In a conscious bid to shore up dollar inflows in the wake of a widening current account deficit (CAD), the government on Friday permitted unlisted companies to directly list on stock exchanges abroad without prior or simultaneous listing on Indian bourses.
Hitherto, unlisted companies incorporated in India were not allowed to directly list in overseas markets without prior or simultaneous listing in Indian markets, either for raising funds for acquisitions or for retiring debts.
Opening up the liberal window for mopping up foreign exchange, the Finance Ministry, in a statement, said: 'It has now been decided with the approval of the Union Finance Minister that unlisted companies may be allowed to raise capital abroad without the requirement of prior or subsequent listing in India'.
The scheme is to be implemented on a pilot basis for two years from the date of notification and the impact of this arrangement will be reviewed after the initial two-year period. The statement noted that the approval to list abroad would, however, be subject to some specific conditions.
For one, such unlisted companies may be allowed to list abroad only on exchanges in International Organization of Securities Commissions (IOSCO)/ Financial Action Task Force (FATF) compliant jurisdictions or countries with which SEBI (Securities and Exchange Board of India) has signed bilateral agreements.
Moreover, these companies shall also have to file a copy of the return which they submit to the proposed exchange/regulators also to SEBI for the purpose of Prevention of Money Laundering Act (PMLA). 'They shall comply with SEBI’s disclosure requirements in addition to that of the primary exchange prior to the listing abroad,' the Finance Ministry said.
Specific norms have also been set for the utilisation of the funds thus raised abroad. 'While raising resources abroad, the listing company shall be fully compliant with the FDI (foreign direct investment) Policy in force. The capital raised abroad may be utilised for retiring outstanding overseas debt or for operations abroad including for acquisitions,' the statement said.
Also, in the event the funds so raised are not utilised abroad as stipulated, the statement noted that such companies will have to remit the money back to India within 15 days and the money shall be parked only in banks recognised by the Reserve Bank of India (RBI).
'Ministry of Finance (MoF), Department of Industrial Policy and Promotion (DIPP) and the Reserve Bank of India (RBI) would be issuing the necessary notifications in due course in order to implement the required changes to the existing rules,' the statement said.