India’s mothballs plan to allow domestic companies to list abroad: Report

India has frozen plans to allow local companies to list abroad as it seeks to boost its own capital markets, government officials and industry sources said, in a blow to foreign money and exchanges seeking to cash in on the country’s technology boom.

New Delhi’s decision marks a surprising policy reversal after officials said late last year that new rules for offshore listing would be announced in February.



Three senior government officials with direct knowledge of the decision told Reuters that the plan had been put on hold because India believed there was enough depth in its domestic capital markets for companies to raise funds and get good valuations. They declined to publish their names because the move has not been announced.

India’s finance ministry did not respond to a request for comment.

Indian stock markets boomed as excited retail investors and an influx of easy money brought on by the pandemic drove prices to record highs, encouraging a large number of Indian tech founders to switch locally through their initial public offerings (IPOs).

More than 60 companies debuted in India in 2021 and raised a total of more than $13.7 billion, more than the previous three years combined. Like other global markets, Indian stocks have been shaken by Russia’s invasion of Ukraine, and the volatility has delayed plans for an IPO.

But expectations for such listings waned after digital payments app Paytm, backed by China’s Alibaba and Japan’s Ant and Softbank, tumbled to debut in November, raising questions about valuations. Its shares are 75% below the issue price.

Reuters reports that even before Paytm’s defeat, US venture capitalists such as Tiger Global and Sequoia Capital lobbied Prime Minister Narendra Modi to allow Indian companies to list overseas to achieve better valuations.

A second government official said offshore listing rules were now “in limbo” and both officials cited the highly rated food delivery giant Zomato’s debut on the stock market as contributing to a change of opinion.

When Zomato went public on the Mumbai Stock Exchange in July, its offering was oversubscribed 38 times and its stock jumped 66%. Indian cosmetics platform Nykaa is up 96% when it debuts, achieving a valuation of nearly $14 billion.

Both have given up many of those gains in recent months.

Two industry sources briefed by government officials also said they had been told the plan was pending, also marking a setback for stock exchanges in New York and London, which have been competing for a slice of India’s fast-growing economy.

lobby

Global investors have pushed India to allow offshore listings, saying overseas markets would give Indian companies better access to liquidity and capital. But such a move, which has been under consideration since at least 2020, has deeply divided India’s policymakers.

The nationalist group Swadeshi Jagran Manch, the economic wing of Modi’s ruling ideological parent, has opposed the plan, saying such listings would mean less Indian oversight of domestic companies, while Indian investors would find it more difficult to trade shares of overseas-listed companies. .

Despite intense lobbying against the change, India’s revenue minister said in August last year that offshore listing rules could be announced by February.

A source familiar with the matter told Reuters on Wednesday that representatives of Swadeshi Jagran Manch pressed India’s finance minister in a closed-door meeting in January not to proceed with the policy announcement.

Although the group is widely seen as having a strong influence on policy-making in India, it is not clear whether this particular meeting contributed to the government’s decision.

A senior industry executive, who has lobbied New Delhi to allow the foreign listing, said its decision could lead to pressure for further changes by Indian companies.

“Some (investor) funds may want to register Indian companies outside the country,” the executive said, adding that such a move could allow them to list overseas more easily.

(This story has not been edited by Business Standard employees and is automatically generated from a shared feed.)

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