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Finance Minister Nirmala Sitharaman Friday said the government has decided to enable listed and unlisted domestic companies to directly list their equity shares on the International Financial Services Centre (IFSC) at Ahmedabad. The decision will facilitate access to global capital and result in a better valuation of the Indian companies, she said at the launch of the Corporate Debt Market Development Fund (CDMDF) and AMC Repo Clearing Ltd (ARCL).
“I had said in May 2020 that direct listing of securities by Indian public companies would now be permissible in foreign jurisdictions. Now, I am pleased to announce that the government has taken a decision to enable the direct listing of listed and unlisted companies on the IFSC exchanges,” Sitharaman said.
The facility will be operationalised shortly and will enable start-ups and companies of like nature to access the global market through GIFT IFSC.
The existing legal framework in the country does not permit the direct listing of equity shares of companies incorporated in India on foreign stock exchanges. The only available routes for companies incorporated in India to access the equity capital markets of foreign jurisdictions are through the American Depository Receipts (ADR) and Global Depository Receipts (GDR) regimes.
In 2018, a Sebi-appointed expert committee made certain recommendations for listing equity shares of domestic companies on foreign exchanges.
Highlighting the reforms undertaken by the government over the last few years, Sitharaman said one of the major steps that the government has taken is to consolidate the laws dealing with the securities market in the country into a single Securities Market Code.
“This is vital as it is intended to consolidate the three different laws – the SCRA (Securities Contracts (Regulations) Act) of 1956, SEBI Act of 1992, and the Depositories Act of 1996 – into a single Act with updated and rationalised provisions,” she said.
The Code is intended to be future-ready, and will take into account developments from a long-term perspective and promote ease of doing business, the finance minister said, adding that it will cater to the developmental and regulatory needs of the country’s capital market, which is witnessing rapid growth.
“A lot of groundwork has already been done and I expect this new Code to become a reality soon,” she added.
Sitharaman further said at this stage of our economic development, the main focus of our financial sector regulations should be the development of the market and also investor protection.
For a vibrant financial sector, during Amrit Kaal, the country’s regulatory architecture should set global benchmarks with regulations that are flexible, effective and proportionate, and do not stifle innovation, the finance minister said.
“We may also have a regulatory impact assessment to critically assess the positives and negative effects of proposed and existing regulations and non-regulatory alternatives. It is an important element of evidence-based policymaking, and I feel this can enhance accountability and transparency in the policy and decision-making processes,” she noted.
Sitharaman said that the regulatory environment should try to balance at all times the creation of a conducive environment for starting and running businesses.
“The trinity which is important for all of us is — the creation of a conducive environment for starting and running businesses, the maintenance of market integrity and sustenance of market stability.
“I would think that this can be the possible trinity with which we can take the financial domain, markets, the regulators, the government, policymakers and the legislators to look forward for a robust market system, which will take us forward for a development India,” the finance minister said.
CDMDF launched today by the finance minister will act as a backstop facility for the purchase of investment-grade corporate debt securities to instil confidence amongst the participants in the corporate debt market during times of stress.
The fund will provide stability to the corporate bond market during times of stress through an asset purchase mechanism.
With the support of Rs 30,000 crore from the Central Government, in the form of a guarantee, and over Rs 3,000 crore of corpus coming from the mutual fund industry, the CDMDF will have access to capital of over Rs 33,000 crore.
The limited purpose clearing corporation mechanism – AMC Repo Clearing Ltd (ARCL)- is aimed at widening and deepening the corporate bond market in the country.
