing a company in overseas market means taking it abroad in the form of manufacturing and servicing. Ajeet Khurana, Early Stage Investor, Mentor, Entrepreneur, says, “Companies take this decision to make them prominent in overseas market. Cost advantage in R&D and labour work, big market opportunities and better technologies are other plus points that help in their growth.” Moreover, it will help Indian companies to raise capital and strengthen the rupee. Since equity capital will flow into Indian companies, it will strengthen the Indian corporate world. In addition, this foreign money will be largely spent in India like on salaries, bills and raw materials and open many other doors of gaining foreign exchange. In fact that is probably what has motivated the government to go ahead with this move. Each country, regulator, and exchange has its own process. And that will not change for Indian companies.
How it Benefits Start-ups?
This move will be helpful to start-ups. Khurana says, “The reason is that several developed economies are more open to the idea of taking a risk in early stage companies. As a result, Indian start-ups that suffer from low valuations in India can gain from much higher valuations in other countries like the US. This becomes crucial for companies that have customers abroad, as they can now access equity capital from the locations where they do business. I think that Indian start-ups which have reached some size should make the most of this opportunity and initiate the process of listing.” Many other market leaders are happy with this government announcement and hopes that this move will help them in raising capital and global recognition. Sunil K Goyal, Founder & CEO, YourNest Angel Fund, says, “For creating a vibrant ecosystem for entrepreneurship in India, we had recommended few actions plans for the Ministry of Finance (MoF) and this is one of them. Indian start-ups require significant funding to scale them to serve global customers. So opening-up the doors of equity fund raising from across the globe will widen their scope. In his view, it is a greatest move for successful Indian unlisted companies and it has opened-up doors for equity fund raising from across the globe, and hence widens the scope of fund raiser through overseas listing. Furthermore, there is no need for unlisted company to move head-quarters outside India for exercising the option of global fund raisers. Goyal has submitted a report on Indian industries to the MoF and suggested that MoF could allow companies registered in India to make an initial public offer on exchanges outside India without or before listing in India, as was the case earlier. YourNest Angel Fund have number of VC/PE funded enterprises that are seeking to offer exit to their investors or are looking for growth capital. He says, “The funds released for investors may come into circulation for cash starved start-ups. It can give the desired boost to productive job creation.“ Moreover, the scheme will also push exporters in beating prospects in developing markets and increase their participation internationally.
Proposed Scheme
In pursuance of the new announcement the government has decided that only those Indian firms are allowed to list abroad that will fulfill SEBI disclosure requirements. They may be allowed to list abroad only on exchanges in IOSCO/FATF, which is currently representing most major financial centres in all parts of the globe. The matter of raising capital abroad shall be fully submissive with the FDI and may be utilised for business overseas expansion only. In any case if a company does not use this raised fund overseas, it has to be submitted to in any Reserve Bank of India (RBI) recognised AD category Indian bank with in fifteen days. Besides, MoF, RBI and Department of Industrial Policy and Promotion (DIPP) reserve right to issuing the necessary changes in the policy if it required any changes.
The Bottom Line
The policy has opened the doors for entrepreneurs to do business in other countries. However the selection of a right market for business expansion can be a big challenge for entrepreneurs. First of all they need to decide on their business goals in order to fulfill the specific requirements for the business growth and then determine the zone for listing.
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