Arka Biswas
Recently, on 30 October 2023, the Ministry of Corporate Affairs (MCA), by notification in the Official Gazette, brought the Companies (Amendment) Act, 2020 into force; which will allow Indian companies to list their securities on foreign stock exchanges directly and will also allow the companies incorporated outside India to list on Indian stock exchanges directly. It replaces the previous ADR/GDR and IDR regime. Indian companies like Infosys, HDFC, ICICI, Reliance Industries had opted for the ADR/GDR route to get indirectly listed on the New York Stock Exchange (NYSE) to tap into the capital markets of developed economies, have a broader investor base and pursue international expansion. However, the old ADR/GDR route soon became irksome for the Indian companies, the regulator as well as foreign investors.
In such a background, introducing direct overseas listing is undoubtedly going to be a boon for many companies who have been seeking to access the pool of capital in foreign markets and foreign investors. Liberalisation of capital markets will also increase the ease of doing business and boost the overall Indian economy. China had already taken the decision in 2017 to allow foreign companies to get listed on the Shanghai Stock Exchange. Next, the United States also adopted a similar policy and allowed direct listing in 2018, and then Spotify utilized this mechanism and created a benchmark when it, being a Swedish company, got directly listed on the NYSE. So, India too had to strategize a new framework for direct overseas listing to keep pace with the global trends.
But since every situation has its pros and cons, this new amendment is not an exception to the same. This article navigates through the intricacies of the amendment, its benefits, negative impacts as well as the ways to triumph over the probable challenges.
